Key function on Xbox 360: marketing

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When Microsoft's next-generation Xbox 360 hits store shelves in the fall, the system will not only kick off another video-game console war with rivals Sony and Nintendo, it will also determine whether Microsoft's gameplan to attract marketers will pay off.

During a May 16 press conference in Los Angeles, Xbox executives didn't shy away from giving marketers ideas of how to use the Xbox 360.

"Picture a video-game racing season on Xbox Live sponsored by one of the world's leading auto manufacturers," said Peter Moore, Xbox's corporate VP-worldwide marketing and publishing. "At the start of the season, 250,000 people pay $10 each to sign up for a head-to-head 30-race competition. The stakes? How about a million bucks to the overall champion? In the final race, 16 finalists go head-to-head for the million-dollar prize. And with spectator mode, 250,000 fans will log on to watch the competition. If you are the sponsor, you've captured the attention of hundreds of thousands of people who've spent the last six months living and breathing your tournament and your brand."

Executives are also pushing the console's Xbox Live Marketplace, an online bazaar in which companies will be able to distribute game trailers and sell new titles, as well as additions like levels, maps and vehicles, while gamers can sell stickers, T-shirts, soundtracks or in-game elements that they designed.

COMMUNITY

But Microsoft has bigger plans for the marketplace than just games. It envisions a community through which record labels will be able to launch new bands (with MP3 downloads, videos and live concerts) or studios could unveil an exclusive film trailer.

The 360 will also play DVDs and CDs, and include ports for Apple's iPod or other music devices and digital cameras, and connect wirelessly to PCs through a Wi-Fi connection. It will also enable users to send e-mail, instant message and chat via video conferencing during gameplay or while watching TV or a movie.

Microsoft hopes all that functionality will help the company sell 1 billion consoles. The current Xbox, introduced three years ago, has sold 20 million units. Its Xbox Live service has 2 million subscribers. Xbox wants over half of its 360 consoles to be connected to Xbox Live.

Some industry watchers likened the potential for advertisers on the Xbox 360 to the current practice of sports sponsorships and naming rights on stadiums and other venues. But there's an intrinsic added value for a marketer, said Jamie Berger, general manager-consumer products division of IGN Entertainment. "For an Xbox 360 event, lots of people can participate and lots can watch. That makes for a lot of highly engaged people. "

Executives from Microsoft declined to comment further on their upcoming plans to attract marketers. In the past, Xbox has tried to steer clear of turning off gamers with the image of its console serving as an ad machine.

But Xbox 360's ability to collect information on gamers is exactly what will make the system appeal to advertisers. Video-game devices are "becoming an exciting new medium," said Mr. Epstein. "We're all waiting for the rate card."

What’s Microsoft doing?

* Pushing an online bazaar for distributing game trailers

* Dreaming up a platform for record labels to launch new artists

* Touting the 360’s ability to play DVDs, CDs and connect to PCs

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