Digital A-List 2009

Xbox Is Not Just for the Hard-Core Gamer Anymore

Microsoft Is Successfully Positioning Console as a Broader Entertainment Platform

By Published on .

Illustration: Pete McDonnell

YORK, Pa. (AdAge.com) -- Randy Ksar's Xbox 360 doesn't exactly sit idly in his living room, even though he's not giving it marathon "Halo" or "Gears of War" workouts like many other young men.

Mr. Ksar, a long-time fan and loyal Netflix customer, streams movies from the service via Xbox Live, the platform that connects the device to the internet. He's using the gaming device, like millions of other Americans, as a bridge to bring web-based content to the big screen in the living room.

That's sweet music to Microsoft -- and validation of the initial device strategy it devised way back in 2002, after it first launched the Xbox.

The Netflix Watch Instantly offering, introduced six months ago via the New Xbox Experience, has propelled Xbox ahead in its digital-living-room strategy. By February, 1 million Xbox Live users had downloaded the application and streamed 1.5 billion minutes of TV and movie content from Netflix. That means about one-tenth of Netflix's 10 million subscribers have watched via Xbox 360.

"We were really pleased with the response, but I can't say we were surprised," said Steve Swasey, Netflix VP-corporate communications.

Live growth
Xbox users are used to using the console to connect to the web. Of the more than 28 million Xbox owners today, more than 17 million, or about 65%, pay for Live, or internet-connected, service, according to Microsoft. Since the launch of 360, more than $1 billion has been spent on Xbox Live, with no signs of slowing -- spending on Live was up 84% in 2008 vs. 2007.

And in a recent survey on online gamers, NPD Group found that half of those who use a console for online play use an Xbox; that's compared with 29% for Nintendo Wii and 20% for Sony PS3.

Since the Xbox 360 launched in late 2005, the company has pushed the box as more than just the next iteration of the already-popular Xbox online-connected video-game console. The Xbox 360, Microsoft said, would be a much-broader entertainment platform. The initial ad campaign theme, "Jump In" (still used today), was meant to be the anthem for that idea. Of course, that was also back when the box cost $399, and even hard-core gamers were struggling to fork over almost half a grand.

But fast-forward a few years -- after a lot of marketing, new content and feature deals, and several price cuts -- and the Xbox is beginning to deliver on its original promise as the go-to entertainment box in the living room.

"That is just what Xbox 360 was meant to do," said Charlotte Stuyvenberg, general manager of global marketing for Microsoft's Interactive Entertainment Business division. "Xbox Live is really the conduit for our entertainment strategy ... a medium to deliver different and diversified content when it comes to all entertainment."

Marketplace-based solution
The extension of the video-game box began with Xbox Live, which launched in 2002, a year after the original Xbox console bowed. That initial version promoted co-mingling gamer play and interactive experiences but was really gamer-focused. It was the Xbox 360 and the launch of the Xbox Live Marketplace -- with its virtual storefront of not only hard-core-gamer candy but also the Xbox Live Arcade, featuring lots of old-school and female-friendly downloadable games, video-game and movie trailers, plus full movie, TV and music-video downloads -- that expanded its base.

WORK
Xbox Live

By February, a million Xbox Live users had streamed 1.5 billion minutes of TV and movie content from Netflix via Watch Instantly.

"Microsoft has done a good job of working across divisions and cross collaborating, and now Xbox fits very well into its overall strategy," said Michael Cai, gaming analyst with Interpret. "It's become one of the key parts of its digital-media strategy."

And where there are people, marketers aren't far behind. Microsoft will run more than 100 different ad campaigns on XBox Live in the 2009 fiscal year, which ends June 30.

Most recently, for example, Honda signed on as the sole sponsor of Xbox Live Primetime's "Play and Win" game show, which starts May 15. It's the first time the automaker has partnered with Xbox -- and incidentally, it's counting on reaching more than just young males.

"It's a great way to be in this uncluttered environment and a good association with a fun, more entertaining campaign," said Jenny Howell, manager-interactive marketing at American Honda Motor Co., which is counting on the game-show format to draw a broad demographic. Honda will run 15- or 30-second spots while players sit in a virtual waiting room to participate in the game, and will also show the ads during an intermission. The top prize is Honda's new Insight hybrid car. Honda's ad agency, independent RPA, Santa Monica, Calif., handled the deal and the ads.

"The revenue per Xbox owner is generally increasing," said Ted Pollak, senior gaming analyst at Jon Peddie Research. "There was a lot of foresight from Microsoft and getting this Trojan horse into the living room. ... Pretty soon they become your set-top box, and that's the ultimate goal -- not only to compete with Sony and Nintendo but Comcast and Viacom and Motorola and Texas Instruments."

MOST IMPORTANT DIGITAL LESSON I'VE LEARNED

Charlotte Stuyvenberg
Don't be afraid to broaden your customer base -- it keeps a brand fresh.

"With a powerful consumer brand like Xbox 360, you need to ensure that you stay culturally relevant to truly connect with consumers at an emotional level," said Charlotte Stuyvenberg, general manager of global marketing for Microsoft's Interactive Entertainment Business division.

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