Apparently, size really does matter-at least when it comes to jostling for position in the video game console marketplace. The financial deep pockets and technological might of Microsoft has industry analysts and game developers alike believing Xbox can not only be a competitive player, but could very well vie with PlayStation 2 as the industry leader come the all-important Q4 2001.
‘Microsoft has three powerful things in its favor-money, relationships and technology,’ notes Roger Lanto of Reston, Virginia-based PC Data, who adds that on the other hand, ‘the biggest albatross it has around its neck is the Microsoft name. In spite of the success the company had with its Flight Simulator franchise for PCs and its expansion with the acquisition of the developer of the Mech Warrior franchise, it is not exactly a powerhouse in the game market. But provided Microsoft can make enough new titles to drive volume, it becomes a marketing issue-Microsoft has to establish itself as a game brand.’
David Hufford, marketing manager for Xbox, agrees, saying that while ‘we benefit from being powered by Microsoft, the brand is Xbox.’ He acknowledges that while its name might carry weight with some gamers, ‘Microsoft doesn’t come from a gaming heritage, and that’s one of our challenges. So in an effort to really stand apart from the company and showcase that we are creating an entirely different business surrounding this game culture, we’ve created the Xbox brand.’
And establishing that brand to both the hard core gamers and general consumers will be vital to the platform’s success, believes Schelley Olhave, senior analyst at Mountainview, California-based market research firm IDC. ‘The marketing not only has to imprint Xbox on [consumers'] consciousness, but it must promote the games as well. The most important thing for selling a video game console is the games that are available for it. It’s not a coincidence that when Sony launched PlayStation, it had some very, very good games in the beginning that drove a lot of sales and sparked the interest of core and casual gamers alike.’
To date, Xbox has secured more than two hundred game companies to develop and publish content for Xbox, including Activision (Tony Hawk’s ProSkater 2X), THQ (Raw is War), Konami (Crash Bandicoot X, Jurassic Park X, Silent Hill X and Metal Gear Solid X) and Infogrames Munch’s Oddysee, which will only be available on Xbox.
Getting the word out about those games and the console that plays them remains a top priority for Xbox marketers, which is why Microsoft has committed US$500 million for marketing. ‘You can’t enter this business lightly,’ Hufford says. ‘In order for us to come in and be seen as a credible games company, we basically had to go big or go home.
‘When we talked to companies like Electronic Arts, they said `you have to show us a resource commitment.’ And we said, `Okay. How does US$500 million to worldwide marketing in the first 18 months sound as a commitment?”
To that end, the first stages of what Hufford describes as an integrated marketing approach have already begun, courtesy of third-party avenues. Xbox is counting on game press coverage to be the first line of public consciousness-raising. Hufford expects the newsworthiness to hit a peak during the Electronic Entertainment Expo in Los Angeles this coming May. ‘E3 will be the big war between Xbox and PS2,’ Hufford believes. ‘E3 will be where Sony, Nintendo and Microsoft duke it out for the number-one position. Then coming out of that, people will be bombarded with news and information about the platform.’
After that, the integrated marketing approach will kick in with traditional media. ‘You’re going to see all the pillars come together with a strong advertising campaign-very heavy on television-especially targeted at the 16- to 26-year-old male, and you’re going to see cross-promotions with big promotional partners,’ which have yet to be announced.
‘Our strategy is to drive home the message that Xbox is the future of video gaming. You have to show consumers you’re committed to their hobby and their passion. It’s a slow burn in the first few months, then as you get to launch, you’ve got to absolutely blitz and surround them to make them feel like it’s an inescapable energy that they have to be a part of.’
Hufford also says there will be a concentrated grassroots marketing effort, ‘taking traveling shows around the country to concerts and sporting events. All that stuff will bump up against our launch, which will happen in the fall.’ However, perhaps not wanting to follow in Sony’s misbegotten footsteps, Hufford says Microsoft is not releasing an exact launch date or even the month yet. ‘We’ve learned a lot, there’s no doubt about that,’ he says of PS2′s launch woes.
Industry experts are divided on whether or not PS2′s delivery delays will impact Xbox’s reception in the marketplace. PC Data’s Lanto believes Sony ‘is going to pay for that.’ Developers were counting on strong Q4 sales, and ‘Sony left somewhere between one to two million potential sales on the table just in the U.S. by their inability to deliver sufficient inventory. Microsoft doesn’t look like it’s going to make that same mistake.’
Kathy Vrabeck, executive VP of global publishing and brand management for Activision says, ‘Assuming that PS2 supply gets back on track soon, the installed consumer base should be about the same as everyone has anticipated by next holiday season.’ But, she adds, ‘if Sony continues to have supply problems, Xbox will definitely benefit from the pent-up demand.’
IDC’s Olhava says: ‘I definitely think there’s some hesitancy on the part of the gamers, trying to figure out if they should buy a PS2 now or wait to see what Xbox and its games look like.’
Also giving Microsoft a potential boost was Sega Corporation’s announcement that it will stop production of its Dreamcast video game console after selling a meager 2.3 million units worldwide since its September 1999 launch-compared to the 6.4 million PlayStation 2 consoles sold worldwide last year, plus the 76 million original PlayStations and the 30 million Nintendo 64 consoles that have moved in total.
Interestingly, another advantage for Xbox is that the other new console preparing for launch, Nintendo’s Gamecube, won’t truly be direct competition. ‘Nintendo is for the Pokémon crowd,’ says Microsoft’s Hufford. ‘PS2 and Xbox are the platforms their audience will eventually graduate to.’
If there is any X-factor, it is what shape the economy will be in as Q4 2001 nears. PC Data’s Roger Lanto cited the stunning statistic that PC sales in the fourth quarter of 2000 were down 24% from the previous year. ‘That’s just disastrous,’ he says, explaining that while ‘there are other factors to PC sales that don’t relate to the video game market, they are both optional purchases. And we all know that optional purchases fall way down on the priority list when layoffs and the plunging stock market are in the news everyday.’
Assuming that the economy holds up, that Xbox delivers the consoles in sufficient numbers, and that the integrated marketing strategy succeeds in having Xbox on the lips of hardcore and casual gamers alike, the final litmus test of where Xbox will end up in the console marketplace will be whether the games live up to the marketing hype.
‘In a normal platform development phase, you have probably three million core gamers who are going to go out and buy it no matter what,’ notes Joe Morici, VP of sales for San Francisco-based vid game studio bam! Entertainment. ‘Then you get past launch, and it’s the software that’s going to drive it. In the beginning, you’ve got to have games that will appeal more to the core gamers because that’s who’s going to be buying it-at least for the first six to nine months. So if Microsoft has the software support, and I think it does, I think they can be very competitive with Sony.’
Hufford believes that games will ultimately set Xbox apart. ‘We’ve been building our software business now for about the last year and a half and took a very ground-up approach,’ he says, describing the process of interviewing software developers. ‘We wanted to know all the things they had in their heads but weren’t able to put on the canvas because of technology limitations. That’s why Xbox is really a platform for them.’
But for all the software development jockeying and attention to marketing detail, Xbox’s ultimate position in the marketplace boils down to a simple equation, believes Activision’s Kathy Vrabeck. ‘The key will be delivering a state-of-the-art game system that allows for better games. In the end, gamers just want great games.’