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The Future of Microsoft's Xbox

John C. Dvorak

To the gaming community, the Microsoft Xbox console has a lot to offer and promises even more in the future. But the company has not been able to get worldwide sales, especially Japanese sales, to the levels it hoped for. Depending on whose report you read, the Sony PlayStation is outselling the Xbox at a 4 to 1 pace, and that's an optimistic ratio. The Xbox has become the number-two platform in the USA, ahead of the Nintendo GameCube, but it still has not been popular enough to become a profit center for Microsoft. All this has recently been compounded by Microsoft's decision to cancel or delay the release of its online game True Fantasy Live Online.

What's wrong with this picture? Microsoft has over $56 billion in the bank and should be dominating the console market. Unfortunately, the company's overall strategies have failed and may continue to fail, leaving the Xbox in the dustbin with the last great American hope for a super game machine, the 3DO box from circa 1993. The 3DO machine was the first 32-bit console; there were great games for it and it had powerful underpinnings. Its $700 price tag was probably the main thing that killed it, but it also suffered from the same problem that the Microsoft Xbox has suffered from: high-expectation syndrome.

This is the killer problem, and I think it can be argued that high-expectation syndrome was partially responsible for the deaths of both the 3DO machine and Sega. It definitely plays into the Xbox story. A year before the Xbox was released, the buzz had begun. People were extolling the virtues of the thing sight unseen. Furthermore, it was expected that Microsoft with its war chest could dominate any market that it sincerely wanted to dominate, and the company looked sincerely focused on the Xbox. I had experts come on my radio show and tell me flat-out that the Xbox would become the number-one gaming console, with Sony number two and Sega and Nintendo probably dropping out. It was amazing how these high hopes were not only dashed, but reversed, when the machine shipped. Suddenly it wasn't what it was cracked up to be. The relative lack of hot games reinforced the negative attitude, as did the promises that many of the hot games on the Sony platform would be "ported"—and when they were ported, they'd somehow be better. Some were marginally better, but not enough to change anything.

Compare this rollout to the original Sony PlayStation 1's debut. There was little hoopla surrounding the Sony device. It just kind of appeared and worked its way to the top by attrition. Perhaps if Microsoft were more casual and less aggressive, it could have done the same thing, while waiting for the home-run game titles to come in. Why did the company have to try to take the market by storm? This tactic also gave Sony and Nintendo a heads-up on what to expect, so they could counter Microsoft with their own marketing tricks. Sometimes humility can be a marketing ploy too. Then there is this recent debacle with True Fantasy Live Online. Microsoft's reputation for lack of originality is bad enough. When the company does something original, it seems to have self-esteem issues, so it tends to copy what other people have proven works. This is played out over and over as Microsoft plays follow-the-leader with its Windows OS by continually adding features developed by the Macintosh community. I'm actually surprised that Microsoft has not come out with an iPod clone and music service by now. So now we see the company throw three years of development work into True Fantasy Live Online. This was supposed to take on Final Fantasy, the popular Japanese online game running on the PlayStation. Can't Microsoft even create a game name that doesn't sound a lot like an established game? True Fantasy? Final Fantasy? This is sad. I'm sure the developers didn't have their hearts in this at all. According to the Reuters reports on Microsoft pulling the plug, the game "failed to live up to expectations."

Microsoft's long-term marketing scheme was to develop networks of online games that people would subscribe to. Sony has been quietly sneaking into this online market, again without a lot of hoopla, and may well lock out Microsoft. If Microsoft sees its strategy fail, then the Xbox will become an exercise in futility.

Still, we hear of a next-generation Xbox utilizing better hardware and powerful PowerPC chips. There will probably be no backward compatibility, as consoles tend to move into new generations without such considerations. But it does mean that with the next generation of consoles ahead, the game starts over from scratch once again. Whether Microsoft really wants to go another round with Sony or throw in the towel remains to be seen. Nintendo can still play since it has good market share in Japan, owns the little-kids market, and has a real winner in the diminutive GameBoy machines, which people adore. Nintendo's continued existence does not help Microsoft.

Keeping the Xbox alive is important to Microsoft. Its pride and prestige are at stake. It has never been this committed to something that doesn't make money, and it made a lot of promises to devoted Xbox players. Pulling the plug on the platform would be a huge blow to the company. So I expect to see one more round of fighting. We will see an Xbox II. Whether it fulfills Microsoft's dream or becomes a collector's item remains to be seen.

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Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in PC Magazine.

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