Xbox 360 Launch: Success, Failure, or Something In-Between?

Many have analyzed the Xbox 360 launch, but I’ve yet to see an article that defines Microsoft’s goals and rates the launch according to how much (or how little) it furthered those goals. What is Microsoft actually accomplishing? Here’s my take on the subject, early as it may be.

Regarding criteria for success: the 360 launch can’t be expected to cement any major victories, but Microsoft presumably hoped for a big splash that would set the stage for:

1. Eventual market dominance among 15 – 35 year olds, preferably resulting in the implosion of either SOE and/or Nintendo. (Of course, Microsoft can hope for dominance outside that age range, but that would happen in spite of Xbox’s marketing campaign, not because of it.)
2. Better penetration of the Japanese market, in which the original Xbox fared very poorly. (If you doubt that Microsoft cares about this, just read about everything the company has done to improve its chances in Japan this go-around.)
3. Defense of Microsoft’s stranglehold on home computing. (It always interests me how little this is discussed in the media. Sure, Microsoft is excited about the revenue potential of the video game industry. But it cares much more about computing & digital communications in general. There are a few things keeping Bill Gates up at night; one of them is the thought of consumers neglecting their PC to enjoy email, instant messaging, and web browsing via a Playstation. I suspect that Microsoft would willingly lose money on Xbox for another five years just to prevent this from happening.)

So, has the 360 launch brought Microsoft one step closer to it’s goals? Let’s see:

Win over 15 – 35 year olds: Unclear how much headway Microsoft has made. The 360 was successfully hyped to the target market. Every 360 available in North America was sold the instant it hit the shelves. Unfortunately, not nearly enough 360s hit the shelves! Intentionally or not, Microsoft appears to have delivered too few units, allowing the initial launch hype to wane before a healthy number of gamers got their 360s. Now, some hardcore gamers with limited cash (not to mention avid but less-hardcore gamers) may simply wait for the Playstation 3 to come out. And Microsoft’s decision to offer differently-priced retail packages (core and premium) might have worked brilliantly with a healthy supply of consoles, but it simply managed to piss off the early hardcore crowd that was forced to choose between a core 360 or nothing. You can’t price discriminate with a handful of consoles, I’m afraid. The counterbalance to all this: a shortage is still way better than an over-supply.

Moving along… early-but-persistent defect rumors have not helped perception of the 360, fairly or otherwise. There are also no “must-have” games inciting consumers to drool over the next shipment of 360s, and game diversity remains low in general. A steady drumbeat of new titles is expected, but so far all I’ve heard are the anguished sobs of developers announcing revenue shortfalls for the fiscal year. All in all, I’m not impressed.

Penetrate the Japanese market: Yeaaaah… not so much. Early reports from Japan are disheartening. Just 39 percent of the consoles shipped to stores were sold on opening weekend, and Japanese consumers have, in general, expressed little enthusiasm for the 360. It can’t help that the 360 is nearly the same size as the original Xbox — an undeniable factor in its predecessor’s failure to please the space-conscious Japanese. Note to Microsoft: smooth curves and a paint job won’t turn a hog into a fox.

Defend home computing monopoly: Looking good! The 360 plays very nicely with Windows XP-based PCs and has a great interface. It’s a wireless dream that streams music, displays photos, etc. Xbox Live has been widely praised by fans and critics alike for its accessible interface and interesting early content. Developers are salivating over the possibility of using Live to digitally distribute (and charge for) new content. Communicating with friends via Live is convenient and enjoyable. Of course, Live’s usefulness is entirely dependent on the number of people who buy 360s, but let’s give credit where credit is due. Live rocks, and Microsoft can leverage that to control computing in the living room.

Overall, I give the Xbox 360 launch a C plus, or “slightly better than average”. My desire to bump the score higher (in recognition of the great effort required to launch a console) was tempered by my disappointment that Microsoft chose to shorten the console cycle by a full year, costing game developers millions of dollars in potential profit. Higher-quality games become easier to produce later in the console cycle, as developers gain experience and accumulate useful development tools. It’s a shame to see a cycle end early. I respect why Microsoft did it, but that doesn’t mean I have to like it.

So that’s that. Microsoft did a fair job, but the field remains wide open. Let’s see what Sony and Nintendo do next.

Update (1/22/06): Ever more speculation about likely PS3 delays and shortages. If the rumors prove true, Microsoft’s initial stumbles might mattter significantly less…