Gates considering Xbox clones?

Microsoft Chairman Bill Gates alludes to licensing the basic software to third parties as a stab at Sony's rival PlayStation.

Microsoft Chairman Bill Gates is dropping hints that he may be ready to license the brains of the Xbox gaming device to other companies. It's a risky move to better compete with Sony's PlayStation, according to one analyst.

In an interview with Nikkei Newspaper in Tokyo, Gates was asked whether Microsoft would consider opening the manufacture of Xbox units to third parties. Gates responded that "there is nothing concrete" but said the company is always talking with partners about how to expand the Xbox culture.

Gates declined to give details, such as which companies Microsoft might be thinking about working with or if a license would be extended to the underlying software of other electronics equipment, such as handheld devices, PCs or home digital media centers.

Microsoft's Xbox currently when it comes to sales, with Nintendo's GameCube ranking third. The PlayStation makes up more than 60 percent of the market, with the Xbox accounting for 29 percent of sales and the GameCube rounding out the top-tier players with 11 percent, according to the latest statistics from NPD Group.

All three console makers are preparing their next-generation gaming box. Microsoft's Xbox 360 is expected to hit store shelves later this year, with Sony's PlayStation 3 available soon after and Nintendo's Revolution console expected in 2006.

Despite the suggestion that Microsoft's device could be cloned, Xbox representative Molly O'Donnell reaffirmed the company's stance that the Xbox is exclusively a Microsoft product.

"There's certainly a potential for other hardware companies to manufacture Xbox some day in the future, but that is not something we're focused on right now," she said.

Licensing the Xbox's underlying software to other manufacturers is, of course, not outside the realm of Microsoft's capabilities. The company found sterling success in licensing its Windows operating system to PC makers.

But breaking the traditional proprietary mold of the game console world is something no one else has tried and something JupiterResearch analyst Michael Gartenberg says would be a bold move on Microsoft's part.

"Clearly, everyone at Microsoft is thinking out of the box to increase sales. I mean, look at the nontraditional way of introducing the Xbox on MTV," Gartenberg said. "It sounds like they are just testing the waters with a hybrid of the (white box) PC model and the (proprietary hardware) video game model."

Gartenberg said Microsoft's strategy may be centered on gaming software. The majority of money made in the video game industry comes from the games themselves, not from the hardware. Recently, both Microsoft and Sony reported that the newer models of their devices will be priced far less than the cost needed to make them.

Microsoft's reasoning, Gartenberg said, may be that the more Xbox-like consoles there were on the market, the easier it would be to sell Xbox-branded games. That would mean Microsoft would have a larger market for the titles it published. And it could also put the squeeze on the PlayStation by inspiring game developers to focus on titles for the Xbox and its generic brethren.

"No one video game software developer just writes for Xbox," Gartenberg said. "But what it would do is tell publishers, 'Hey, look how many more consoles we are on.'

"Still," Gartenberg said, "Microsoft would have to make sure that all the people who license their Xbox are up to their standards, and at the end of the day they would still be competing with Xbox sales."

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