Game selection key to Xbox's chances

By David Becker
Staff Writer, CNET News.com
November 15, 2001 4:00 am PT

You can blast away at gruesome aliens, whack fellow motorists with giant mallets and run roughshod over the Green Bay Packers with the Xbox. But it's anybody's guess at this point whether that will be enough for Microsoft to succeed in the game console business.

Game players, industry figures and analysts agree that Microsoft has assembled a fairly strong roster of titles to accompany the Xbox's Thursday launch, beating the limited software lineup that accompanied the American arrival of Sony's market-leading PlayStation 2.

Initial Xbox titles include shoot-'em-up game "Halo," fighting game "Dead or Alive III" and street racing simulation "Project Gotham Racing," all visually impressive genre titles likely to generate strong interest from hard-core game enthusiasts, and all exclusive to the Xbox.

But long-term success for Microsoft will depend on having breakthrough titles--games that appeal to the average entertainment consumer--that are only available on the Xbox.

"I think the challenge for Microsoft is going to be...how do you get the Xbox into more than the hands of just the hard-core gamers," IDC games analyst Schelley Olhava said. "They really have to target the casual gamers who don't play every day, who buy a couple of titles a year. The challenge for Microsoft is to develop brands that will be appealing to the mass market."

For now, there doesn't appear to be much like that in the Xbox stable. "A lot of what I hear is that there doesn't seem to be any must-have game for Xbox," MDR/Instat analyst Brian O'Rourke said.

What Xbox does have is a number of games such as the Microsoft-developed "Halo" that are likely to appeal to veteran button-mashers. Those will drive initial sales of the console and may be Microsoft's best hope for gaining the market position it needs to convince developers to create more games for the console, eventually delivering the breakthrough hit that will push Xbox to the masses.

"The more consoles they can get sold, the more they can convince third-party developers to really make Xbox a priority," O'Rourke said.

Ed Fries, vice president of games publishing for Microsoft, said the Xbox's software lineup will deliver the goods. "I'm really proud of our launch lineup; it may be the strongest lineup a console's ever had in history," he said. "The killer app for us is really 'Halo.'"

What you see is what you get, however, cautions Trip Hawkins, CEO of game developer 3DO, which has no plans to support the Xbox. Console makers count on selling many games per console (known as the tie-in ratio) to subsidize hardware costs, and the Xbox lineup is way too shallow to pay off, he said.

"It looks like Xbox will have the worst tie-in ratio in the history of the games business," Hawkins said. "It'll have a couple of killer games for the hard-core gamers, and the rest of them will be rented."

Success for console makers largely depends on having exclusive titles that aren't available on any other system. Nintendo does that by making most of the software for its consoles, relying on franchises such as Mario Bros. and Pokemon. However, third-party developers such as Activision, with its "Tony Hawk: Pro Skater" series, and Infogrames, with its "Alone in the Dark" games, generally hedge their bets by tweaking hit games for as many systems as possible.

Sony has worked from both ends. It has developed a few of its own hits, such as the "Gran Turismo" racing game, while at the same time using its market dominance to convince third-party developers such as Konami, whose "Metal Gear Solid" was a breakthrough for the PlayStation, not to bother with other consoles.

Microsoft has developed a number of the most prominent Xbox titles on its own, but it's still relying largely on third-party developers, a dangerous position for a newcomer to the market. The software giant's position has even slipped a bit in recent months. "Malice," a former Xbox exclusive that Bill Gates highlighted at the Xbox's unveiling early this year, will now also be available for the PlayStation 2, developer Argonaut recently announced.

"Microsoft has really copied Sony in a number of ways, including the first-party mix," O'Rourke said. "About 70 percent of the games are third-party, which means that 70 percent of your games are on other consoles. You can get away with that if you're Sony, but its a lot more problematic when you're just entering the market."

Added Olhava: "If I'm going to decide between one of these three systems, it all comes down to the content. If it's all the same content, I make my decision based on price. When you're talking about exclusive games, that's going to determine whether people buy your console or not."

Microsoft's secret weapon may have nothing to do with developing its own world-class racing game or creating fun game characters, however. Somewhere around the middle of next year, the company is scheduled to unveil an online gaming service that will take advantage of Xbox's built-in broadband support, and online services could well turn into the key element that sets Xbox apart from its competitors.

Analysts have identified online services as one of the key factors likely to drive growth in the video game market over the next few years. Yet Sony has offered only vague descriptions of online plans that include using an add-on modem and keyboard to outfit the PlayStation 2 for e-mail and streaming audio, and Nintendo has frankly said it doesn't know what to do with online connectivity.

Microsoft executives, meanwhile, have painted intriguing pictures of using an Internet-connected Xbox to hook up to huge virtual worlds for role-playing and action games and creating virtual sports leagues around games such as "NFL Fever."

"One of the biggest differences between us and our competitors is that we learned it's very difficult to get console buyers to go out and buy an upgrade for the machine," Fries said. "So we decided it was really important for the Xbox to have everything a gamer needs for the next five years, and online support is a big part of that...Our approach all along is that interactive entertainment is the future of entertainment."

Analysts and others in the industry say Microsoft has a better shot than anyone at bringing online gaming into the living room. The company already runs a large online service for PC games, and the entire corporation is being restructured around the .Net vision of software as an online service.

"Microsoft has been very consistent in positioning this as a networked gaming device, and that fits right in with the overall direction the company is going," said Matt Rosoff, an analyst at research firm Directions on Microsoft.

Robert Kotick, CEO of games publisher Activision, says he's glad to have Microsoft help lead the push into online gaming. "We think Microsoft is particularly well suited to provide the infrastructure needed to support massively multiplayer online gaming," he said. 
 

A $500 million gamble