The Xbox 360 should win this console war

For a while, I've said that Microsoft needs to find a way to attract more customers and bring more people on board. The first step, I said, was to lower the price of the Xbox 360 all over the world to increase its value to consumers and finally make it an ideal solution for customers.

Just one day after writing that here on The Digital Home, Microsoft did just that. And according to its own internal figures, Xbox 360 sales over the weekend subsequent to its announcement of the price cut were six times higher than sales over the previous weekend. Granted, these are internal Microsoft numbers and we'll need to wait another month to see what the impact will be when NPD releases its official numbers, but I don't doubt Microsoft's sales numbers at all.

From the beginning, the Xbox 360 had the kind of potential the other consoles simply didn't. Sure, the Wii is selling well and there's no sign of it slowing down, and finally the Playstation 3 is catching up to the rest of the pack, but Microsoft has an advantage aside from online gameplay now that it has taken the pricing lead from Nintendo.

The biggest barrier to entry for many consumers in the video game space is price. Because of that, millions of consumers needed to decide which console they prefer based on their budget. Since the Wii was released, those choosing with their wallets picked the Wii. But now, they can pick up the more powerful console at even more affordable price.

There are two ways to be successful in business: product differentiation or pricing differentiation. The way I see it, Microsoft has the advantage on both counts.

Let's face it--the Wii isn't something you play on a daily basis. I own a Wii (and the others, too) and I know all too well how most of my friends and I play: we pick up a game, play nonstop for a week or so, and never play it again. And during the time between playing games, my Wii goes largely unused. And unless a group of friends are over, I don't see much reason to pick up some Wii games and start playing.

In other words, the Wii is for fun and the console you'll normally play at a party. But for those times when you're alone, you simply won't.

The Playstation 3 is an entirely different story altogether. That console is more costly than its competitors and has the kind of third-party support Nintendo could only dream of. But when it's compared to the Xbox 360, it strikes me as an overpriced behemoth that fails on too many levels to make it an attractive buy at the store.

Sure, it has a Blu-ray player, which adds some value, but what else does it really offer that would justify someone paying $100 more for it than an Xbox 360? Better graphics? I don't think so. Better third-party support? No way. A quick glance at upcoming releases tells you that Microsoft is competing just as well, if not beating Sony on the software front. Better first-party games? Eh.

I'm a firm believer that the Wii really is a competitor to the Xbox 360 and the Playstation 3, but I'm suspect of its long-term success. As first-party titles continue to dominate the platform and third-party games (aside from Guitar Hero) sell better on the other platforms, can we forget that online gaming is practically nonexistent on the Wii and it's no longer the only affordable console on the market?

It's tough to say what the future will hold in the video game business. Everyone is under the impression that the Wii will take the prize of this generation's console war victor, but I'm not so quick to agree. Just because it's the leader right now by a relatively wide margin, can we expect it to perform this well indefinitely? I don't think so.

The Wii is out in front because it's the most innovative product on the market, it's the cheapest, and it has the most hype. But now it clings to just two of those components and eventually those will wear off too. That hype won't last another three or four years.

I'm not saying, though, that the Xbox 360 will be purchased instead of the Wii. In reality, I think the higher sales will be the result of Wii owners wanting to own a more powerful console with more features, but until the price cut, they simply weren't able to.

And as for the Playstation 3? Sony better find a way to reduce the price quickly or it'll be the forgotten console of this generation.

When it's all said and done, I'm a firm believer that the Xbox 360 will win the console war. At a price that's finally coaxing people to buy it, Asian sales rising, an unmatched online offering, and a large group of high-quality third-party titles on the way, things are looking up for Microsoft.

It may not be the leader in the short-term or even over the next year or two. But by the end of this generation, look for the Xbox 360 to take the lead and cement itself as the victor.

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