Xbox tries to get its 'Halo' back

Microsoft is hoping "Halo 3" will boost Xbox sales enough to knock Sony's PS3 down for good.

With next week's release of Halo 3, gamers will get their chance to see just what happens to Master Chief at the end of the trilogy.

For Microsoft, it's a golden opportunity to get some positive mojo for the Xbox 360 after a summer's worth of headlines centered around quality problems that forced the company to extend the console's warranty and take a $1 billion charge.

"This is the kind of attention that we'd prefer," said Shane Kim, general manager for Microsoft's game studios.

There is little doubt the game, which goes on sale at midnight on Tuesday, will be a blockbuster release. Brokerage Wedbush Morgan predicts that Microsoft could sell 3 million copies in the product's first 12 days. The 2004 release of Halo 2 brought in $125 million in its first day, a then-record, Kim said. That's a far cry from the kind of revenue that Windows or Office generates in a quarter, but it's still some serious cash.

"Halo is one of those 'sure thing' releases for the industry," said Anita Frazier, a video game analyst at NPD Group. Microsoft has already sold out of an ultra high-end "legendary edition" that includes a Spartan helmet.

But the real question is what the broader impact of Halo will be, particularly on sales of the Xbox 360. Kim said he has talked with retailers, some of whom expect 30 percent of early Halo 3 purchasers to also take home an Xbox 360.

"We're pretty convinced that a lot of Xbox 360s are going to get sold along with copies of Halo 3," Kim said.

Wedbush Morgan predicts that, spurred by Halo, Microsoft might sell 400,000 consoles for September, the most it would have sold in any non-holiday month since its launch.

Microsoft, already outpacing Sony's PlayStation 3, hopes it can declare victory over its archrival after this holiday season. "We have a great opportunity to push them to the brink in terms of finishing behind us in this generation," Kim said.

This holiday season is seen as a critical one, with Microsoft, Sony and Nintendo all at full production.

The wild card has been the success of Nintendo's Wii, which has been outselling both rivals by a considerable margin in recent months.

Kim acknowledges Microsoft needs to become better at attracting the casual gamers who have been drawn to the Wii with its easy-to-pick-up games and intuitive motion-sensitive controller.

"We have to compete for that customer," Kim said. "There's no question about it."

While Kim didn't offer any specific plans, he said that the company doesn't plan to wait to lure some of those casual gamers over to Xbox. "That's a 'this generation' thing and not a 'next-generation' thing."

The release of Halo 3 will be a key test, though, for just how much confidence Microsoft has managed to restore with its warranty extension.

Kim said Microsoft hopes its problems are behind it.

"From everything we can tell we have been able to remove a lot of concerns and doubts in people's minds," he said.

"Halo is one of those 'sure thing' releases for the industry."
--Anita Frazier, analyst, NPD Group

Some consumers are still griping, however. One reader recently wrote in to CNET earlier this month, upset that Microsoft said his Xbox's hardware problems were not covered by its warranty extension program.

Even with Halo 3's release imminent, he said, "I am seriously considering tossing this and the games and going with a different console."

Alyson Craghead, part of a group of female professional gamers known as the Frag Dolls and a Halo expert, can't wait to get her hands on Halo 3.

She took part in the beta test earlier this year. "I'm curious to see how the story ends," Craghead said. "Bungie (the Microsoft game studio behind Halo) is just so good at telling the story."

Craghead was a diehard Quake player until a friend convinced her to give Halo a try four years ago. For a while last year she was working eight hours, playing Halo 2 for eight hours and then sleeping.

She really liked the ability to play the game with others over the Internet through Xbox Live, but grew somewhat frustrated with the level of cheating. "Over the past six months to a year, there have been so many cheaters and modders," Craghead said. "It's not as fun as it was right off."

Craghead's professional game playing duties (spending 40 to 60 hours a week playing Rainbow Six Vegas) have also cut into her Halo time, but she plans to reconnect with Master Chief once the new Halo debuts.

"I will make time for Halo 3," she said.

It's that kind of enthusiasm that Microsoft is hoping will be contagious and eventually spread beyond Halo and even the Xbox.

"It's important to add that hipness and coolness to Microsoft, the brand," Kim said.

Microsoft is also working to extend the Halo franchise. Although Halo 3 is definitely the last in the trilogy, the company has two Halo-related games in the works.

One, Halo Wars, is an action-strategy title due out early next year from Ensemble Studios, another game studio within Microsoft's game division.

Microsoft is being stingy with details on the other venture, which it says is a new interactive series to be set "in the Halo universe."

What it won't be, is a Halo 4. "Halo 3 really is the end of the trilogy," Kim said. "Master Chief will finish that fight."

Filmmaker Peter Jackson was due to help create a Halo movie, announced back in 2005, but plans were shelved a year later. Kim said it is still likely that Halo will make it to the big screen.

"I remain convinced that a great Halo movie will be made sometime in the near future," Kim said, but didn't reveal any new details on how that might happen. "We continue to be in active discussions with our friends and potential partners in Hollywood."

Microsoft also has done some product tie-ins, including Halo 3-themed Xbox 360s and Zunes.

Halo remains largely a console story. However, the company did release a Windows Vista version of Halo 2 earlier this year.

"That's done OK," Kim said, but added, "We don't have any announced plans to bring Halo 3 to any additional platforms."