Technology

Microsoft Plays It Cool on Games


Microsoft Chairman Bill Gates made a surprise appearance at the E3 gaming conference in May. One reason for showing up was to whet the public's appetite for Xbox Live Anywhere, an extension of its Xbox Live online gaming platform. Xbox Live Anywhere lets gamers play Xbox games against one another through Xbox live service on whatever device, from cell phones to consoles, PCs to portables.

Gates succeeded in his mission at E3, and on Sept. 27 Microsoft (MSFT) released more details on the service. The newly released Marvel Universe Online, from Microsoft Game Studios, will allow for cross-platform play between users of the Xbox360, out since November, and personal computers outfitted with Microsoft's coming Vista operating system. Ditto for the new first-shooter game "Shadowrun," first announced in May.

"This week is where people will really see what Microsoft is up to [with Xbox Live Anywhere]," says Rich Wickham, director of the games for Windows, entertainment, and devices division at Microsoft. "It's a very big vision. It's ambitious."

LESS THAN SATISFIED. Still, many who got their hopes up after Gates' presentation are likely to come away unsatisfied. The blockbuster game "Halo 2," where players direct armies to battle aliens, will be available on Vista PCs, Microsoft said on Sept. 27. But in this version, PC users still won't be able to compete against Xbox owners.

At E3, Microsoft demonstrated cross-platform gaming that included cell phones. But Microsoft remains mum on its mobile Xbox Anywhere plans. It's also staying tight-lipped on its portable gaming plans.

What about other cool features for Xbox Live for PCs? On Sept. 27 Microsoft announced a new action-adventure game "Splinter Cell" title for Xbox Live fans, as well as a partnership between Academy Award-winning director and producer, Peter Jackson, and Bungie Studios to create episodic content for Xbox Live. But many analysts expected more sweeping announcements, such as new user-generated games tools for PCs and consoles. "Halo 2" for Vista will let PC users create their own maps for use in games. Billy Pigeon, of consultancy IDC, expected an array of capabilities that would turn Xbox Live into a YouTube of self-made games.

FIGHTING OFF SONY. It's possible Microsoft is holding off on big-gun announcements until November, when rivals Sony (SNE) and Nintendo are expected to release the latest versions of their respective consoles and accompanying online gaming services, which may be similar to Xbox Live (see BusinessWeek.com, 9/20/06, "Will Nintendo's Wii Strategy Score?").

Online service rivalry will heat up as Sony introduces a free online service (Microsoft charges users $49.99 for a 13-month subscription). Microsoft's products "were the big news last holiday season," says David Cole, principal at gaming consultancy DFC Intelligence. "They might have trouble rising above the noise this time." In May, Gates promised Xbox Live Anywhere mobile capabilities by spring 2007.

Some Xbox Live Anywhere features, such as mobile capabilities, may have been placed on the back burner while Microsoft focuses on console sales, analysts speculated. By June, Microsoft had sold 5 million Xbox 360 units after a half year on the market. Sony expects to sell 6 million units of its PlayStation 3, due in November, by March 2007. Nintendo plans to ship 4 million units in the final two months of 2006 (see BusinessWeek.com, 5/10/06, "Game Time For Sony, Nintendo and Microsoft").

In other words, Sony and Nintendo "could catch up fast," says Cole. That makes it vital for Microsoft to focus on consoles rather than PC and mobile gaming. "Trying to be a master of everything can make you a master of none," Cole says.

PLAYERS WANTED. Then there's the question of demand. Parks Associates surveyed 2,000 gamers with Internet connections, and found that only 18% of all gamers play games on consoles, portables, and cell phones. Of those, 31% would be interested in cross-platform play. "If you are an Xbox loyalist, [Xbox Live Anywhere] expands the value of the service," says Matt Rosoff, an analyst with consultancy Directions on Microsoft. "But it's an incremental thing [in terms of revenue and users]."

Adding PC-to-console playing capabilities may make more sense. Parks Associates' research shows that 40% of gamers who play both console and PC games would be interested in cross-platform play. PC gaming is a huge market, expected to grow from $3 billion worldwide to $9 billion by 2010, according to Microsoft estimates. Microsoft already has a foot in the door with Windows and MSN Games.

That said, Microsoft appears committed to producing more cool new games for the Xbox 360. On Sept. 27, Microsoft announced "Halo Wars," a new real-time strategy game for Xbox 360 based on the legendary "Halo" universe. It has also announced pricing; $199.99 for its new high-definition DVD player, to be used with the console. Xbox 360 is well-positioned to compete against rivals—unless, with Xbox Live Anywhere, Microsoft attempts to bite off too much.


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