Microsoft Moves onto Nintendo's Motion Turf

(page 2 of 2)

Indeed, the Microsoft effort is part of a broader industry trend to expand gaming from a solitary pursuit into a more social experience inclusive of all ages and types. To do that, Sony and Microsoft are rushing to position their consoles as multipurpose entertainment centers. Both the Xbox 360 and PS3 now let users download movies and television shows through Internet connections. And Microsoft aims to one-up competitors this year by adding Facebook and Twitter applications that are closely integrated into its online Xbox Live Marketplace, which offers access to friends' lists, the games they are currently playing, and their digital avatars.

Analysts say that for rivals to have any chance of winning back market share against Nintendo they will have to convince more people that their console is not just a games platform. More widespread availability of high-speed Internet connections makes it easier for console makers to forge partnerships with Netflix (NFLX) and other content providers. But convincing people other than ardent gamers that consoles are a good choice for such services has been a challenge, says Gartner (IT) analyst Michael McGuire.

Price: More Than $200?

Microsoft's plan to add game-changing technology might require spending hundreds of millions of dollars more to support its money-losing game business. Experts say depth-sensing cameras of the type Microsoft is demonstrating cost about $600 each. Prices should drop during the next year, and the Xbox team is likely to bargain for bulk discounts. Still, analysts say most consumers will balk at paying more than $200 for such a gizmo.

It's a risk Microsoft seems willing to take. The company has a larger objective of securing a lasting place in consumers' living rooms. Once there, it can charge content providers and advertisers to get access to potential customers through the Xbox. "Those transactions are not something that has escaped Microsoft's attention," McGuire says.

The appeal hasn't been lost on Nintendo and Sony either. Both have efforts under way to deliver new services and technology to their handheld systems and home game consoles.

Edwards is a correspondent in BusinessWeek's Silicon Valley bureau.

Business Exchange

Track and share business topics across the Web.