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Monday, October 21, 2002

Game that Microsoft plays
Faisal Islam

IF you can’t beat them, buy them. Or so, appears to be Microsoft’s approach to the $ 30 billion video games industry. Last week Bill Gates’ software giant swallowed Rare, the acclaimed British company behind the Donkey Kong, Starfox and Goldeneye games, for $ 400 million. Rare’s reclusive founder-owners, the Stamper brothers, will develop games only for Microsoft’s Xbox. Until now the British company had made its games exclusively for the rival, Nintendo system. Disappointingly for Microsoft, just a year after launch the Xbox is battling with Nintendo’s Gamecube to establish itself in second position in the global market.

It was not meant to be like this. A year ago, armed with a launch marketing budget of $ 500 million, Microsoft set its sights on Sony’s market leader, PlayStation 2. Despite an award-winning advertising campaign, Xbox has miserably failed to reach shipment targets outside the USA. In Europe, the competitively priced Gamecube undercut the Xbox.

In the six months the machine has been on sale, the price has had to be slashed twice to kickstart sales. Industry analysts say Microsoft loses up to $ 150 on every Xbox sold, hoping to make money back on royalties for publishing games. In Japan, the crucial pioneer market for video games, latest estimates suggest the machine has sold fewer than 3,00,000. The original decade-old PlayStation outsells it, as does the ‘Wonderswan’, and even the discontinued Sega Dreamcast. Sony has just sold its 40 millionth PlayStation 2.

So it was brave of Microsoft to charter three planes, the whole of Spain’s Seville version of Alton Towers, and dance music act Groove Armada for three days, to show hundreds of European journalists and games developers how great life has been on Planet Xbox.

This festive season is not the last-chance saloon for the Xbox. But it will heavily influence the amount of money that the Microsoft mother ship is willing to throw at the box. European executives were at pains to tell fellow developers Microsoft recognised it had made a mistake over the launch price, and even the size of the controller, considered too cumbersome by many aficionados.

The machine was always expected to be a loss leader, but there are signs of increasing nervousness at the very top of the company. ‘We’re already number two in the US and we expect to be number two in Europe,’ Microsoft chief executive Steve Ballmer said in Vienna last week. ‘I’m not going to tell you any bold prediction when we’re going to be number one. We’re going to keep at it, at it and at it.’

The line-up of games, while technically impressive, has failed to engage consumers with enough ‘must-have’ games to show off the true power of the machine. By Christmas nearly 200 will be available. Xbox is trying to reposition itself, as the discerning gamer’s choice. For the first time their roster boasts some of the Christmas season essentials. The deal, personally signed off by Bill Gates, was delayed as Rare unravelled complex claims over intellectual property rights with Nintendo.

Rare relinquished all rights to Donkey Kong and Starfox to Nintendo. It will keep the rest, including an extensive back-catalogue of ‘retro’ games from the Eighties.

Microsoft has almost given up on catching Sony in the medium term. Nintendo is very much the target of the Xbox push. The long-term gameplan is rumoured to be to join forces with, or even acquire, Nintendo. But that is a long way off. A previous attempt apparently received short shrift.

For now, the focus is firmly on selling more machines on the back of the Xbox’s communication capabilities. Xbox Live, the machine’s broadband online portal, will launch in March, enabling hundreds of thousands of enthusiasts to compete online while talking to and taunting one another.

Exactly a year on from its global launch, Microsoft’s foray into digital entertainment has yet to prove the doubters wrong. With Sony promising a $150 million marketing assault and Nintendo offering the return of Super Mario, Microsoft will praying for that bright Christmas. — The Guardian