Sunday, May 3, 2009

The Road to E3: Preludes and Transformations

Transformative. That’s how Microsoft is describing its E3 press conference, slated for June 1st, the day before the Electronic Entertainment Exposition officially kicks off. The console manufacturer will “completely transform how people think about home entertainment,” or so its press release says.

These are, of course, bold words, and just how, exactly, the big MS plans on fulfilling them is completely unknown – though there are certainly quite a few hypotheses out there. Some point to a likely growing focus on the casual gaming audience, a hitherto untapped – unknown, even – market until Nintendo cultivated and captured it with the one-two combo of the DS (released in November 2004) and the Wii (November 2006). If true, then expect Microsoft’s briefing to be full of the kind of announcements it made last year: a sleeker interface intended to be more (casual) user friendly; the ability for gamers to make Avatars of themselves and use them in online games; and NetFlix compatibility, allowing movies to be streamed on the Xbox 360 from your computer. Others have speculated that a motion controller, supposedly long under development, will finally be unveiled, constituting the company’s last, best hope at penetrating the Wii’s large install base (although this is just as strong a rumor for Sony’s E3 presence, as well, so take it for what it’s worth). But a very strong contingent of fanboys holds the most interesting, as well the most obvious and unlikely, guess: the latest evolution of home entertainment will turn out to be Microsoft announcing its next system.

There are definite reasons to believe this will be so. Console generations, stretching all the way back to the first modern one, in 1985, have always occurred in alternating lengths: either four or six years. Since the previous generation, the 128-bit epoch, lasted six years, the Xbox 720 – or whatever it will be called – launching this fall, when the 360 turns four, will be right on schedule. A number of publishers and developers, chief among them Blizzard, the creators of the harder-than-hardcore World of Warcraft, have publicly acknowledged that Microsoft has already begun discussing the next-gen Xbox with them. And with the market’s sudden, dramatic, and completely unforeseen shift to the land of casual gaming, there is no better way for Microsoft to capitalize on the industry-wide trend than to create a system that fully embraces motion or other alternative methods of play control from the ground up; releasing peripherals, especially those that are required to play a slew of new titles, well into a console’s life cycle has never historically been profitable (just ask Sega about its ill-fated Sega CD and 32x add-ons for the Genesis, two blunders that alienated the core of its audience and ultimately caused the company to close its doors on the hardware business for good).

Why this won't turn out to be true resides in two basic facts. First and foremost, and to put it as simply as possible, Microsoft hasn’t sold enough units of the 360 to justify the huge amounts of R&D it has sunk into it. Traditionally – the point that console generations are hugely cyclic phenomena should be sinking in right about now – systems bow at $299, sell to a far wider, but still quasi-hardcore, audience at $199, and blow off the doors to all and sundry at $99. This is precisely the pattern followed by the Sony PlayStation (September 1995), the PlayStation 2 (October 2000), and the first Xbox (November 2001). (Nintendo doesn’t count in this analysis, as all of its systems, starting with 1985’s NES, shipped at $199.) The 360 was the first major console to release at a $299-plus price point – and at $399, the word plus certainly is apropos. Even worse, it established a more-expensive-than-is-warranted benchmark that the other two manufacturers were only too eager to pounce on: the Wii cost – and still costs -- $250, while Sony slapped the ridiculous price tag of $599 on its newest machine. With all three companies extremely hesitant to slash their prices – Microsoft has been chopping only $50 a year off of its MSRP – the Xbox 360 has yet to hit its sales peak, and, furthermore, it won’t be on schedule to do so until 2013.

And if that isn't a grim enough picture, then the state of the economy certainly will make it so. Although the gaming industry hasn’t taken nearly as much of a beating as other sectors in the business world, it has, without a doubt, been affected, as the rash of closed studios can attest to – Free Radical and Factor 5 being two of the bigger names on the list. MS itself has even recently said the world’s current fiscal woes would suggest that it should squeeze every drop possible of out its current system, as no one will probably be eager to drop another four to five hundred dollars on a new spate of machines anytime soon. Indeed, this may prove to be a highly convenient reason to stretch out the current generation as long as possible for both of its competitors: Nintendo is literally making money hand-over-fist with every Wii sold (and it sells a lot every month in every global territory); Sony has been making the case for a ten-year console lifespan since before the PS3 shipped two-and-a-half years ago, citing the exorbitant cost of developing both the Cell processor and the Blu-ray format. And there’s something in it for Microsoft, as well – it can take the next few years to position itself as a valid, go-to choice for all the hordes of casual gamers being enticed into the industry by the DS and Wii. By the time the Xbox 720, PlayStation 4, and Wii Too are ready to inundate the world stage, Bill Gate’s company just might have a shot at nabbing the crown away from Nintendo.

In other, more grandiose words, the company will have transformed itself.

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