May 21, 2013

Microsoft preps Xbox do-over

The new gaming console -- to be unveiled Tuesday -- faces more competition that past versions.

Bloomberg News

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Attendees play with Microsoft’s Xbox 360 game console at the Consumer Electronics Show in Las Vegas. Microsoft faces threats from companies including Apple and Facebook.

David Paul Morris/Bloomberg News

Zynga Inc. pioneered social gaming with such titles as "FarmVille," which lets users populate digital landscapes with virtual cows and tractors. Facebook, owner of the world's largest social-networking service, is building its own gaming empire, announcing in March that the number people paying to play games on its service rose 24 percent from a year earlier.

Companies like Finland's Supercell, maker of "Clash of Clans," and Japan's GungHo Online Entertainment Inc., which sells "Puzzle and Dragons," are winning over customers with free downloadable games that for many are replacing pricey console titles, said Ed Fries, a former Microsoft video-games vice president.

"I don't want to go to a store and pay 50 bucks - that's not how people will consume games," Fries said. "I want that Apple-like experience of having a lot of choices and to be able to try to buy."

New entrants may challenge the Microsoft-Nintendo-Sony oligopoly in video-game devices as well. Ouya Inc., funded by Kleiner Perkins Caufield & Byers, is making a $99 game console that runs on Google's Android. Nvidia Corp., maker of the graphics chips Microsoft used for the first Xbox, began taking orders this month for a handheld device called Shield.

Apple has sold more than 500 million devices with its iOS software built-in, it has more than 175,000 games and entertainment titles on its app store and more than 200 million users of its Game Center, a hub for multiplayer games, a company spokeswoman said.

Intel Corp., the world's largest chipmaker, is planning to introduce an over-the-Internet paid-TV service later this year. The new offering will be based around an Intel-designed set-top box that the company says will be much easier to control than existing devices from cable and satellite providers.

Even as it upgrades the Xbox, Microsoft needs to ensure it doesn't short-change its core audience by shifting focus too much toward entertainment and casual games.

To get hard-core gamer types to pony up for a new Xbox, Microsoft must deliver better graphics and more innovative experiences, said Liam Callahan, an NPD analyst, citing a survey. He found that general entertainment features like Netflix Inc. movies are further down the list of features desired in a new console.

"Those entertainment options are important - in a sense they are almost a given," he said. "But gamers won't buy a next-generation console from Sony or Microsoft for that."

Microsoft already offers television, movies and sports on its Xbox Live online service, through partnerships with various content companies.

The company hired former CBS Corp. television executive Nancy Tellem in September to oversee content produced for the Xbox.

With Microsoft's smartphones and tablets barely making a dent in those respective markets, the company has also exhibited a willingness to connect the Xbox to tablets and mobile phones from competing companies. Xbox SmartGlass, an app meant to let console users view additional content and features on mobile devices, comes in versions for Android and iOS.

All the while, Microsoft will need to remain vigilant against perennial contenders Nintendo and Sony.

"Microsoft has the opportunity to really kick the ball out of the park," said Fries, who co-founded video-game developer Airtight Games and advises game companies including Ouya. "But there are a lot of competitors they have to think about and a lot of things they have to get right."


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