Smith+Strategy+Report

TO: Proximity Video Team FROM: Jesse Smith SUBJECT: Xbox 360 Strategy Analysis DATE: January 10, 2010

This is my Xbox 360 strategy analysis. Xbox 360 is in position to be the front runner in the game console world. The capabilities of the Xbox console still have not been fulfilled despite it already offering so many different products and services. Microsoft is committed to developing unique software for the Xbox 360 in order to maintain and expand its current market share in the gaming world. With correct implementation, the Xbox 360 will be able to incorporate motion-interacting game play while also keeping their previous gamers on board.

Where is Xbox wit respect to the rest of the market? Are they behind Playstation? Is motion gaming the next step in the gaming world?


 * __Xbox 360 Profile__**

The Xbox 360 is Microsoft’s 2nd generation release for the Xbox video game console brand. It was released on May 12, 2005, and as of January 2010, there are over 39 million consoles worldwide (//Xbox 360//). The 360 is more than just a disc-loading video game console; it is also capable of downloading video games, television shows, music, and movies. Xbox 360 also introduced the first live interactive gaming experience with Xbox Live, where you can play other gamers and interact in real-time using an internet connection.

Xbox 360s revenues come from a wide range of sources including: · Console purchases · Game purchases · Video purchases · Xbox Live subscriptions · Avatar accessory purchases · Accessory purchases

possibly combine avatar accessories and plain accessories into one category to make the list less bulky?

Considering the software market, Xbox 360 has increased its market share from 28% in November of 2008 to 37% in November of 2009. This compares to the shares of Nintendo Wii (40%) and Sony Playstation (23%), both of which decreased since 2008. However, Xbox 360’s overall revenue decreased 17% from the fiscal year of 2008-2009 to 13.10 billion, and profits are down 29% to 3.05 billion. This was due to the decreased revenue per console from price reductions during the past 12 months (//Microsoft//).
 * __Competitive Landscape__**

The primary force driving competition in the video game console marketplace is the rivalry between the market’s two major competitors, Xbox 360 and Playstation 3. Although it is clear that Playstation owns the most powerful hardware package, neither Playstation 3 nor Xbox 360 has tapped into the potential power available in the separate hardware packages.

What else are these things capable of doing? How will it affect the gaming market in the future?

Both consoles offer similar products with the main difference being that Playstation’s online gaming experience is free. The development of unique software or the partnership with a company offering a competitive advantage (such as Tivo) will be what determines which video game console will eventually win this competition between Xbox 360 and Playstation 3.

What are the major constraints on this market? Who is more important to the market, suppliers or consumers? How difficult is it for new companies to compete in this market? It would be nice to know a little bit ore about how the market operates depending on changes in the industry (not much information, just a small overview).

The Xbox 360’s business strategy does not follow the previous mold of computer entertainment systems. In the past, completely new consoles were introduced about every 3 years, but Microsoft believes the 360 will not need to be revamped for many more years than that. With new software packages and content services, the Xbox 360 is prolonging its own life. Project Natal is Xbox 360s most recent and most significant software package. Set to come out sometime in 2010, Project Natal is an entirely new gaming experience which allows the gamer to interact with the console by moving their body, not a controller. Microsoft claims they will change gamers’ experiences completely by developing games around the Natal software, and not simply adapt past games to the software (McWhertor). The Xbox 360 will continue to offer all of the current amenities as well as introduce 3D games in the near future.
 * __Player’s Business Strategy__**

Will the Wii or Playstation affect this strategy? What problems could possible arise during this stratgey? Isnt this following directly in the footsteps of Wii with its motion sensor?

The current capabilities established by Xbox 360s system are very appealing to Generation Y. Being able to download movies, music, and video games, all without even getting up from the couch, is very convenient. However, I feel that the physical nature of Xbox 360’s Natal software is somewhat contradictory to the sort of lifestyle the Xbox brand has already established. From my experiences, Xbox users are completely different from Wii users. Xbox users are tactically intense gamers who enjoy the lack of physical effort involved in playing the console, whereas Wii users are more inclined to facilitate the motion interaction of the gaming experience. As long as Xbox 360 separates its past games with its up and coming Natal games, there will be a new market for the Xbox 360, but combining the two will deter a significant portion of Generation Y users.
 * __Implications of strategy for Gen Y marketing__**

I like the report, I think it is very well done. I am just a little lot by the information because I am not up-to-date with what is going on in this industry. It read well and it was written in lay terms so those of us uneducated on the topic can follow.

Fulton, Scott. (2007, January 25). //huge xbox 360 sales boost microsoft revenue//. Retrieved from [] Hartley, Adam. (2010, January 10). //Microsoft has no current plans for the 'next' xbox//. Retrieved from [] Industry Gamers, Initials. (2009, December 15). //Xbox 360 picks up software revenue slack from nintendo, says analyst//. Retrieved from [] McWhertor, Michael. (2010, January 10). //Microsoft: natal focus on "new original games," not motion control for existing ones//. Retrieved from [] //Microsoft, xbox 360 division see revenue declines//. (2009, July 23). Retrieved from [] Takahashi, Dean. (2010, january 6). //Lifetime sales of xbox 360 top 39m, $20 billion in revenues//. Retrieved from [] //Xbox 360//. (n.d.). Retrieved from []
 * __References__**