Xbox 360: $50 Bucks Less in the US Won’t Fix a Broken Strategy

One month ago I came up with a list of things Microsoft needs to do to get the Xbox 360 strategy on track:

1. Cut the price;



2. Deal with the product defect issue head-on and move forward;



3. Make the development of E games and changes to its platform core to its messaging; and



4. Continue to develop leading-edge T and A games for the core gaming audience.

Well, Microsoft just dropped the price of its Xbox 360 line by $50 dollars in the US (yet no word yet about Europe).  Ok, they’ve taken the first step, although it is a pretty wimpy effort given where the price needs to be to appeal to a broader array of gamers. But price is only a small piece of the puzzle. They need to listen to their current customers and the broader market they purport to be targeting if they have any chance of achieving a decent return on their multi-billion dollar investment. The handling of the product defect issue? Too little, too late. The price cut? Too little, too late.  Getting the non-hard core gaming market excited about their upcoming offerings, as well as convinced about their commitment to both  leading-edge games and innovative hardware enhancements beyond the current controller? Hasn’t happened yet. And this also means getting the developer community behind the console as something other than a hard-core product dependent upon Halo 3, Gears of War and games of this ilk. I haven’t seen evidence of this strategic shift and messaging, and am personally quite cynical that without a pronounced change in Microsoft H&E leadership that this will happen any time soon.

And as cynical as I am about Microsoft’s Xbox 360 strategy, consider these words from the guys over at GigaOM:

If you glance at game industry news every now and again, you might have noticed that Microsoft (MSFT) is lowering the price of its Xbox 360 line
by $50, starting today. But unless you’re a hardcore gamer who’s
already planning to buy a 360, it’s too little, too late. It won’t
significantly extend the 360’s waning lead in the market, or bolster
Microsoft’s dreams of owning the PC living room space, let alone stop
the juggernaut that is the Nintendo Wii.
Why? Neither the original Xbox or its follow-up have built up much of
an install base outside of the hardcore gamer demographic, which
typically buys next-generation consoles in the first few years of their
cycle. By one estimate, these “power gamers” comprise just 6 million U.S. households;
the remaining 47 million who play games but aren’t so eager to pay
$350-plus for a new gaming system are likely to remain unmoved by such
a paltry price cut. With 10.3 million units sold worldwide, this market
is pretty much tapped out, leaving Microsoft to struggle against 360’s
branding as a hardcore gamer system (which the company itself fostered)
while competing with a console that entirely owns the “game system for
everybody” niche.

********************

And regardless the 360’s price, the industry is moving away from the
system in the area that matters most: exclusive titles and development
budgets. Here the Wii has already claimed victory; it has the most exclusives currently in production, while top publishers like Electronic Arts and Activision
are shifting their budgets in Nintendo’s direction. (It’s doubtful that
the sequel to the 360’s upcoming lead exclusive, Halo 3, will bring in
any new customers.)

So in the end, it doesn’t matter if the 360 is $50 or even $100
less. Ultimately, the price cut will just reveal how niche the system
has become.

Exactly. Come on, guys. The blogosphere, be it the guys at GigaOM, Chris Kohler at Wired Game I Life or myself, have come up with some pretty rational approaches for how you can get it together. Unfortunately, however, our protestations seem to fall on deaf ears. Best of luck with your “winning strategy.” I guess you know best.