MICROSOFT XBOX:

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MICROSOFT XBOX THE BATTLE FOR GAMING SUPREMECY
Michele Della Briotta Yeganeh Mashayekh Stephen
Stokols Steven Sesar Charlie Zhong
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Introduction

• What is Xbox? Product Description
• Gaming Market
• Competitive Landscape
• Microsofts Current Marketing Strategy
• Recommendations

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What is XBOX?

• Xbox is an entertainment hub that provides
  users
• High Quality Video Games
• DVD Player
• Internet Support
• Online gaming
• Web surfing, Checking E-mail, etc.
• Audio/Video System
• Create soundtracks
• Supports HDTV and TV resolutions up to 1920 x
  1080.

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Product Specifications
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Market Size

• Total Gaming Market Size 50 Billion, 2001
• 2001 total market served by Xbox 18.5 Billion
• 2006 total market served by Xbox 47 Billion

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Market Share

• The console market has few players
• Sony owns 45 of the console market
• Sega exited the console market this year

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Gaming Value Chain

• The value chain in the game industry
• A few strong incumbents are leading the market
• Content companies and console makers are creating
  the capabilities to control the consumer
• Content companies are creating platforms and
  consolidating to create economies of scale

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Top Competitors

• Sony PlayStation 2
• Sony is the market Leader
• PS2 has entered market a year earlier than Xbox
  and GameCube
• PS2 has achieved critical mass
• Sony has the largest selection of video games
• PS2 is targeted at 18-34 year old consumer market

• Nintendo GameCube
• GameCube is 199 only
• Nintendo has historically successfully game
  brands
• Nintendo has most advantageous royalty structure
• GameCube is targeted at 7-16 year old consumer
  market

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Product Comparison

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Competitive Landscape
High
Technology Sophistication (based on
functionality such as DVD offering and online
gaming capabilities as well as graphics quality)
Gamers Ages 18 - 34
Approximately 60 of total market
Sony Playstation 2
Sony Playstation
Gamers under 18
Approximately 35 of total market
Nintendo Game Cube
Low
0
300
Number of Games Offered
Source Global Equity Research, USB Warburg,
The Global Video Games Monthly
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Current Marketing Strategies

• Target Market
• Sophisticated gamers
• Men, ages 18 to 34
• Consumers who want more than just games
• Pricing
• Console is priced at 299
• Bundling issues
• Distribution
• Sell 1 to 1.5 million consoles by the end of the
  year
• Xbox will be available at most major retail
  outlets
• The product will be launched in Europe and Japan
  next year

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Current Marketing Strategies Cont.

• Supply
• Flextronics regional Xbox manufacturing
  operations in Mexico
• Retailers started taking advanced orders in early
  September
• Partnerships
• The company has signed more than 200 of then
  worlds top game developers and publishers to
  create Xbox games
• Marketing partnerships have been formed with Taco
  Bell and Sobe
• Communication
• 500 million worldwide marketing budget
• 111 million domestic this year
• Primarily print and television advertising
• Only 500k spent on online advertising

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Long Term Strategy
Convergence of Console PC
Generation III All-Encompassing unit like PC
(2005)
Generation I Just plays games (1990s)
Generation II Entertainment hub (2003)

• Competing consoles run on different OSs
• Microsoft must ensure that Xbox, and more
  importantly, its OS, is the dominant standard.
• Keeping Xbox at the forefront of migration to PC
• Introduce new features closely related to PC to
  accelerate the consoles transition to a PC

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Positioning Strategy

• Xbox is positioned as possessing higher quality
  and more functionality than existing consoles

High
Technology Sophistication (based on
functionality such as DVD offering and online
gaming capabilities as well as graphics quality)
Gamers Ages 18 - 34
Approximately 60 of total market
Sony Playstation 2
Sony Playstation
Gamers under 18
Approximately 35 of total market
Nintendo Game Cube
Low
0
300
Number of Games Offered
Source Global Equity Research, USB Warburg,
The Global Video Games Monthly
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Recommendations 3 Ps

• Pricing Increase price point 50, to 349
• Aid in positioning as higher quality Price
  Performance
• Reduce loss per unit
• Non-Price Competitive signal to Sony and Nintendo
• Positioning Target online gaming niche by
  focusing on Internet Gaming as the KEY
  differentiator
• Ability to improve prices as a result
• Dominate online gaming market niche
• Partnerships Increase game development network
• Tap entertainment industry for band and
  creativity
• Online gaming developers

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Recommendations Cont.

• Distribution Create Incentives for Retailer
• Increase margins on console and/or Video Games
• Develop joint promotion and advertising campaigns
• Communication Focus communication of superior
  capabilities
• Specifications vs. Capabilities
• Co-Promote games
• More co-advertising online with e-tailors

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Questions?