It wouldn't be accurate to say that the sky is falling for Microsoft's one and only gaming console, the 360, but it may be time to look at what the company is doing right... and where it's going wrong.
The Sony PlayStation 3 is beginning to chip away at the 360's lead in both software and hardware sales in the US, and that system only seems to be picking up steam. In contrast, the 360 doesn't seem to have much real momentum these days.
While it's hard to find ways for Microsoft to get its mojo back, we can easily identify a few problem areas that are becoming clear as the 360 ages. These are the weaknesses in Microsoft's strategy that have to be addressed before the system can hope to get its groove back. Let's take a look.
You have to find your voice
When the PS3 launched, the 360 was the system with more, better games, and the better online strategy. Microsoft also did a wonderful job in poaching some of gaming's largest franchises. Microsoft even brought this up at its press conference at E3: We have Grand Theft Auto, Devil May Cry, and now Final Fantasy! Look at how we've caught up to Sony!
The problem is, these games are still on the PlayStation 3, and Microsoft isn't offering much in the way of improvements to these titles. In fact, given that Microsoft bet on the wrong optical format, we don't know how many discs Final Fantasy XIII will take up when the title arrives on the 360. What else does Microsoft have in the way of exclusives? Halo is a system-seller, sure, but Metal Gear Solid IV is still a PS3 exclusive. Microsoft has many solid racing franchises, but nothing like the power that Gran Turismo brings to the system.
Xbox Live is a great service, but it's not clear that all of its features are needed. While the hardcore complain about Nintendo's friend codes, most mainstream gamers are more than willing to put up with them. And Microsoft's competitors aren't standing still; Home could be the silver bullet that finally gives Sony the edge in online play. The PS3 has one of the most anticipated casual games ever with LittleBigPlanet, and the branding of Sackboy is already amazingly strong.
Add idiosyncratic games, such as Flower, that are coming to the PS3 and Nintendo's absolute dominance of the casual market, and you have a gaming world where cherry-picking old franchises is no longer enough. Gears of War 2 looks great, but Resistance 2 and Killzone 2 look just as good in terms of scale, graphics, and online play.
Microsoft needs to step up efforts to keep its brand strong. The new Viva Pinata game looks good, but that was a game that didn't set the world on fire with its first iteration. Lips looks okay, but with Rock Band 2 and Guitar Hero: World Tour coming up, a voice-only game might not find a home in the collection of most gamers.
Microsoft has spent so much time trying to match Sony's past glory in terms of game selection that it finds itself somewhat at a loss now that Sony has managed to keep some games as exclusives, at the same time it's developing all news ones. The new firmware update that will refresh the UI of the 360 looks strong, but the press gave it a scarily icy reception at E3; the full-scale plagiarism of the concept and design of the Nintendo Mii had many onlookers audibly laughing. It was not a comfortable moment.
Will Halo be enough in the future? With Bungie now independent, that's a very large, very open question. It's time for Microsoft to find its own voice and give itself a unique feel in the market. Its old tricks and the "first to launch" advantage isn't enough anymore.
Find a home in the world
We tend to focus on US sales, because we live in the US. But gaming is an international business, and Microsoft has seen almost all of its success in the US. Both Nintendo and Sony do very good business in Japan and Europe, while Microsoft has always struggled in those markets. Heck, in Japan, the big story is the sales of Sony's PSP.
Microsoft depends on US sales, and while the system sees spikes in other territories when there is a launch of specific, big-name titles, it tends to flounder otherwise. It's hard to think of a way for Microsoft to make in-roads in Japan, but Europe has to be seen as a major battleground. Both Nintendo and Sony have multiple systems that are doing bang-up business across the globe. Microsoft has one system that does well in one market. It might be too late for Microsoft to grab a piece of the portable business, and the Zune is hardly an opportunity in that area, so Redmond is left with one option: the 360 simply has to step it up outside of the US.
Take the PS3's advantages seriously
Whether or not Microsoft has fixed its Red Ring of Death problem, the fact remains that most gamers think the hardware is untrustworthy. You hear about it in the forums, in the game stores, from even casual gamers... everyone either has had systems go bad or they know someone who has. The PlayStation, on the other hand, is damn near rock-solid. Microsoft has to start getting the word out that it has fixed the reliability problems; pretending like this issue never happened is not the solution.
Microsoft also has to pay attention to the hard drive of the PS3. The drives are large, getting larger with the standard systems, and anyone can swap out their drive for a roomier one. Heck, Sony suggests it and gets the word out about DIY tutorials on the upgrade. Microsoft, on the other hand, is sticking with expensive, proprietary drives. It's a situation made more frustrating by the fact that, without large, standard drives, Microsoft can't begin to match Sony's efforts at releasing full games through its online portal.
There is also the fact that Sony's online offerings are free. Yes, Xbox Live is better. But how much better? There are large numbers of gamers out there who simply will not pay money for online play and are more than happy with Sony's offerings. So what if you can't send a voice message across games? Sony's newly-launched in-game XMB adds a ton of functionality, and the Trophies it brings seem to be gaining popularity; I know many people personally who are revisiting old games to tackle the new challenges. Frank and I argued about making Xbox Live free, but it may not matter; the more powerful Sony gets with the PS3, the less Microsoft can count on Live as a profit base.
There is also the fact that Sony has the Blu-ray drive, provides strong multimedia functions on its system in general, and its video rentals and sales work seamlessly with your PSP if you want to take your content on the road. The PSP-PS3 connection gives you so much cool functionality that it makes consumers want to own both for a great media experience. Microsoft has no competition for that at the moment.
We're not offering solutions, just problems
How should Microsoft fix these issues? That's a huge question, and it can be argued for days. Whatever your preferred answer, these problems are real, getting worse, and starting to show up in the sales numbers. Microsoft doesn't have the wiggle-room it did in the market even a year ago, and it's past time to step up to the competition.
Does the company have a viable plan to do that? We'll see as we move into the holiday season. What's clear is that the competition is now much stronger across the board, and that's a good thing for gamers. More PlayStation 3 News...