LOS ANGELES--Videogame-console makers are grappling with the
rise of an array of less-expensive options for gamers--and the
price differences aren't getting smaller.
Microsoft Corp. (MSFT) announced Monday its new Xbox One will be
launching in November for $499, well above price levels it has
previously set for new videogame-console launches. The company was
quick to point out that the device would sell as a single package,
with no extra charges for accessories such as its popular Kinect
controller device.
"I think we're bringing tremendous value," said Marc Whitten,
head of Microsoft's Xbox Live Internet service, in an interview
following the announcement here at the Electronic Entertainment
Expo, or E3.
But the new console's starting price--about $200 more than when
Microsoft's Xbox 360 was launched in 2005--comes as videogames are
increasingly becoming a free or low-price standard feature of
smartphones, tablets, televisions and set-top boxes.
And there could be price competition from a more traditional
rival, Sony Corp. (SNE, 6758.TO), which is preparing its own
PlayStation 4 for release later in the year.
Michael Pachter, an analyst at Wedbush Securities, said the Xbox
One price was too high by $100. "Sony can price $50 below
[Microsoft] and still make money," he said.
The price differences underscore console makers' determination
to add new microchips and other features to their hardware to make
videogames much more realistic than those played on less-expensive
devices.
Microsoft, in particular, wants its hardware to play a broader
role than in videogames alone. When it first took the wraps off
Xbox One in late May, it started by showing off features like
live-television technology and the ability to video-chat through
its Skype service. It wasn't until about 25 minutes into Monday's
hourlong presentation that the company announced the first new
games for the device.
At the E3 presentation, which was dedicated to software for the
Xbox One, Microsoft showed an array of first-person action games
that show off the console's improved graphics. But the company also
showed new gameplay aimed at customers who like more casual
titles.
One was a world-building game called "Project Spark." It allows
customers to build their gameplay world by shouting commands at the
Xbox One, such as "Show me trees," and trees suddenly appear on the
ground. Gamers can also shape the ground using a tablet running
Microsoft's SmartGlass applications.
Don Mattrick, head of the Microsoft division that includes Xbox,
said while games are the most widely used application for most
consumer electronics, his unit wanted to make an all-purpose
entertainment machine for "all scenarios and all combinations."
Videogame-console makers' attempts to grow outside the well-worn
mold of selling disks and cartridges for about $60 a pop come at a
time when the industry has been under attack from all sides.
Just as cameras have evolved to become a common feature in
nearly all consumer electronics from their beginnings as bulky
devices for taking photographs, videogames have proliferated to all
ends of the electronics universe. Smartphones and tablets, for
example, have become unexpected hits in the gaming world. Nearly
three-quarters of the 50 most-downloaded paid apps of all time in
Apple Inc.'s (AAPL) App Store, for example, were games.
Even TV-set makers, such as Samsung Electronics Co. (SSNHY,
005930.SE), have joined in the game, offering a version of Rovio
Entertainment Ltd.'s Angry Birds game for its televisions.
That trend, along with cyclical declines in the industry, has
led to more than a year of monthly sales declines of
packaged-videogame products in the U.S., according to market
researcher NPD Group.
Mr. Whitten said he believes the Xbox One's innovations and its
mix of appeal for core gamers, with titles like a new installment
in the "Halo" sci-fi shooting series, along with more casual
products like TV-watching technology and "Project Spark," will make
the device appealing to a broader range of customers.
"I believe Xbox One can grow at a significantly higher clip than
5% on its own," he said, referring to estimates by PwC. "The
product that opens up the next-generation living room will have
very large growth."
He added: "The opportunity is much larger."
Sony is taking a different approach with the PlayStation 4 from
Microsoft. The Japanese company is publicly saying its new device
will be aimed at hardcore videogame fans--and not styled as a
broader entertainment offering.
But the electronics company also is making sure that its new
system is capable of more. While the PlayStation 4 may not offer
the same type of television-viewing features as the Xbox One, Sony
will likely bring a suite of entertainment options such as Netflix,
Amazon Instant Video and Hulu--all are already available on the
PlayStation 3--to the new platform, according to people familiar
with the matter. In December, Netflix said the PS3 was the
most-used device for streaming its video service.
Hulu is a joint venture partially owned by News Corp. (NWS,
NWSA, NWS.AU), which also owns Dow Jones & Co., publisher of
this newswire and The Wall Street Journal.
Meanwhile, rival Nintendo Co. (NTDOY, 7974.OK) introduced a
video remote service for its Wii U console last year. The service,
called Nintendo TVii, used the console's tablet-like controller to
access programs on cable and satellite as well as on-demand
streaming services from Netflix, Amazon and Hulu. Nintendo is
trying to create a second-screen experience to allow users to
comment on social media while watching sports or television.
Nintendo executives said they wanted consumers to feel compelled
to pick up the Wii U controller constantly throughout the day for a
wide range of activities, and not solely for gaming.
Write to Ian Sherr at ian.sherr@dowjones.com and Daisuke
Wakabayashi at Daisuke.Wakabayashi@wsj.com
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