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X-Box's Future?

Thursday, September 06, 2001 by TheDoc

Written by: Mike Laidlaw

With November looming ever closer, the real war for your Christmas console dollar is heating up. For those who haven't noticed, the X-Box is receiving a major push at this point, which seems sensible since Microsoft appears aware that they're fighting an uphill battle into gamers' hearts. With this in mind, your author went out into the field and sat down for some conversations with various video game retailers, including owners, managers and sales associates alike. While most of them couldn't speak in specific terms due to company policy, they were able to give me an insight into Microsoft's strategy, which, for all intents and purposes, can best be described as the old "velvet glove over an iron fist" approach. Below we'll take a look at the specifics of marketing the green and black console while we also sneak a peek at what plans the competition has already set in motion to counter the Redmond powerhouse.

With stiff competition from Sony and Nintendo, one had to wonder what stance Microsoft would choose in order to help promote their product best. Would they rely on top-tier developers like Bungie and Sega to pull off their launch? A few years ago, we might have expected the system to be judged on merit and balanced and weighed by the companies who retailed the product, while receiving the same treatment from an ever-cautious public. Certainly we can see signs that developer branding is a key part of the X-Box strategy, as the acquisition of FASA Interactive and Bungie were obviously part of a long-term plan to build up a sizable roster of purely game developers. Later announcements that Sega and EA would be strong supporters of the X-Box certainly didn't hurt things any, though both companies are also producing titles for the PS2 and GameCube, meaning they've simply allowed Microsoft to match the competition. Still, as we saw with the feud between Sega and EA Sports, not having a major developer on your side can seriously hurt your system's sales and appeal.

Another common tactic when launching a console is to promote its capabilities heavily. Until Mr. Gates announced the massive $500 million budget to promote his new system, the Dreamcast's $500,000 marketing campaign was one of the biggest media blitzes yet seen in the land of gaming. Sega knew that their system was superior to the well-established PlayStation, so they pushed that angle with their "It's Thinking" campaign. When coupled with a barrage of images and drool-inducing screenshots, the emphasis on thought implied that Sega was more worried about gameplay and AI than anything else, and that the high polygon counts and crisp textures just happened to be side-effects of their system's vivid imagination. With its Pentium processor, hard drive and more, the X-Box has certainly made no secret of its capabilities, though a jaded gaming public has heard enough statistics over the years to know better than to trust raw capabilities without seeing the system in action.

So, if traditional marketing can only take you so far in the battle for gamers' hearts, how does the new guy on the field compete? Take a stroll into your local software retailer, and chances are that you'll have your answer: product positioning. While some smaller chains may not have extensive marketing devices in place, the larger moguls of software distribution all have this mysterious chunk of shelf space devoted to black and green DVD cases, all stamped with "Coming Soon!" Even the smaller retailers have X-Box paraphernalia on hand, with the most notable being the burnished steel stand-up that has been in stores since March this year. This exposure is key to raising the consumer's consciousness of a new product, and Microsoft doesn't have to worry about damaging the sales of their older hardware; Nintendo, however, can't afford to push too hard while N64 units are still selling moderately well and need to be cleared out.

With the consumer blitzed with X-Box merchandise "already" on the shelf, thus giving the impression that the console is practically here, Microsoft decided to push the game one step further by targeting the sales personnel. According to many managers and sales staff, Microsoft has been the most open company of the big three when it comes to demonstration units, private previews and information. One retailer noted that Microsoft was the only company to ever offer his staff a preview of their system, and that this willingness had strongly influenced his decision to heavily promote the console before its release. He also noted that the probability of receiving a complimentary demonstration model was quite high, a stark comparison, in his opinion, to the other developers' reluctance to match that offer.

Moving from management to a more casual chat with the sales personnel, it became clear that the fever had caught them up as well. While questions about the GameCube were met with vague answers and sometimes shrugs, X-Box literature was quoted with wild abandon and the game lineup seemed both common knowledge and highly anticipated. In part, this was a direct result of asking the questions when I did, as the only real solid information about the GameCube available to these purveyors was its launch date. Pre-orders, cost and so forth had yet to be solidly determined, so it's understandable that they would be more familiar with the product for which they were currently taking orders. Why promote an item that you can't sell immediately when you could close a juicy pre-order today by emphasizing the X-Box's capabilities?

So far we have painted a picture of a gentle giant, smiling benevolently while handing out goodies and gaming magic to the shopkeepers of the world so that they might more effectively share the joy with the public. To a degree, and from the perspective of the individual, this is exactly the case. If we zoom out to a macro scale, however, the situation is quite a bit different. Back a few months ago, this writer pointed out that Nintendo was engaged in a bit of heavy-handed thuggery regarding the gaming market, but declined to "blame" them for this act and instead pointed out that they were simply engaged in competitive business practices. At the time, a letter was circling around the Internet that suggested to retailers that they should remove the emphasis from a product that was months away from store shelves so as not to hurt their immediate sales of current products. The truth, however, is that most retailers had no choice but to promote the unnamed product of Nintendo's contention (which was clearly the X-Box). Microsoft, as everyone knows, is more than a game developer and their share of the personal computer market was proven extensive enough to warrant and sustain accusations of monopolistic activities. Between their large lineup of titles, application software and, of course, operating systems, software retailers the world over have a large chunk of their product tied up in the Redmond-based company's lineup. Factor in additional products like gaming peripherals, mice, keyboards and more, and Microsoft makes up a significant portion of what we see on the shelves of our local computer retailers. This, of course, is excellent for chains of retailers, since they can benefit from bulk discounts by purchasing vast amounts of products from one supplier and cross promoting the items' interaction with each other. Of course, Microsoft demands some consideration for these incentives and this results in extensive displays of their products alongside other major producers like Logitech, Hewlett Packard and so forth.

When you have so much invested in a single supplier, it's hard to say "No" when they approach you with a simple request to promote their new product -- especially when your competitors will benefit from incentives that you will lose if you refuse. This, of course, explains the shelf space devoted to the X-Box, even though it's more than a month off of release. Even though shelf space is at a premium in retail outlets, it makes sense for Microsoft to devote money, resources and some leverage towards the promotion of their product, simply because this is their first console. Unlike the other giants, Microsoft loses nothing by encouraging buyers to hold off on their purchases until November.

Despite this massive marketing budget, leverage with the retailers, and a large roster of developers under their belts, the X-Box still has a hard road ahead of it. With the fantastic Gran Tourismo 3, Twisted Metal Black and other second-generation titles finally using the PS2 to something approaching its potential, we're seeing some spectacular visuals and gameplay that make for an alluring package. The lower price point and whimsical but jaw-dropping quality of the GameCube's graphics have also caught more than a few critics' eyes, causing them to dub Nintendo's new console as the only one that actually looks like it's running video games, instead of technical demos.

In the end, the launch of the X-Box and GameCube will mark a landmark in console gaming, as it's the first time a new kid on the block has been able to step up to bat with a fairly even playing field, both in terms of marketing and system power. In the end it's the games that will decide which of the three emerges victorious, if there's to be a clear winner at all. In the long run, though, the big winners might be the PC gamers, who will find that the X-Box's titles port easily to their systems. Even better, once the fervor surrounding the new consoles dies down a bit, the industry will have time to turn its attentions back to the PC, which will continue to evolve where the PS2, GameCube and X-Box remain behind with processors that will seem, by comparison, slower by the month.

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