Xbox games system to hit stores
By Greg Chang
Bloomberg News
REDMOND, Wash. — Microsoft Corp.'s new Xbox game console has little chance to outsell Sony Corp.'s PlayStation 2, though it may position Microsoft for a second shot at No. 1 in a few years, game-industry executives and analysts say.
Associated Press
The $299 Xbox goes on sale tomorrow, with the first units handed out at midnight at the Toys R Us Inc. store in New York's Times Square. The biggest software maker will have a hard time besting top game makers Sony and Nintendo Co. because of the dearth of games that can be played only on Xbox, industry executives say.
Will Rogers, 17, tries out a Nintendo GameCube. Microsoft's Xbox, to be released tomorrow, will have an uphill climb in competing with GameCube, to be released Sunday, and Sony's PlayStation 2, released last year.
Microsoft lacks the video-game expertise of its rivals, and most independent game-software makers are focusing development resources on PlayStation 2, introduced a year ago.
Microsoft, which can afford to lose the hundreds of millions of dollars it will take to ramp up Xbox, needs to court game developers and hone its own gamemaking skills to become a contender for No. 1 when the next round of consoles are introduced in five years or so.
"I'm not expecting Xbox to even come close to PlayStation 2," said Bruno Bonnell, chief executive officer of Infogrames Entertainment SA, Europe's biggest game publisher. "But Microsoft can leave a legacy to move forward with Xbox 2."
Nintendo will kick off sales of the new $199 GameCube system Sunday, three days after Xbox's debut. PlayStation 2, which costs $299, was introduced in October 2000.
Microsoft should be pleased if consumers purchase 20 million Xbox units worldwide over the life of the product and 200 million software titles, Bonnell said. He expects Sony to sell 100 million PlayStation 2s and 700 million games.
Because game machines are sold at a loss, with software providing the profit, console makers need to create a large customer base by selling millions of devices before they can earn money. It's not until late in the second year or even the third year after introduction of a new game system that profit, if any, will come.
This year, Redmond, Washington-based Microsoft will lose $50 to $100 for each Xbox sold, analysts said. The company may lose more than $1 billion on Xbox before breaking even in fiscal 2004, Morgan Stanley analyst Mary Meeker estimates.
Microsoft is risking the losses to tap the $20 billion worldwide game market because sales of personal computers are slowing, crimping growth for its Windows and Office software. Sales of games are forecast to grow at 20 percent or more over the next several years.
