The cutting edge - Viewpoint - Microsoft tries to win video game market with XBox

Electronic News, May 27, 2002 by Bernard Levine

Microsoft is having a tougher time than some thought winning the gaming game. Microsoft's Xbox is in the thick of the game console battle, but so are Sony and Nintendo, which are proving they're no pushovers. The ultimate champ has yet to be crowned.

While Microsoft faces tough and formidable competition in the game market, competition should make a better overall game business, with game aficionados the biggest winners.

And Microsoft has insisted all through the years of antitrust litigation that it is a firm believer in tough but fair competition, and that it faces formidable foes in many markets, so it should relish the game war. One game Microsoft would never want to be accused of playing in the business world is Monopoly, some wags might quip.

But Microsoft is clearly no monopolist in games. My guess is Microsoft will still turn Xbox and associated software into a video goldmine, but not without a good fight, and not without rivals also retaining a large share of gaming profits.

Probably none of this should really be surprising. Microsoft is basically new to this part of the consumer electronics business, although it's a fast learner. Its toughest gaming foe is probably Sony, long one of the savviest home entertainment marketers in the world. Sony's recent price cut on the popular PlayStation2 put the squeeze on Xbox, forcing Microsoft to cut prices, as well, while Nintendo stands pat on the price front for now.

The pending shift of a lot of Xbox production by Microsoft and its contractor Flextronics from Hungary to China will lower Microsoft's costs, allowing it to compete more effectively. And you can be sure Microsoft will pull out all the promotional firepower to hype Xbox sales, which reportedly have been disappointing in some parts of the world.

Consumers, of course, benefit from all the competition. A price war making many game consoles less expensive is especially good news for younger game enthusiasts with limited funds, who may be counting on an after-school job, or Mom and Dad, to fulfill their gaming fantasies.

The intense competition also should stimulate game developers to produce better and more challenging games to play.

Competition does things like that.