While Nintendo's Wii and Sony's PlayStation 3 are in short supply at retail, Microsoft's next-generation Xbox 360 console is readily available and approaching sales of 11 million. Hollywood has helped fuel the momentum, furnishing content for the Xbox Live Marketplace.
"From the launch of Xbox 360 (in November 2005), Hollywood studios like Warner Bros., Paramount and Universal all provided us with exclusive windows for their HD movie trailers for films like 'X-Men: The Last Stand' and 'Mission: Impossible III,' " says Peter Moore, corporate vp at the interactive entertainment business in the entertainment and devices division of Microsoft.
"We're looking for innovative ways in which to interact with our demographic, which is primarily the 16- to 34-year-old male, which tends to be an elusive demographic for Hollywood right now because they're utilizing their TVs to play rather than to watch."
Through the Marketplace, Xbox 360 owners can access more than 1,000 hours of entertainment programming, ranging from such buy-to-own high-definition TV shows as "CSI: Crime Scene Investigation" and "SpongeBob SquarePants" to such HD movie rentals as "V for Vendetta," "M:I-3" and "Nacho Libre." Music videos and Xbox Live Arcade games also are available.
Exclusive games remain the most important aspect of building Microsoft's Xbox 360 installed base, Moore says. There are more than 160 games available for Xbox 360, and slated for release this year are such exclusives as "Halo 3" and Ubisoft's latest "Splinter Cell."
While Sony is using its Blu-ray Disc technology to drive next-generation sales, Microsoft is employing a different approach.
"We did not want to burden the box with a high-definition movie format that would not be of interest to a great majority of our consumers early on," Moore says. "We're finding the DVD-9 format to be quite adequate to delivering game experiences."
Microsoft recently released a $200 add-on high-definition DVD drive that comes packaged with Peter Jackson's "King Kong." Through November, Microsoft had sold more than 42,000 add-ons. The strategy has allowed Microsoft to keep its Premium system at $400 compared with the $500 and $600 PS3s that come with the Blue-ray technology.
Microsoft also hopes to take advantage of its long-term deal with Jackson to create original games. Rather than just doing a licensed movie, Jackson's first project with Microsoft will be to bring the "Halo" universe to life in an innovative way. Later, the acclaimed director will bring his own intellectual properties to Xbox 360, Moore says.
"It's fortunate for us to leverage one of the world's best storytellers, but then to take those storytelling digital skills to bear in a different way," Moore says.
This fall, the publisher released "Viva Pinata," a game for kids that has been turned into a Saturday morning CGI TV series on Fox.
"When we look at this business, as popular as video games are in the U.S., they are still only penetrating 35% of households, so there's a huge upside for bringing consoles into homes," Moore says. "But we have to do that with content that's applicable to a broader market and interfaces that are less intimidating than the current controller."
Microsoft's new Zune is another way the company hopes to attract consumers to Xbox 360. Like the iPod, Zune can connect to an Xbox 360 and allow gamers to play their favorite songs while playing games. Moore also announced this week at the Consumer Electronics Show that Zune will be able to play video games within the next 18 months.