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Saturday, May 14, 2005

The Xbox Or The Xbox PC!!

Microsoft Monitor writes, the first reaction to Xbox 360 is a strange one: Why buy a PC? Looks like the household computer won't be the one sitting in the office but the game console in the living room. Make no mistake: Xbox 360's core functionality is gaming, whether locally or online. Microsoft may not sacrifice any core capabilities for additional entertainment features or expansion. That said, there's going to be a whole lot of PC inside the Xbox 360 and in the capabilities that will extend to other devices – the next PC purchase probably will be Xbox 360.
Computer manufacturers should seriously consider the implications of that thought as they plan, even now, for the holiday sales season. Game console and PC markets have until now been fairly distinct and separate. But as Microsoft extends Xbox capabilities to entertainment functions that belong to PCs, such as photos and music, the market/feature distinctions diminish. And in some ways, maybe small initially, that puts Microsoft the game hardware maker into conflict with its PC manufacturer partners.Michael Gartenberg offers an insightful analysis about Xbox 360, explaining why "Microsoft has realized that if it wants to further software initiatives in the home, it needed to reluctantly become its own hardware OEM."While Microsoft is the dominant player in the world of desktop computing for business users and home users, the home market beyond the PC has remained elusive to them. Despite several attempts, Microsoft has had poor success attempting to jumpstart the home market using the software licensing models that had served it so well in the PC arena. In the handheld market, PocketPC and Smartphone are only now beginning to make some inroads against entrenched competitors such as Palm and Symbian and other efforts such as WebTV (now called MSN TV) and Sega's Windows CE based Dreamcast system failed to create a Microsoft presence in the family room. Microsoft has learned that trying to sell operating software to third party OEM licensees in the consumer electronics space is a very different world than the world of PC operating systems.

Microsoft has realized that if it wants to further software initiatives in the home, it needed to reluctantly become its own hardware OEM and create the market for the hardware necessary to sell software. It is important to note that while Xbox 360 is a hardware platform it is really a software play for Microsoft. In fact, Microsoft has long now adopted a traditional video game business model, where it publishes ALL titles for the platform and charges third parties a fee on each disc that they ship for Xbox.

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