INTERVIEW: MICROSOFT'S CONSOLE WAR

[CoFree]

INTERVIEW: MICROSOFT'S CONSOLE WAR
By Kris Graft
Xbox 360 group product manager Aaron Greenberg gives Next-Gen an in-depth view on the console war from Microsoft's vantage point, getting a few digs against PS3 in the process.
ImageMicrosoft has been lamenting Xbox 360 hardware shortages this year, which the company claimed allowed PlayStation 3 to outsell the Xbox 360 in January and February.

However, the Xbox 360 was able to edge out PS3 in terms of hardware sales in March in the US, according to the NPD Group. But not by much: 262,000 versus PS3's 257,000.

Nevertheless, Microsoft remains utterly confident in the battle against its closest games rival (we'll just mention briefly that the Nintendo Wii sold a mind-boggling 721,000 units during the same month). Here, Greenberg talks Grand Theft Auto IV's impending release and its expected effect on hardware sales, why he believes Microsoft has effectively "won" the core gaming audience at Sony's expense, and how the Xbox 360 hopes to succeed in PlayStation-loving Europe.

Next-Gen: This month, the Xbox 360 edged out the PS3. Does this mean that supply is back to normal?

Aaron Greenberg: Yeah, I think we're happy with where we're at with supply. We definitely started to see improvements in the month of March and that is reflected in some of the sales you're seeing there. We weren't exactly where we wanted to be, but there's definitely much improvement. But we're definitely back in the game, and we're prepared for the launch of GTA IV next month.

But yeah, it's always good, even if it's close, to beat the PS3. For us, one of the things we've said is that we're going to be really careful to watch any sort of signs for the Blu-ray impact, and it seems pretty clear that while Blu-ray may have won, consumers don't care. PS3 sales have actually declined week over week and month to month since the format war has ended. Games are what sell systems, and we feel pretty good about where we're at in that position.

At the same time, PS3 and Xbox 360 sales are pretty much neck-and-neck. How does Microsoft hope to expand gap in its favor?

Supply. We had a lot of shortages where you couldn't even find Xbox 360s on sales in January and February. That really impacted our ability to effectively market at retail in March. We had retailers pull a lot of circular ads, we weren't being featured in-store. We were on-shelf for most of the month, but the barn was sort of empty. Believe it not, those retail circulars do drive part of the sales. We didn't have that support in March, but we will have that in April and around the launch of Grand Theft Auto IV.

What kind of hardware uptake are you expecting with GTA IV? Are you getting a better picture of that yet?

Actually, it's interesting. Based on what we're hearing from retailers right now, both in the US and in the EMEA, we're seeing our preorders for GTA IV outpacing the PS3's by a 2:1 margin. We've seen some really good signs early on about how presales are going. We think that similar to titles like Madden, Guitar Hero and Rock Band, etc., that GTA will be another multiplatform title that will lead and sell better on Xbox 360, in addition to the fact that we have exclusive content coming.

Back to hardware sales, are you concerned at all that PS3 appears to be keeping pace with Xbox 360?

One thing you have to realize is that this is the time of year when games are primarily sold as opposed to hardware. So it's a slow time of the year for hardware sales. 70 percent of all hardware sales happen in the second half of the year. We think we'll continue to extend our lead over the PS3 over the course of the year. We expect we'll end the year with a two- to three-times larger installed base.

...Frankly, we'll see most of the growth in the second half of the year. Titles like GTA are one of the exceptions to that rule. We think that title will help move hardware sales when that launches.

So it's pretty safe to assume that Microsoft has some pretty big plans for the second half of the year that it's not ready to talk about yet.

[Laughs] That's very safe to assume. We definitely have a lot of cards in our back pocket that we have not played yet, and we're very excited to throughout the year share more about what we believe are pretty significant announcements around the Xbox 360 experience and games that will drive people to purchase our console versus the PS3.

I'm sure you've seen the insane Wii figures. 721,000 sold in March in the US. What's Microsoft's take on that?

We think Nintendo's success, to be honest, is great for us. They're doing great things to help broaden the audience in the industry. We're playing a role as well. And Xbox is a great complement to that experience. It's interesting, because we're not really targeting the same consumer with the same kind of experience, but in many ways we're finding that as we grow and broaden...a lot of that audience is going to be graduating up from the Wii experience. We think we're a great complement to that. What Nintendo's doing is great for the industry, but it's great for us as well.

The attach rates for Xbox 360 continue to be strong, standing at 7.5.

And that doesn't include any digital transactions at all. In the history of all NPD data across multiple generations, no console lifecycle has ever attached anywhere near 7.5 games.

...That really speaks to our strength with the consumer, frankly. I think the battle for the core user is sort of over, if you will. We're heading now well beyond the 20 million in console sales. I feel we've secured that core buyer, and that gives us quite a bit of an advantage versus PS3, which is late to the game and still at a price disadvantage relative to the Xbox.

That's quite a claim to say that the battle for the core user is over. PlayStation 3 has got LittleBigPlanet, Gran Turismo 5 and Metal Gear Solid 4 coming. Do you really feel it's safe to say that you guys have won the core?

Yeah. I think the type of audience that they are going after with many of those games, frankly, are Xbox 360 owners...They're trying to go after a consumer that has already bought an Xbox 360, and frankly has a much broader lineup with more titles and more exclusives. You could say that they showed up with too little, too late.

The PlayStation brand is still very strong in Europe in particular. We're hearing that outside of the UK, the Xbox 360 is dying a death.

Without a doubt, Sony is a very formidable competitor in Europe, and they have entrenched themselves as an established brand, and we recognize that. But it's also part of the reason why we say Europe is the battleground territory for us this generation. So we've really double-downed our efforts there in marketing spend and our aggressiveness in that market.

In Europe, the core consumer is still very much up for grabs, and we will continue to do things in Europe that we may not do globally, because we see that market is so critical to our success. We've launched a massive TV advertising campaign, multi, multi-million campaign across the region that launched before anything in the US...The second thing is that in advance of GTA IV, we've dropped the price of Xbox 360. We're now a lower-priced console throughout Europe. We're cheaper than the Wii, and just about half the price of a PS3. The result of that is our sales doubling, sustained over a number of weeks now, across Europe.

[Sesshomaru]

Hmm, if you cut through the typical MS stat-manipulation and BS, he actually says some relevant stuff. In particular:

PS3 sales have actually declined week over week and month to month since the format war has ended. Games are what sell systems

I've been saying that for two years, blu-ray vs HD-DVD was never the deciding factor for console sales. It will always be games, and with 90% of series going multi-platform, I don't expect a huge gap to open between the PS3 and 360 anytime soon. The Wii will come back to the pack, and the competition is great for the consumer.