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No Price Cut for Xbox 360

10 Jul, 2007 By: John Gaudiosi

Microsoft won't cut the next-gen console's price.

SANTA MONICA, Calif. — While Sony was forced to announce its PlayStation 3 model and price changes Sunday night after retailers leaked the information, Microsoft did not counter with any Xbox 360 price announcements of its own at the new, much smaller E3 show.

Still, Microsoft did announce new content for its Xbox Live Video Marketplace through a deal with Disney.

“Xbox Live Video Marketplace is currently the No. 1 online delivery service for high definition content,” said Peter Moore, corporate VP, interactive entertainment business, entertainment and devices division for Microsoft. “Thanks to the success we've had with delivering movie rentals, we're adding movies from all four Disney studios to the service, including Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures and Miramax Films.”

As of July 10, there were 35 movies from the Disney studios available to rent on Xbox Live Marketplace, including The Hunchback of Notre Dame, Tarzan, Atlantis, Hercules, The Emperor's New Groove, Armageddon, Sky High, Unbreakable, Bad Company, Coyote Ugly, Premeval, Venus, Bringing Down the House, D?j? Vu, The Queen and Bridge to Tarabithia. Gamers will be able to purchase and download the movie and have 14 days to watch it. Once started, the films erase after 24 hours. Disney joins studios Paramount Pictures, New Line Cinema, Lionsgate Entertainment and Warner Bros. in offering movie content for rental.

In the online space, Microsoft has reached 7 million Xbox Live users worldwide. Moore said that by this time next year, Microsoft will have crossed the 10 million mark with its online gaming service.

“I'm not sure if studios are ready for selling movies digitally through Xbox Live [Video] Marketplace,” Moore said. “I'm a big fan of watching a movie and then deleting it and I think many Xbox 360 consumers are similar. If I really want to keep a movie and watch it again and again I buy it on HD DVD.”

Microsoft supports the HD DVD format through an add-on movie player for Xbox 360. Xbox Live Video Marketplace will continue to offer TV shows for purchase to gamers. Moore said he expects more studios to offer shows through this digital distribution platform.

“As more studios see that Xbox Live has become a way for people to socialize, I believe you'll see not only more content offered by Hollywood, but exclusive content windows and debuts on the service,” Moore said. “With more and more males playing games and not watching TV, this becomes a unique way to reach the 18- to 34-year-old demographic.”

While Microsoft won't be creating original TV programming for Xbox Live Marketplace, it will explore video content surrounding key game franchises. With Halo 3, Microsoft has hired a number of directors, including Neill Blomkamp — the man who was originally chosen by Peter Jackson to helm the Halo movie that has since been put on hold — to direct short films that will appear exclusively on Xbox Live Marketplace. Moore said this content will be sponsor-supported so that consumers can enjoy it for free.

“We're building a new business model around free sponsored downloads, which I think are a win-win for gamers and for advertisers,” Moore said.

As far as competitor Sony's pricing moves, Moore said Microsoft doesn't plan to follow suit.

“I think the world was looking for a PS3 price cut to $400 by Sony,” he said. “We're comfortable with our price points with Xbox 360 and the three choices consumers have. The consumer needs great games regardless of price and that's what we're delivering with Xbox 360.”

Since Sony and Nintendo entered the new console war last November with PS3 and Wii, Microsoft has sold $2.4 billion worth of Xbox 360 hardware, games and accessories, according to The NPD Group. Moore said in its first 18 months on the market, Microsoft has generated $1.7 billion more in top line retail revenue than it did during the same time frame with its original Xbox. Moore added that the average consumer has spent $823 at retail on Xbox 360 hardware, games and accessories, which is $300 more than they had spent on Xbox at the same point.

Microsoft has sold 11.6 million Xbox 360s worldwide since launch, including 5.6 million in the United States. Moore said Microsoft has sold double the number of units of Wii and five times the number of PS3s. Since November 2006, Xbox 360 and Wii have sold neck-and-neck and both consoles have sold 2-to-1 compared to PS3, according to Moore. Nintendo has sold every Wii it has shipped but has not been able to keep up with demand, while Microsoft has Xbox 360s sitting on retail shelves, industry observers have noted.

Microsoft's attach rate of games sold for every piece of hardware is 5.9-to-1, Moore said. He also stressed the importance of third-party games, citing that since November 2006, Microsoft third-party games have appeared in the NPD Top 10 charts 16 times, compared to no third-party games for Wii or PS3.

The company will release an original mass market Xbox 360 game in high definition based on the DVD games series “Scene It.” The game will ship with four one-button controllers for multiplayer support. Players will watch HD movie clips and answer more than 1,800 trivia questions based on them.

Another mass-market offering is Viva Pinata: Party Animals, which Microsoft will release this fall. The sequel to last year's game also has a TV show aimed at kids. Another popular kids show-turned-game, the anime-based Naruto, will ship exclusively for Xbox 360 from publisher Ubisoft this fall.

Microsoft focused solely on games shipping this year, which includes Halo 3 — a game that ships Sept. 25.

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