Me on Reuters TV Discussing Halo 3: Financially Successful? Likely Yes. Transformational? Definitely Not.

I was recently interviewed on Reuters TV concerning a topic I love: gaming, and specifically the new release of the Xbox 360 game Halo 3. What about the game? Is this just the ticket to help the Xbox 360 cross over into the mass market? And what about the Xbox 360 media center strategy anyway? Does it have legs? These were some of the questions posed to me by Jeanne Yurman of Reuters. Though I have provided a link to the clip, the two key points I made during the interview are:

1. Halo 3, while likely a very successful game that will be sold into the existing installed base of mature, hard-core Xbox 360 gamers, is not going to help Microsoft cross the chasm into the mass market. First of all, the game is an M game. A mature game, a violent game. This is most decidely not a game for the whole family. Contrast this with Nintendo, where most of the games are rated either E or T and with much broader appeal. Further, unlike its predecessor Halo 2, the Halo 3 game is not backward-compatible, only being able to be played on the Xbox 360 console. This limits its initial target audience to around 10 million Xbox 360 console owners, versus the 30 million that are available to Halo 2. Neither of these are helpful facts if "mass market" is truly the objective. And I certainly don't buy the argument that the Halo 3 game itself will drive new console sales. The game has gotten OK reviews and I am confident it will sell well to existing Xbox 360 loyalists, but beyond that, I am neither a dreamer nor a believer.

2. The Xbox 360 media center strategy has been discussed ad nauseum on this blog and others. And there are certainly differences of opinion on the likely success of this strategy. My position remains: the mass market will not be willing to pay for an all-in-one home entertainment solution, and certainly not one which is first and foremost a gaming console. They will buy consoles to play games at home, play games with others and maybe a little game-related social networking on the side. Might I be wrong? Of course. But this is one hell of an expensive bet to make, and one that has some ugly historical precedence in the form of the Sony PSX.

Anyway, that's it. I hope you find the clip interesting. I have so much more to say and so little time... More later.

Comments

[Merus]

Actually, I think Roger's on the money here - Microsoft have been having considerable trouble finding a breakout game that shifted consoles, despite having several opportunities (with marketing blitzes on the order of Halo 3). Frankly, if Gears of War can't sell an Xbox 360, how the hell is Halo 3 going to? What's different about Halo 3 that it'll succeed where Gears failed?

Online multiplayer? Multiplayer doesn't sell systems to the mainstream - one look at the Wii or the DS will tell you it's not appreciated by the mainstream, although as a feature for the hardcore fans it's invaluable - and it's arguable that Halo's audience is mass market in the first place, being that it's a violent science fiction game. Par for the course in terms of traditional gaming, but this generation is shaping up to rewrite a lot of those rules. It's entirely possible that Halo 3 could be seen to be a hardcore game for people dissatisfied with the Wii, and not something that Joe Sixpack wants or can afford.

Which is another question raised by the flat sales of the 360 during Gears' peak: is the Xbox 360 too expensive for Halo's audience (college kids and young adults)?

[JEB NAGEL]

LAST NIGHT I TRIED TO HOOK UP WITH A COUPLE OF FRIENDS ON XBOX LIVE TO PLAY SOME RAINBOW SIX AND AFTER AN HOUR OF FRUSTRATING RESETS, ETC...(COULD NOT CONNECT TO XBOX LIVE)I FINALLY TUMBLED TO THE SCREEN THAT SAID MY XBOX CONSOLE HAD BEEN PERMANTLY BANNED FROM XBOX LIVE. I HAD READ THE HEADLINES A COUPLE OF WEEKS AGO ABOUT MICROSOFT BANNING THE MODDED CONSOLES BUT HAD NOT REALLY PAID MUCH ATTENTION AS THAT CERTAINLY DID NOT APPLY TO ME. I HAVE A VIRGIN 360 BOUGHT NEW, LESS THAN A YEAR AGO FROM COSTCO AND IF I AM LUCKY, I GET TO PLAY ONCE EVERY COUPLE OF WEEKS WITH THE SAME ONE OR TWO PEOPLE. I DON'T MULTIPLAY, CURSE, CHEAT,ETC.... NOTHING BUT PLAY RAINBOW SIX OR GEARS OF WAR WITH A COUPLE OF BUDDIES FROM WORK. I WOULD NOT HAVE THE FIRST CLUE ABOUT HOW TO GO ABOUT MODDING THE THING OR ANY OTHER ELECTRONIC DEVICE FOR THAT MATTER.....AFTER ANOTHER TWO HOURS IN ATTEMPTS TO TALK TO A REAL LIVE HUMAN THAT ACTUALLY WORKS FOR MICROSOFT, I FINALLY GOT A VERY NICE GUY TO TELL ME THAT I WAS SCREWED. THERE WAS ABSOLUTLY NOTHING I COULD DO ABOUT IT, AND MICROSOFT HAD JUST RUINED MY FIVE HUNDRED PLUS DOLLAR INVESTMENT.HE WENT ON TO SAY THAT MICROSOFT COULD DO WHATEVER THEY WANTED TO DO TO MY CONSOLE AND DID HAVE TO EVEN TELL ME WHY. NEEDLESS TO SAY, THIS DID NOT MAKE ME A HAPPY 45 YEAR OLD HUMAN. I COULD NOT EVEN CALCUALTE HOW MUCH MONEY I HAVE GIVEN TO GATES AND CO. AT MICROSOFT OVER THE YEARS AND TO BE TREATED LIKE THIS IS THE VERY LAST STRAW. IT TRULY IS ALMOST BEYOND THE SCOPE OF IMAGINATION THAT A COMPANY COULD BE SO CYNICAL IN REGARD FOR THEIR CUSTOMERS AND SO BLATANT IN THEIR THEFT FFROM SAID PEOPLE. I HONESTLY COULD NEVER HAVE IMAGINED THIS SCENARIO BEFORE LAST NIGHT AND ALTHOUGH STILL IN SHOCK 24 HOURS LATER I WILL NOW MAKE IT A MISSION IN LIFE TO DO EVERYTHING IN MY POWER TO SPEED THIS COMPANIES DEMISE. I WILL NOT REST UNTIL EITHER I AM DEAD OR MICROSOFT IS NO MORE. I WILL DO EVERYTHING I CAN TO GET PEOPLE TO STOP DOING BUSINESS WITH THESE ANIMALS. I WILL JOIN OR START AS MANN CLASS ACTION LAWSUIT AGAINST THE "BIG BROTHER OF ALL BIG BROTHERS", NO MATTER HOW LONG IT TAKES. IT IS THE PRINCIPLE OF THE MATTER. DO NOT GET ME WRONG...THE MONEY MATTERS, BUT NOT NEAR AS MUCH AS THE THEFT.. THIS IS TRULY THE LOW POINT OF MY CONSUMER AND TECHNOLOGICAL LIFE AND A DEEP PSYCHOLOGICAL BLOW TO FIND OUT THAT IN A COUNTRY THAT WAS FOUNDED ON THE BELIEF THAT ONE IS INNOCENT UNTIL PROVEN GUILTY, SOMETHING LIKE THIS CAN JUST BE "DONE' TO YOU.
SHAME ON YOU, YOU HORRIBLE "PEOPLE", IF YOU CAN EVEN BE PROVEN TO BE HUMANS, AT MICROSOFT.I WILL NOW BE BUYING A PLAYSTATION 3, SOMETHING B4 LAST NIGHT, I HAD NO INTENTION OF DOING. I WILL BE REMOVING EVERY DEVICE IN MY POSSESION THAT HAS A MICROSOFT OS AND IT WILL NOW BE NOTHING BUT APPLE, LINNUX AND SYMBIAN.I AM SURE THERE ARE THOUSANDS IF NOT HUNDREDS OF THOUSANDS OF OTHER VICTIMS OUT THERE WITH THE SAME STORY AS ME AND I WILL BE FINDING AS MANY OF YOU AS I CAN. TOGETHER WE CAN STRIKE BACK AT THIS AWFUL EMPIRE AND BRING CONSUMER RIGHTS BACK TO THE FOREFRONT.

[Chris Kohler]

I do think that Halo 3 will drive console sales. Even though the "hardcore gamers" are buying Xbox 360 already, there are still a lot of fence-sitters -- the kind of people who drove PlayStation 2's numbers up to 100 million by the end of its lifecycle.

Joe Average Frat Guy doesn't have an Xbox 360 yet, but he will with a price drop and a game like Halo 3.

Now, sure, JAFG doesn't represent the elusive casual consumer that Microsoft desperately wants and only Nintendo seems to be able to get. But there are a lot of them, and last generation showed that you can in fact make money off them.

[Rhayader]

I liked seeing the story, but I have a couple points of contention. First, you state that Halo 3 has gotten "OK reviews". As far as I am aware, the game hasn't gotten any reviews yet. The only taste people have had is the public beta, and trolling the forums reveals an overwhelmingly positive response to the game. Secondly, the idea that an "M" rated game cannot garner mainstream attention is false. One simply has to look at Halo 2, or any of the GTA games, to see that an "M" rating does little to diminish a game's customer base, and in fact is often considered a plus by gamers. Finally, depiction of Halo 3 as anything other than an absolute blockbuster will soon be proven faulty. Prime-time trailers, product tie-ins, collector's editions -- these types of marketing blitzes are typically reserved for huge movies, and nearly always predict incredible profits. Make no mistake: this game WILL sell consoles, without a doubt.

[Mitch]

Although I am one of those people that think Halo is horribly overrated since I don't have the time to be a competitive online player, I still think it will move consoles. There are many gamers that have yet to purchase a 360 because they haven't had too many reasons to get it. Big games have always moved consoles ... maybe not an incredible amount, but you will definitely see a surge when it comes out (probably larger than last year's holiday season surge).

@Richard A.: I think you are missing the point about 'mass market'. I would assume he means mass market as in people who usually don't play video games all of a sudden come over and become casual gamers. As I'm sure most people have noticed with the video game industry, it has grown in sheer numbers but I think it has become just as much of a niche as beforehand (especially as games became more complex you would have less mothers playing video games, i.e. less mass market appeal).

[Richard A.]

So many things wrong, where do i start.

1. If Halo is not "mas market" then why is it list number 31 on the most video games sold world wide list. Also the total units sold for halo 2 is 7.89 million (2 millions sold day one), so there is more then enough 360s out there.

http://vgchartz.com/worldtotals.php

2. It's a bit silly to say that a BLOCK BUSTER game will not move consoles. A little research would have easily given you a correct answer to that.(hint see pokemon diamond/pearl's release and the number of ds lites sold for that month).

(PS its not just HALO 3. its GTA IV and other games that are coming out this fall that will push the system).

3. You have this problem in believing that consoles should be a mass market product from the get go. Video games usually (not the Wii) don't hit "mass market" until the later half of it's life span. And even then the non-"mass market" products (games) produce more revenues in total then the "mass market".

[curious]

I was wondering if anyone could provide some insight on how many halo 2 sales roughly translated into new xbox sale during its first three month release. thx

[Ernst]

I've been following your coverage of the gaming market for awhile - your analysis is excellent and usually spot-on.

But as both a gamer & investor I will have to disagree with you on one point.

I do buy the argument that Halo 3 will drive consoles sales - if based on nothing but past performance. Console sales get a significant boost during the holiday season every year, but if you look at the sales data for the original xbox (I'm using vgchartz.com) you'll see the 2002 & 2003 holiday spikes nearly equivalent, with a much larger 2004 spike - Halo 2 was released in Nov. 2004. I don't think there was any other marked improvement in the Xbox in 2004 except for the addition of Halo 2/Xbox Live - an offering that Sony/Nintendo couldn't match.

Additionally, there are ~10M current Xbox owners with no 360 - at least a decent amount of them are waiting for a reason to upgrade - Halo 3 will be that reason. The current 360 live titles have all failed to live up to the Halo 2 experience (in part due to the MS TrueSkill failure) that should be rectified with Halo 3 - and cause more of the existing 360 base to upgrade.