The Making of Xbox 360

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Case Details:

Case Code : OPER061
Case Length : 20 Pages
Period : 2000-07
Organization : Microsoft Corporation
Pub Date : 2007
Teaching Note : Not Available
Countries : US
Industry : Gaming Console

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

Microsoft's first foray into gaming was Xbox, which was launched in November 2001; more than a year after Sony⁹'s PlayStation2¹⁰ was launched in the US. This gave Sony the edge to capture the market and by the time Xbox was launched PlayStation 2 was well established in the market with loyal customers (Refer Exhibit I for the sales of Xbox and PlayStation 2 in 2002). After Xbox's lower than expected performance, Microsoft decided to launch Xbox 360, the next version of the gaming console, well before PlayStation 3¹¹ could hit the market. Xbox 360 was launched in May 2005 well ahead of Sony's PlayStation3, which was released in November 2006 in Japan and the US, and Nintendo¹² Wii¹³ which was also launched in November 2006.

This gave Microsoft the advantage in capturing market share. In the quarter ending December 2005, Xbox 360 sold 1.5 million units (900,000 in North America, 500,000 in Europe and 100,000 in Japan). By June 2007, Microsoft expected to sell over 13 to 15 million Xbox consoles in the market.

According to Wagner James Au from GigaOM¹⁴, "Microsoft's lead seems unbeatable now, fueled by a one-year headstart, the raging success of Gears of War as 2006's killer app, and most recently, a blitzkrieg of promotion for Halo 3, scheduled for 2007."¹⁵

Background Note

Microsoft was founded in April 1975 as a partnership concern by William H Gates (Gates) and Paul Allen. At this time, the duo had developed an improved version of BASIC¹⁶, which was distributed by Micro Instrumentation and Telemetry Systems. In 1977, Microsoft introduced FORTRAN¹⁷ and COBOL¹⁸ languages for PCs.

By the end of 1977, Microsoft had emerged as the market leader in microcomputer languages, with sales exceeding $1,000,000...

Excerpts >>

9] Japan based Sony Corporation is one of the largest media conglomerates in the world. The company is involved in several businesses including electronics, communications, video, media, and information technology. Sony generated revenues of US$ 63.98 billion in 2006, and net income of US$ 1.05 billion. The company entered the gaming console market through launch of PlayStation in 1994. The product was highly successful and Sony launched PlayStation 2 in 2000.

10] Sony's PlayStation 2 was its second video gaming console after the successful launch of PlayStation. Sony announced development of PlayStation in March 1999 and it was launched in March 2000 in Japan and in October 2000 in the US. Sony had sold more than 111 million units of PlayStation 2 by end of 2006.

11] PlayStation 3 was released in November 2006. It has Blu-ray drive, HDMI Port, Blue tooth controller etc. On the first day of its release, PlayStation 3 sold over 80,000 consoles.

12] Nintendo was founded in Japan in 1889 as a maker of Japanese playing cards. The company entered into several other businesses but emerged as one of the leading video game console manufacturers. The company's revenues in 2006 were at US$ 4.5 billion.

13] Wii is the fifth game console from Nintendo. The company announced the development of Wii in 2004 and was launched in December 2006. As of January 2007, Nintendo had sold 1,720,700 units of Wii in North America.

14] GigaOm is a blog published by Giga Omni Media. According to Technorati, GigaOm.com is one of the top 50 blogs worldwide. The blog offers Web 2.0 news, analysis, details of new technologies, broadband and online games etc.

15] Ed Oswald, "Has Xbox 360 Already Won the War?" BetaNews, December 07, 2006.

16] Beginners All-purpose Symbolic Instruction Code (BASIC), one of the first programming languages for computers.

17] FORTRAN stands for Formula Translator. It is a high-level computer programming language suitable for mathematical and scientific computations.

18] Common Business Oriented Language. A programming language used in business data processing.