How Kinect's brute force strategy could make Xbox One a success

Microsoft's Xbox One has some public relations problems, but don't count the company out -- like the Kinect, Xbox One could become a success through sheer force.
With the May 21 announcement of the Xbox One, Microsoft faced the ire of its most traditional fans and a skeptical press. The company's policies on used games, always-online concerns and the paucity of games in the presentation put it into a public relations hole from which it will try to emerge with a flurry of announcements at next week's E3 media briefing. At Monday's E3 presentation, and in the coming months, I think many will be reminded of how persistent and effective Microsoft can be. Let me show you, in particular, what happened the last time Microsoft launched a game device to an unconvinced public. When you see how much the company was able to accomplish through sheer force and money, I think you'll have a new appreciation for what it will bring to bear as the Xbox One launches.

The Original Kinect

When Microsoft launched Kinect in November 2010, the company was pushing a line that made many traditional game players uncomfortable: "You are the controller." After the industry had struggled with, and was finally abandoning, Nintendo's Wii and its novel motion controls, why would any developer or publisher buy into a new control model which didn't even include buttons, directional pad, or joystick? But Microsoft managed to bring most third-party publishers to its side, presumably with lots of cajoling and more than a little cash. The results of Microsoft's push are pretty astounding. For example, look at the following figure which shows how many retail Xbox 360 titles were released in the U.S. during each calendar year since the system launched.
After three years with releases between 141 and 146 titles, the Xbox 360 saw its release slate jump by 40 titles to 186 titles in 2011. That's the first full calendar year in which Kinect was on the market. Were those 40 additional titles truly related to Kinect? You bet they were. In 2011 alone, there were 53 new retail titles that required Kinect, up from 14 launch titles that required Kinect in 2010. On top of those 53 you can add nine more titles in 2011 that included Kinect support. Perhaps this is one fact makes the point best: One out of every three Xbox 360 games released in 2011 were Kinect-enabled. While Microsoft's role publishing its own Kinect games was important, a large majority of the Kinect-enabled titles came from a wide range of third parties. Ubisoft was clearly the most active Kinect game publisher, releasing nearly two dozen titles since the system launched. Others like Activision, Electronic Arts, Majesco, and the now-defunct THQ each published about 10 to 12 titles each. The rest of the list reads like a who's who of video game publishers: Capcom, D3 Publisher, Konami, LucasArts, Sega, Take Two, Warner Bros., and many smaller publishers. Each of these companies released at least one, and in many cases several, Kinect-required games. Approximately 120 games have been released at U.S. retail with Kinect support since November 2010, almost 80 percent of those requiring Kinect. (The PlayStation Vita has a retail library less than half that size, and has been out for more than half of Kinect's lifetime.) This isn't just a software story, however. The story of Kinect is really about launching a new platform. In round numbers, since Microsoft launched Kinect is has shipped around 30 million Xbox 360 systems worldwide. In that same period, the company reports it has shipped 24 million Kinect cameras. If we classified the Kinect systems as a separate platform, it is now ahead of both the original Xbox (24 million systems) and Nintendo's GameCube (22 million).
Microsoft spent millions making the Kinect a big deal in gaming. Reports at the time suggested that Microsoft was spending as much as $500 million on the system's launch, although I don't believe that that figure has ever been confirmed directly by the company. Regardless, Microsoft launched a new, expensive system in the midst of an extremely challenging time for the video game industry and its success has made it an integral part of the company's vision going into the next generation. That, I believe, is the key lesson we should take from the last two and a half year of Kinect.

The Lesson

Look at what Microsoft accomplished in that period. It wrangled an industry in the midst of a downturn into embracing a new system, encouraged publishers to bring dozens of new titles to market requiring this new technology, and simultaneously drove up its retail sales of hardware and software. Along with the restyled Xbox 360 S model, Kinect gave Microsoft a relaunch of its system, a relaunch that some publishers treated like a brand new system launch. That is precisely what Microsoft is going to do starting next week and through the next year, but they'll have a brand new hardware platform with far more performance and network technology behind it. They'll also have a more powerful Kinect camera to tout, and a legion of developers and publishers who spent the last two years learning ways to use Kinect in their games. Those publishers know what happened between 2009 and 2011 in the U.S.: Software revenue on the Xbox 360 grew from $2.7 billion to $3.0 billion to $3.4 billion in those years. They should know because they were probably the greatest beneficiaries of that growth. It is a leap to say that Kinect drove that increase – I certainly wouldn't say it was all – but it would be foolish to discount that Kinect played a part. And I say this in part because I think Kinect helped Microsoft change the public image of its video game business. Before Kinect, there was no question that Microsoft's Xbox image was heavily tilted toward male-oriented, violent, M-rated games. But now Kinect has helped them claim some of the audience abandoning Nintendo and the Wii. Just look here, at how the Kinect business gave Microsoft a huge influx of titles rated by the Entertainment Software Rating Board (ESRB) as either E (for general audiences) or E10+ (for everyone age 10 or older).
Looking over the Kinect push, you can see lots of titles targeting children (SpongeBob and Sesame Street) and families (The Price is Right and Wipeout). That push will continue through the coming generation, especially now that Kinect will be attached to every new console, and unlike a couple of years ago, Microsoft now has a route directly into Nintendo's more casual, family-friendly audience. Those audiences, of course, are also the ones who will find Microsoft's push for more television programming integration appealing. That's what the May press briefing was all about. So now we see all the pieces Microsoft has been putting together for the past few years: - Kinect technology attached to 24 million Xbox 360 systems, and now an integral part of every Xbox One. - Dozens of publishers and developers who have been using the Kinect technology since early 2010. - A library of over 120 Kinect-enabled titles on the market (just in the U.S.) and scores more available on the Xbox Live service. - A stronger focus on games for families and children, giving publishers a new outlet for their licensed titles as Nintendo's consoles struggle in the market. - A new focus on living room integration, including television and telecommunications. Add in Microsoft's willingness to throw millions, even billions, of dollars at what it views as an essential product, and the company is surely well-positioned to make a splash later this year when the Xbox One launches. Remember: People were skeptical of the original Kinect, and here we are years later looking at how much Microsoft was able to accomplish with it. Now that Kinect technology is a foundational piece of the Xbox One, and everyone takes it for granted. All the negative reactions in the industry press won't amount to a hill of beans if Microsoft is able to help shape the larger public opinion of the Xbox One with all the pieces I've pointed out above. That's the lesson of Kinect: that Microsoft is willing to change its image, court the right partners, and spend the money required to succeed.

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