E3 2009

Microsoft Shows Off Several Xbox 360 Upgrades to Embolden Its Place in the Living Room

| Jun 2, 2009 | Digital Home - U.S. | Competitive Intelligence Report

| Analyst: Bruce McGregor

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate/High

Event Summary

June 1, 2009 -- Microsoft pours on the glitz by announcing several advancements to the Xbox 360 video game console on the eve of the E3 conference in Los Angeles, CA. In fall 2009, Xbox LIVE users will be able to access many Internet applications from the TV connected to the console including social networking via Facebook and Twitter as well as music streaming from Last.fm. Other improvements on the horizon include 1080p HD video streaming of movies through the merger of Zune and Xbox LIVE’s Internet video platforms. Last but not least, Microsoft previewed its body motion controlled technology code named Project Natal that could eventually make game controllers and TV remotes obsolete.

Analytical Summary

• Current Perspective: Positive on the new partnerships Microsoft announced at E3 because by integrating popular Internet sites including Facebook, Last.fm and Twitter on to the Xbox LIVE application consumers will have a new method to connect with content that today is mostly trapped on their PC and cell phone. Xbox Video Marketplace will be integrated with Zune’s video site to offer instant streaming of pay-per-view movies, as opposed to the current method of downloading, and all video will be at 1080p resolution. A drawback to the Netflix Watch Instantly service on Xbox LIVE is being rectified by allowing Netflix titles to be chosen for streaming through the Xbox, without requiring the use of a PC. We are withholding judgment on Project Natal because while the demo showed promise as a controller-free solution using body motion and voice recognition, there was no word on when it will hit store shelves and for how much.

• Vendor Importance: High to Microsoft because it needs the Xbox 360 to succeed as a game console so that it can leverage that position in the living room into success throughout the digital home. The Xbox faithful will be pleased to see improvements made to watching movies and TV shows through their game console. Of course, the Xbox is first and foremost a game console, and Microsoft successfully demonstrated its upcoming games will remain cutting-edge.

• Market Impact: Moderate to high on Digital Home devices because Xbox 360’s upcoming improvements not only make it a more competitive gaming platform but also a more powerful device to access premium high definition content (TV shows and movies) as well as interact with social networks. The $200 cost for the Xbox 360 equipment and $50 annual membership for its online services (Xbox LIVE Gold membership) is a low enough entry point price for more non-traditional gamers to see the merits of the gaming console as a complete source of home entertainment. This could then affect the prospects for other emerging Internet-to-TV devices like the Roku Video Player.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

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