Microsoft Sets Sights on Future with Xbox 360

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With the upcoming release of the XBox 360, Microsoft is taking another step toward making the personal computer the center of home life. The newest Xbox is not just for game-playing teens: Anyone can hook it to televisions, stereos and computers to take advantage of its enormous hard drive.

STEVE INSKEEP, host:

On Mondays, we focus on technology and today the technology of games.

Just after midnight tonight, Microsoft is releasing its new game console, the Xbox 360. It updates the previous Xbox and for Microsoft it's about more than games. It's part of a strategy to get into your living room, as NPR's Laura Sydell reports.

LAURA SYDELL reporting:

For many people, game consoles bring to mind teen-age boys with agile thumbs and dreams of shooting aliens. Yes, those boys are going to love the Xbox 360, says Peter Moore, vice president of marketing and publishing at Microsoft, but hopefully Mom, Dad and maybe Grandma will too.

Mr. PETER MOORE (Microsoft): Not only can you play great games in high definition and hear great games in multi-channel sounds, but also connect your portable music player, your digital camera, bring all of your digital entertainment to life in the living room.

SYDELL: So families will be able to hook up their high-definition television sets and their stereos through the Xbox. It will be possible to store music and movies on its 20-gigabyte hard drive. But more importantly, from Microsoft's point of view, it will connect to PCs in the home and with much bigger hard drives where music, movies and pictures are stored. It's part of Microsoft's vision for the home, says P.J. McNealy, an analyst at American Technology Research.

Mr. P.J. McNEALY (Analyst, American Technology Research): Microsoft's looking for a way to extend their value proposition around the house. In other words, they're trying to get into the living room here. And so the Xbox 360 is a continuation of their efforts to make the PC the center of the home and other devices around the home, like the Xbox 360, be an extension for that PC into the living room and on to the TV.

SYDELL: As part of a promotional program on MTV, a designer at West Coast Customs, an automotive restyling center with a show on MTV, touts Xbox 360's versatility.

(Soundbite of MTV promotional program)

Unidentified Man #1: ...so essential for, you know, entertainment experience right now. It's not just a video game any longer. I'm glad I came. I think you guys are on to something really good. I appreciate it, man.

Unidentified Man #2: All right.

Unidentified Man #1: All right. Cool. Xbox 360.

Unidentified Man #3: Feel the experience.

SYDELL: This week, MTV is teaming up with Microsoft again for the Xbox 360 launch as part of a week of wall-to-wall programming dedicated to video games. While Microsoft wants consumers to see its Xbox as more than a game console, it also has to be careful not to alienate the core audience of gamers. This is Matt Rosoff from Directions on Microsoft, a firm that does research on the software giant.

Mr. MATT ROSOFF (Directions on Microsoft): Microsoft did some market research there and they found out that the sort of hard-core gaming audience, when they were told about all of the other things that the Xbox 360 was going to do, they looked at that as a drawback. And they said, oh, if it's going to do all these other things, then is it really going to be a great gaming machine?

SYDELL: So Microsoft's also doing a major promotional campaign to let gamers know that games are still at the center. And at forums like this one in San Francisco, Microsoft's Jeff Henshaw plays with a companion online and shows off the detailed graphics of Project Gotham Racing III.

Mr. JEFF HENSHAW (Microsoft): Larry, you got a head start on me. I'm going to have to catch up with you. So, Larry and Major Nelson up in Redmond and I are now racing online together in real time and you can see I am--oh! Oh...

SYDELL: Microsoft is now in the race for the next-generation game consoles. Microsoft has an early start. Sony's PlayStation 3 and Nintendo's Revolution console are not due out until next year. So far, Sony has dominated the gaming market. Its current PlayStation 2 outsold the old Xbox 4:1. And Sony has a different idea for the living room in which the PlayStation 3 will dominate. Microsoft lost money on the last Xbox. Analysts say if the company is going to remain in the gaming industry, it will have to make money this time or get out and stay focused on its profitable PC software business.

Laura Sydell, NPR News, San Francisco.

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