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Year ahead a "struggle" for Xbox

Analysts paint a grim picture.

Clever industry analysts have laid into the Microsoft Xbox business, calling its attempts to grab the casual audience "disastrous" and predicting it will "start to struggle in the market" in 2008.

The dissenting voices came from a panel speaking at the Nordic Game 2008 conference in Sweden last month. When called to asses the current state of the worldwide games market, analysts painted Microsoft a less than rosy picture.

"When you look at an installed base basis, the Xbox 360's going to come in third place when all's said and done," said David Cole from DFC Intelligence - some sort of videogames spy organisation presumably.

"The concern I would have with a company like Microsoft is, one of these days they're going to have to make a profit on this business otherwise why are they in it?"

Nick Parker, who runs Parker Consulting, and an analyst from Screen Digest argued that the Xbox 360 failure to win Europe was because of a fundamental image problem.

"The trouble with Xbox 360 is it hasn't managed to shake off this urban, irreverent adult male feel; so it hasn't gained traction in the more casual gaming markets of mainland Europe such as France, Spain and Italy, where it's stalled," said Parker. "And there are already rumours of Xbox 360 being delisted from certain retailers."

Parker, who used to work for Sony, hammered his argument home by suggesting Microsoft had learnt nothing from the mistakes of its first Xbox.

"I think they started off badly with the Xbox itself: blood and breasts. This alienated it immediately to a lot of consumers around Europe, and they never got over that. The brand image never went away. And although Halo 3 is a big game, it just emphasises again what the Xbox is all about," added Parker.

"If you go talk to people in Seville, in Rome, they're not interested in that. They're much more casual gamers, they don't want to have such competitive games."

Cole (from DFC Intelligence - keep up) said although Microsoft was struggling to break its hardcore borders, it was still possible for publishers to rack-up strong sales on typically Xbox titles.

"If you're doing a first-person shooter title, you're clearly going to want to be on Xbox 360, and that's for years to come. [But] their efforts at marketing outside of the first-person shooter crowd have been disastrous," he said.

Microsoft hired former Nintendo Europe chief David Gosen (The Gosen One) earlier this year to to head its casual attack on the continent.

Globally the Xbox 360 leads the PS3 by 19 million sales to 12.85, respectively, although Microsoft had a year's headstart. Perhaps the surprise leader of the generation remains Nintendo with Wii sales of 24.4 million.

While the European picture looks grim for Microsoft, with regional Sony boss David Reeves proclaiming a PS3 win on the continent already, the Xbox 360 still performs strongly in the UK and in its home US territory.

Last month Xbox boss Don Mattrick boasted about reaching the 10 million sales landmark, producing rousing statements such as, "History has shown us that the first company to reach 10 million in console sales wins the generation battle."

The panel accused Mattrick of "clutching at straws".

"[Microsoft] get very defensive because they realise the US is their last stronghold now as their sales go into decline across the rest of the world," said Parker (ex-Sony, runs Parker Consulting - keep up).

"So they're a little bit desperate and they're clutching at straws now to cling on to what they've got in the market which is primarily the US."

Parker also drudged-up the "tremendous brand loyalty to PlayStation", which he claims caused many to hold off entering the new generation until Sony and its familiar brands did.

Cole (DFC Intelligence) rued that "there's always the risk" Microsoft might reconsider its place in the console business because of all this.

"They will have to assess their position after this round, and clearly they were very committed to saying they were going to stick with this business through another console system. They haven't really talked much beyond that and I know that really at some point they are going to have to figure out how they're going to make money out of this business."

And while Cole said he expected "the Xbox 360 start to struggle in the market" over the next 12 months, he admitted that Sony faced similar problems to turn PS3 sales into profit.

The Wii was also picked on; despite its success, the panel questioned its long-term prospects and the commitment of its casual audience.

"There's a risk that they [casual users] could actually put the Wii in the wardrobe if there isn't a steady stream of games that please them," offered Martin Lindell, a Swedish analyst.

Parker agreed: "You've got to remember there's a difference between buying and playing - the fact that you get your grandma to play the game doesn't mean she's going out to buy it. I'm still in that kind of faddish feeling about the Wii."

DFC Cole stood by historical third-party support issues as causing a potential long-term risk for the Wii.

"It's a huge issue that Nintendo dominates the platforms they own, as that's how they make all their money," said Cole.

"We see the Wii having a higher installed base but the PS3 generating, by about 2010 to 2011, more revenue in terms of software."

Microsoft did have one smouldering champion at the session. When the panel began criticising Sony and Microsoft for making too many different models of their consoles - specifically referencing the Xbox 360 Elite - an unusually silent Epic Games boss Mark Rein bellowed, "Are you guys crazy?", claiming the victimised unit had been the only profitable model for Microsoft.

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