For the Xbox 360, the Redmond, Washington-based software maker has spent about US$12 billion adding features such as wireless controllers, a 20-gigabyte hard-disk drive, a high-speed Internet connection, and a computer chip almost four times faster than the first Xbox to render more life-like graphics.
Microsoft introduced the system in the U.S. last month and in Europe on December 2. Sony outsold the first Xbox by an almost four-to-one margin globally. In Japan, the world's second-biggest market for video games, 36 Sony PlayStations were sold for every Xbox. Microsoft plans to ship about 3 million units globally within the first three months, and 5.5 million units by June.
Microsoft is "far behind Sony in Japan," said Brendan Barnicle, an analyst at Pacific Crest Securities, who rates Microsoft "sector perform." "They really need to make sort of a significant leap forward."
The Xbox 360 has six games available for today's launch and will have four more by the end of the year. Microsoft had 12 titles, mostly fighting and action games, when it debuted the first console on February 22, 2002, a release date that was almost two years behind Sony's PS2 and five months behind Nintendo Co.'s GameCube.
"It is very important that we are competitive in this country," said Peter Moore, head of global marketing for Xbox, in an interview yesterday. "We also see Japan as an incredible springboard for the Asia market, which will be a power market in the next-generation games."
In Japan, Microsoft has been working with some of Japan's top game developers, such as Hironobu Sakaguchi, who created the role-playing game series "Final Fantasy," and Tetsuya Mizuguchi, who made the "Sega Rally" racing game series, to develop software exclusive to the Xbox 360.
Game sales are crucial for console makers because they sell the hardware at a loss. Microsoft loses at least US$153 on each Xbox video-game console, according to market researcher iSuppli Corp. Microsoft makes money by selling its own games and collecting royalties from third-party game makers.
The Xbox 360s sold in Japan came with a trial version of Square Enix Co.'s "Final Fantasy XI." Previous versions of the Final Fantasy series were the best-selling game in Japan in 2003, 2001 and No. 2 in 2000 and 1999, according to Tokyo-based researcher Enterbrain Inc.'s 2005 white paper on the video game industry.
Four of the top five games sold in Japan in 2004 were role-playing games, which allow users to take a character through an elaborate storyline adventure. No games for the Xbox console were ranked in the top 100 last year, according Enterbrain.
Microsoft will have at least a three-month lead over Sony's PlayStation 3 game console, which is expected to come out in spring 2006. Nintendo's Revolution is expected sometime next year.
For the first Xbox "we were behind the eight ball as it were from the get-go and we did not want to repeat that, and felt it was important to get out in front early," said Moore.
The Xbox 360 will be available in South Korea from February 24 and March 2 in Hong Kong, Singapore and Taiwan.