Can Microsoft Save the Video Game Industry?

Microsoft (NASDAQ: MSFT  ) may be the video game industry's final hope.

The software giant is reportedly gravitating to May 21 as the date when it will introduce the successor to the iconic Xbox 360.

Given the poor market reception for Nintendo's (NASDAQOTH: NTDOY  ) Wii U late last year and the slow-building buzz for Sony's (NYSE: SNE  ) upcoming PlayStation 4, it may be up to Microsoft to bring die-hard gamers back to the console when it rolls out what some have been calling the Xbox 720.

Nintendo was supposed to save the day with November's Wii U rollout. It flopped. Nintendo went on to hose down its target for consoles shipped in its fiscal year that ended last month. You know things are bad when Best Buy is bundling the $60 Nintendo Land game with the entry-level system at no additional cost to the $300 price tag. Amazon.com has several merchants selling new Wii U basic systems for less than November's price.

The Wii U has been on the market for less than five months, and it's already vulnerable?

Microsoft will have a better shot. Its Xbox 360 has been the consistent monthly sales leader for more than two years.

Advanced Micro Devices (NYSE: AMD  ) saw its stock soar 13% on unconfirmed reports that the new Xbox will run on an AMD chip.

Microsoft may be a laggard in mobile operating systems, and it's struggling on desktop, but it's the king of the video game hill.

What can investors expect outside of AMD architecture? Well, gamers will want to know if the chatter about the new system requiring an Internet connection to play games is true. We live in connected times, but if online access is necessary to play every game, it will be a deal breaker for folks with spotty or no connections.

There will also be the thorny issue of backward compatibility -- which could be a problem with Sony's new system -- and the earlier rumor that the new Xbox wouldn't play secondhand games. Tethering purchases to the original buyer would be devastating to GameStop's (NYSE: GME  ) high-margin but declining resale business. If the reason used games won't play on the new system is because distribution will be exclusivity digital -- hence the online requirement -- GameStop will have even bigger problems.

For now, there's little that we can do but wait. With Sony and now possibly Microsoft hitting the market with a new console later this year, it's going to be a defining holiday season for the industry.

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Read/Post Comments (12) | Recommend This Article (0)

Comments from our Foolish Readers

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  • Report this Comment On April 10, 2013, at 10:46 PM, socialspasm wrote:

    If the new Xbox is only functional with a constant internet connection, this will flop harder than beta tapes. This is a hardware breaking feature that will make the console unusable for many. Meanwhile, Sony's PS4 is confirmed not to have this feature.

  • Report this Comment On April 10, 2013, at 11:04 PM, ceph46e2 wrote:

    This is the most blatantly bought article I've ever seen regarding the console industry. I don't normally even care about consoles as I am a PC owner but the author of this piece is obviously not up on the news or choosing to ignore the gaming industry. Microsoft is touting an Alway-On model that EVERYONE hates. Much like the desktop they've torn to hell they are now doing the same thing to the next XBox. The buzz has been entirely around the PS4, I should know, I'm a gamer unlike the author. I mean this is a contrary to public opinion blatantly bought piece of advertising.

  • Report this Comment On April 10, 2013, at 11:16 PM, Burstedbladder wrote:

    Microsuck. Need I say more?

  • Report this Comment On April 10, 2013, at 11:22 PM, btc909 wrote:

    Don't charge $500 for the Xbox 720. That pricing structure did wonders for the WiiU.

  • Report this Comment On April 10, 2013, at 11:32 PM, spydi wrote:

    Price point, price point, price point. The Wii U flopped because the price was too high compared to other Nintendo products.

  • Report this Comment On April 11, 2013, at 12:24 AM, ezmink wrote:

    I am a gamer and I own 3 xbox 360's for myself and my kids. If they go with always on then I would have to buy 3 copies of games because if it is registered on one it will not play on the other ones. They don't realize how many people will jump ship to playstation. I am one of those and I will take my 3 console purchases to the competition.

  • Report this Comment On April 11, 2013, at 1:10 AM, monsterchef wrote:

    This is by far the most biased article I've read. To the hard core gamers Microsoft lost its credibility when it released the Kinect, and strayed away from focusing on core games. The buzz on all hard core gaming sites has been about the ps4 and how Microsoft is losing its focus in the gaming industry trying to implement a more media base system to the living room..

  • Report this Comment On April 11, 2013, at 3:21 AM, Smallz38 wrote:

    Slow building buzz on the PS4? What are you smoking? Ever since it was officially announced it has exploded in popularity. Many people are hearing the rumors about that next x-box (and keep in mind they ARE just rumors atm) and are none to impressed. Hows about everyone calm down and actually wait till the concrete facts are presented before making wildly biased opinions, pretty much this whole article, to decide who's buying what. And I'm sorry, no matter HOW they try to defend always on DRM, the public knows what's up and it will hurt x-box sales.

  • Report this Comment On April 11, 2013, at 5:48 AM, TheKnown wrote:

    It's the last hope. I doubt the P iece of S h-- 4 will be much better than the P iece of S h--3. However if the new xbox requires always being connected to the internet that will give it very low sales numbers.

  • Report this Comment On April 11, 2013, at 6:07 AM, puppybone69 wrote:

    What's killing the video game industry here in the US is the recent trend of selling games as online downloads only, instead of selling them on discs with printed manuals, like they still do in Europe! I import all of my video games from the UK now because of this, and I'm not the only one doing it! Most of us gamers are also collectors, and we want physical goods that we can display on shelves, not virtual icons on hard drives that can be erased! Figure it out, suicidal American game industry, you're losing buisness because your customers feel your products no longer provide any lasting value!

  • Report this Comment On April 11, 2013, at 6:29 AM, sadwell wrote:

    How can we trust a company that puts out a product as crappy as Windows 8.

  • Report this Comment On April 11, 2013, at 6:49 AM, pm21yanks wrote:

    You can make the systems better but the gaming industry is declining in my eyes because of the games. $65 dollars gets you a visually pleasing experience but not a challenging one. Why should I buy a console game that I can beat in a weekend if I can download 1,000 free app games that I can play forever? Give me a game that challenges me and I will buy that game. I would gladly give up some sharp graphics for a challenge.

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