A "Halo" to Light Up the Night

The hours are counting down. The cans of Red Bull are on ice. Diehard gamers know the time is drawing near for them to crack their knuckles, grip their controllers, and get their first tastes of Microsoft's (Nasdaq: MSFT  ) Halo 3.

We're talking about more than a video game. This is an event. Best Buy (NYSE: BBY  ) will be cracking open dozens of its stores at midnight, an honor typically bestowed on console launches or Harry Potter books.

Xbox players have been waiting nearly three years for the third installment in the galactic shoot-'em-up series. It's easy to see why these next few hours may feel like an eternity for them.

Microsoft sold $125 million worth of Halo 2 copies during the first 24 hours of its release in November 2004. There is no reason to believe that tomorrow's sales won't squash that record.

Mr. Softy can use that momentum, too, because it's starting to squander the head start it got in the latest generation of console wars.

The silver aligning
Microsoft is in an unlikely position. Its Xbox 360 was the second-best-selling console last month. But the silver medal isn't the surprise. What's unfathomable is that Nintendo's (OTC BB: NTDOY.PK) Wii is wearing the gold, since industry analysts figured Sony (NYSE: SNE  ) would resume its console superiority. Instead, product delays, high prices, and slow Blu-ray adoption rates have left Sony's PS3 consoles collecting dust while Wii systems still sell briskly.

System

August Unit Sales

Nintendo Wii

404,000

Microsoft Xbox 360

277,000

Sony PlayStation 3

131,000

Source: NPD Group.     

So it could be worse for Microsoft. It could be Sony in the lead. However, the mad scramble beneath Nintendo has forced both Microsoft and Sony to slash systems prices, even as they introduce higher-capacity hard drives and a wider library of software titles. That's a problem, because Sony and Microsoft typically already sell their consoles at a loss. The gravy comes from the royalties software developers pay based on how many games are sold for a particular platform.

In short, it's a sad day when you're willing to subsidize the razors to move more blades and folks still aren't buying your razors.

Microsoft hopes that Halo 3 changes things. The popular game and its online multiplayer combat modes find players just where Microsoft wants them: close. What do you think those fatter hard drives are for, anyway? Digital delivery is a big part of the console model these days. These are blades on steroids, with publishers rushing to offer inventory-free games and add-on accessories through the Xbox Live marketplace.

The stakes are heavy, and Xbox is letting its networking prowess guide decisions that should serve it well past tonight's stroke of midnight. Beyond just Halo 3, Microsoft is paying Take-Two Interactive (Nasdaq: TTWO  ) $50 million for a pair of episodic installments to next year's Grand Theft Auto IV release.

The two new chapters will be available only to Xbox owners. That's important. Even though Halo 3 is an Xbox exclusive (at least when it comes to video game consoles; Microsoft puts out the game for computers, too), Take-Two's Grand Theft Auto franchise is a free agent that has sold far more copies in the past on PlayStation formats. Making additional content available only to Web-tethered Xbox users will make fence-straddling gamers likely to snap up the Xbox version of the game.    

Wii will rock you
Nintendo has taught the industry a lesson. You don't need to have fancy specs, DVD playback, or even an internal hard drive to win the hearts of gamers and the imagination of developers.

In a few hours, Microsoft hopes to teach the industry another lesson. Unlike the 300 Spartans who fought bravely at the Battle of Thermopylae but lost, Halo protagonist Spartan 117 fights on.

Franchise title ... console-specific game ... online enhancements. I hear that the gold-plated baddies are tough to take down in the new game. The same can be said about the gold-medaled Nintendo.  

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