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Can Microsoft Save the Video Game Industry?

By Rick Munarriz - Apr 9, 2013 at 6:00PM

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Mr. Softy may be ready to play some games with its new console.

Microsoft (MSFT -0.23%) 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 (NTDOY 0.05%) Wii U late last year and the slow-building buzz for Sony's (SONY 1.39%) 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 (AMD -3.28%) 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 (GME -3.56%) 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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Stocks Mentioned

Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$252.56 (-0.23%) $0.58
Sony Corporation Stock Quote
Sony Corporation
SONY
$89.94 (1.39%) $1.23
Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
AMD
$93.50 (-3.28%) $-3.17
Nintendo Co., Ltd. Stock Quote
Nintendo Co., Ltd.
NTDOY
$57.63 (0.05%) $0.03
GameStop Corp. Stock Quote
GameStop Corp.
GME
$95.66 (-3.56%) $-3.53

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