Ten months after its initial launch in North America, Microsoft (NASDAQ:MSFT) is finally bringing the Xbox One to Asia as part of its global launch across 28 countries.
Japan will get the console first on Sept. 2. China, Taiwan, Hong Kong, Singapore, and India will follow on Sept. 23, but the launch date for South Korea has yet to be confirmed. Japan gets the cheapest Xbox One, which will start at 39,980 yen ($383) without the Kinect. India gets the priciest Kinect-free Xbox One, which will cost 39,900 rupees ($661).
Microsoft is arriving late in a market where it has traditionally fared the worst. To make things even tougher, Sony (NYSE:SNE) started launching the PlayStation 4 across the region last December, giving it an established position across all major markets except for China.
Microsoft needs the Asian launch to boost sales, since the Xbox One has only sold around 5 million units worldwide compared to Sony's 10 million PS4s. Let's take a look at the top challenges that the underdog console will soon face deep in enemy territory.
Converting PC gamers in China
China's massive video game industry generated over $13 billion in revenue last year, according to the China Games Industry Annual Conference, representing 33% growth from 2012.
Yet it's an industry dominated by PC games, which accounted for 65% of that total. China lifted a 13-year ban on console sales last year, but the ban had never been aggressively enforced, since imported consoles could easily be bought via gray markets and online retailers. That gray market only accounted for $15 million of the $13 billion industry.
The Xbox One will launch in two bundles in China. The first bundle, which which includes Powerstar Golf, Neverwinter Online, and a six-month Xbox Live Gold membership, will cost 3,699 RMB ($600). The second one, which includes all of the above, along with Kinect Sports Rivals, Forza Motorsport 5, a commemorative controller, and the Kinect, will cost 4,299 RMB ($700).
Microsoft threw in a lot of extras, but the higher price could be considered forced purchases, since the Hong Kong version only costs $436 without the Kinect. Microsoft attributes the difference to lower taxes and tariffs. A recent online poll from Chinese news site Sina Tech revealed that out of over 7,000 respondents, only 20% intended to purchase an Xbox One.
Converting handheld gamers in Japan
Japan is an even tougher market to tackle than China. In addition to being Sony and Nintendo's (NASDAQOTH:NTDOY) backyard, it's a market that is dominated by handheld gaming rather than console or PC games.
Media Create reports that out of the top 10 games in Japan for the week ending on Aug. 24, four were 3DS games and one was a PS Vita title. The 3DS XL and PS Vita are both outselling the Wii U and PS4, thanks to the dominance of handheld "monster catching" games like Capcom's Monster Hunter and Level-5's Yo-Kai Watch.
Microsoft tried to break into the Japanese market twice with exclusive games. Microsoft marketed the original Xbox as the successor to Sega's Dreamcast by securing remakes and sequels of the console's titles. With the Xbox 360, Microsoft signed deals for Japanese RPGs from Square Enix like Star Ocean: The Last Hope, The Last Remnant, and Final Fantasy XIII.
The original Xbox only sold 530,000 units in Japan, but the Xbox 360 fared better with 1.7 million units. Yet both consoles were considered flops compared to Sony, which sold 23.2 million PS2s and 10 million PS3s.
The only way for Microsoft to impress Japanese gamers is with better exclusive games. Unfortunately, out of Microsoft's 29 launch titles in Japan, none of the seven games from Japanese publishers are exclusive to the Xbox One or Japan. As for the other 22 launch titles, only six titles -- Crimson Dragon, Forza Motorsport 5, Killer Instinct, Kinect Sports Rivals, Powerstar Golf, and Ryse: Son of Rome -- are Xbox One exclusives. The remainder of the launch titles are previously released cross-platform games like FIFA 14, Assassin's Creed IV: Black Flag, and Wolfenstein: The New Order.
A Foolish final word
Much of the Asian gaming market falls within the Chinese and Japanese spheres of influence, which means that Microsoft will have to work hard in both markets to win over Asian gamers.
Perfect World's Neverwinter Online and other similar massively multiplayer online games (MMOs) could help Microsoft convert Chinese PC gamers over to the Xbox One, but the console's high price could make it a tough sell. Microsoft also faces a tough battle ahead in Japan, a handheld-crazed market which Sony's PS4 has struggled in.
But if Microsoft lowers prices in China to gain market share, and attracts more prolific Japanese publishers and game designers to make exclusive games for the Xbox One, it might just survive the tough Asian market and fare better the third time around.
Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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