The Making of Xbox 360

24 February, 2011

Submitted By:
Nishant Fogaat
Nikhil Bajpai
Mohit Singh
Abhishek Singh
DFT - 06
 INDEX

S.No Topic Page No.

1. INTRODUCTION: The Background Note 3

2. The XBOX 7
3. The New XBOX 11
4. The Design 14
5. The Features 15
6. The Launch of Xbox 360 20
7. The Road Ahead 22
8. References 26
 INTRODUCTION: THE BACKGROUND NOTE
Microsoft was founded in April 1975 as a partnership concern by William H Gates (Gates)
and Paul Allen. At this time, the duo had developed an improved version of BASIC
(Beginners All – purpose Symbolic Instruction Code, one of the first programming languages
for computers), which was distributed by Micro Instrumentation and Telemetry Systems. In
1977, Microsoft introduced FORTRAN and COBOL languages for PCs. By the end of 1977,
Microsoft had emerged as the market leader in microcomputer languages, with sales
exceeding US$ 1,000,000.

In 1980, Microsoft bought an operating system called Q-DOS from a Seattle based
programmer for US$ 50,000 and renamed it MS-DOS(Microsoft Disk Operating System).
Soon, MS-DOS became the accepted standard for PCs. By 1983, 99 percent processing
system called Word 1.0. In 1984, Microsoft introduced Multiplan, BASIC and Word 1.0 for
Apple’s Macintosh Computer. It also upgraded MS-DOS for IBM. In 1985, it introduced
Windows 1.03, and the Excel spreadsheet for Macintosh. In 1986, Microsoft launched an
initial public offering (IPO) and raised US$ 61 million.

In 1989, Microsoft introduced Microsoft Office, which included several applications like
Word, Excel, etc. In 1990, Windows 3.0 was launched, followed by Windows NT 3.1 in
1993. In 1995, Windows 95 operating system was launched. This was followed by web
browser and Internet Explorer, MSN online service. In 1998, Windows 98 operating system
was released and Steve Ballmer was appointed the President of Microsoft, while Gates
remained its CEO and Chairman. Subsequent included Windows XP in 2001.

Microsoft was also involved in the computer hardware business from the early 1980s.
Microsoft’s hardware group was formed in 1982, and by 1983, the company was shipping
pointing devices. In 1989, Microsoft shipped more than 2 million pointing devices. In 1994,
Microsoft launched an ergonomic keyboard and by 1997, Trackballs and Joysticks were
added. In 1999, Microsoft launched the first optical mouse. By 2001, Microsoft’s revenues
from pointing devices stood at US$ 569 million. Other hardware products from Microsoft
were broadband home networking products like wireless base station, network adaptors, and
others.

Microsoft’s interest in gaming dates back to 1983, when the company sold the game
Microsoft Flight Simulator. Some other gaming ideas were also pursued.
 History of Video Game Consoles
Particulars Time Period Some Products

First Generation 1972 - 1979 Magnavox Odyssey (1972)

PONG (Atari) (1975)

Coleco Telstar (1976)

Second Generation 1976 - 1984 Fairchild Channel F (1976)

Mattel Intellivision (1980)

Sega SG-100 (1983)

RCA Studio II (1977)

Third Generation 1983 – 1989 Sega Master System (1986)

(8 – bit era) Atari 7800 (1984)

NES (1985)

Fourth Generation 1989 – 1997 Sega Mega Drive/ Genesis (1988)

( 16 – bit era) NEC PC Engine (1987)

SNES (1991)

Fifth Generation 1993 – 2004 Atari Jaguar and Atari Jaguar CD (1993)

( 32 – bit era) Sega Saturn (1994)

Sony PlayStation (1994)

Nintendo 64 (1996)

Sixth Generation 1998 – 2005 Sega Dreamcast (1998)

( 128 – bit era) Sony PlayStation 2 (2000)

Nintendo GameCube (2001)

Microsoft Xbox (2001)

Seventh Generation 2004 – present Microsoft Xbox 360 (November , 2005)

Sony PlayStation 3 (November, 2006)

Nintendo Wii (November, 2006)

But these were limited to developing gaming software. By 2000, Microsoft emerged as one of
the top PC game marketing companies, with four titles in the top ten games, in PC gaming
business valued at US$ 1.4 billion. Its gaming site www.zone .com had 12 million registered
users at that time. Microsoft also acquired some game companies like FASA Interactive,
Access Software, and entered into agreements with other companies to develop games. Some
of the popular games from Microsoft were Ages of companies to develop games. Some of the
popular games from Microsoft were Age of Empires, Close Combat, Pandora’s Box,
Microsoft Golf, and Midtown Madness, among others.

Though Microsoft played a major role in the PC gaming business, several designers opted to
develop games without using the Windows operating system. They were of the opinion that
the Windows operating system slowed down depiction of graphics. Several games developed
by other companies bypassed Windows and were loaded through DOS. As Microsoft went on
to develop the Windows 2000 operating system, it was widely believed that many of the
games that were using DOS would become incompatible with Windows 2000. In order to
avoid this, in early 1998, Microsoft acquired several gaming companies and entered into
exclusive publishing deals with game developers in order to develop games using Windows
operating system.

During this time, several popular gaming console manufacturers like Nintendo and Sony
were looking at upgrading their consoles by making them Interent compatible. They had to
add a keyboard to the existing console, in order to enable the gamers to surf internet.
Microsoft faced a major threat from gaming console makers, which would be manufacturing
peripherals. Before that could happen, Microsoft itself wanted to enter the gaming area and
bring out its own console. Since the company already owned several popular game titles,
converting them into console PC games would help Microsoft further expand its reach.

Though it was widely believed that Microsoft was keen on coming up with its own gaming
console from 1999, it was only in March 2000 that Microsoft confirmed its entry into
gaming. Microsoft announced that its gaming console would have Internet access, would
allow multiplayer gaming and have movie quality graphics. Microsoft estimated that its
gaming console would be three times more powerful than the existing market leader
PlayStation 2.
According to analysts, there were several reasons why Microsoft opted to venture into
gaming. The most important were: one, its dependence on software; and two, the rapidly
growing gaming market. According to J Allard, Corporate Vice President, Design &
Development, Entertainment & Devices Division, Microsoft, “We had a really good vision
for where we wanted to go in 20 years. We really saw the vision in terms of the entertainment
industry becoming a software industry and Microsoft having the lead role in providing a
platform to really motivate the entertainment industry forward in an interactive medium.”

Microsoft’s first foray into gaming was Xbox, which was launched in November 2001; more
than a year after Sony’s PlayStation2 was launched in the US. This gave Sony the edge to
capture the market and by the time Xbox was launched PlayStation2 was well established in
the market with loyal customers. After Xbox’s lower than expected performance, Microsoft
decided to launch Xbox 360, the next version of the gaming console, well before
PlayStation3 could hit the market.

Xbox and PlayStation 2 Sales – 2002

(In Millions)

REGION XBOX PS2

Western Europe 1.91 6.29

US 3.50 8.54
Japan 0.39 4.03
Australia/New Zealand 0.30 0.50

Source: Screen Digest, (From Ravi Chandiramani,”Can Xbox Prevail over

Power of PlayStation?” Marketing, May 15, 2003).
Xbox 360 was launched in May2005 well ahead of Sony’s PlayStation3, which was released
in November 2006 in Japan and the US, and Nintendo Wii which was also launched in
November 2006. This gave Microsoft the advantage in capturing market share. In the quarter
ending December 2005, Xbox 360 sold 1.5 million units (900,000 in North America, 500,000
in Europe and 100,000 in Japan). By June 2007, Microsoft expected to sell over 13 to 15
million Xbox consoles in the market. According to Wagner James Au from GigaOM
(GigaOM, is one of the top 50 blogs worldwide, offering news, reviews, analysis of the
online games, technologies etc.), “Microsoft’s lead seems unbeatable now, fuelled by a one-
year headstart, the raging success of Gears of War as 2006’s killer app, and most recently, a
blitzkrieg of promotion for Halo 3, scheduled for 2007.”
 THE XBOX
Developing the Xbox was a new experience for Microsoft as the company had never worked
with retailers and game developers before, nor did it have any experience in making consoles.
Microsoft, the first American company to enter into gaming business, had to transform itself
from a software developer to hardware manufacturer and create a consumer brand from
scratch. From the beginning, Allard was clear that the console should have Internet and
broadband capabilities, he said, “Microsoft is totally committed to online gaming. I believed
broadband will emerge from a novelty to a necessity, just as cell phones and Web browsing
have”.

Though market research and focus group studies, Microsoft arrived at its target audience,
who were aged between 16 and 26 years, and were gaming enthusiasts. The brand was
positioned to target this group of passionate gamers who spent at least 10 hours every week
playing games. According to Microsoft, this group comprised of more than seven million
people, predominantly male. To a lesser extent, Microsoft planned to cater to two other
groups who played games for 3-6 hours a week, which comprised of 8-15 years old and
another of 18-22 years old.

Microsoft had a 733MHz CPU, which could process more than 1 trillion operations per
second, a 250 MHz graphics chip that was custom designed by Nvidia Corporation. The chip
was said to be three times faster than any other chip in the market at that time. Xbox had a
64MB RAM, a DVD drive, and an 8GB Hard Drive, which could store games and download
game enhancements through the Internet. Other features of Xbox were its Ethernet port, a
low-end version of Windows 2000, and a 3-D audio processor with 64 audio channels. The
console was targeted at serious gamers. With a view that serious gamers do not often use
USB supported devices, Microsoft did not include USB drives in the Xbox. The reason cited
for not providing the modem, was that the gamers expected a better gaming experience, than
the one provided by 56 Kbps modems, and the growing popularity of broadband.
Microsoft entered into alliance with Konami, a game developer in Japan, which agreed to
provide some of its famous titles like Jurassic Park and Metal Gear, to Microsoft. Several
other game developers expressed their willingness to work with Microsoft due to the software
compatibility and ease in making the new games and transforming old games. According to a
developer from Epic Games, “Our games are good on the PC. They’re gonna be great on PS2
(PlayStation2). But they’ll be unbelievable on X-Box.”

In 2000, Microsoft entered into agreements with more than 150 game developers to develop
games for Xbox. The prominent developers included Konami, Capcom, Bungie Studios,
Indie Built, High Voltage Software, Digital Illusions, Ubi Soft, etc. By the time of the launch
of Xbox, around 20 titles were ready. Xbox compatible versions of some of the popular PC
games like NFL Fever, Halo: Combat Evolved, Halo 2, Links, Midtown Madness, etc were
released subsequently.

In January 2001, Xbox was shown at the computer electronics show in Las Vegas. Microsoft
approached consumers to gather their feedback about the product and incorporated the
changes suggested. The game that was displayed in the show, Malice, attracted instant
attention. In March 2001, the console was displayed in Tokyo. At this time, industry insiders
opined that the console was too big for Japanese homes. In May 2001, in Electronics
Entertainment Expo held at Los Angeles Convention Centre, California, several titles like
Halo, Oddworld, Tony Hawk Pro Skater 2, and Shrek were displayed.

Some of the titles received positive feedback while others like NFL Football were said to be
slow and dull. Some games were said to be showing uneven lines. Analysts opined that due to
the limited time given to the developers, they had not been able to come out with quality
product. At the same time, there was a section of industry experts, who were of the opinion
that Xbox was just a beginning and Microsoft was just testing the waters in the gaming
industry. They opined that the next version of Xbox would be a major competitor to Sony.
To launch Xbox, in November 2001, Microsoft spent US$ 500 million covering advertising,
retailer and third party software support, merchandising, and event sponsorships. The
marketing team was supported by a team which had earlier involved in the launch of three
Windows operating system versions and PC games software. The others involved in the
launch were Don Coyner who was earlier with Nintendo and Jennifer Booth who was
involved in the launch of PlayStation.

After opined that Microsoft had followed a similar approach for developing Xbox as it did for
developing software, the approach allowed improvements to be made from time to time and
emphasized the features rather than the design. This resulted in a bulky box, which weighed 8
pounds and had a huge controller. Many gamers had problems with the controllers of Xbox,
as they could not be held comfortably owing to their size. For the Japanese version, Microsoft
had made smaller controllers. With several gamers opting for these controllers, Microsoft
began shipping all the Xbox consoles with modified smaller controllers.

Visual of Xbox

Source: www.gwnonline.net
Though Microsoft incurred more than US$375 on manufacturing each console, it had to sell
it at US$ 299, the same price as PlayStation 2, effectively incurring loss of US$ 76 on every
console sold. But this was the norm in the game console market, which followed the ‘razor
and blades’ business model. According to analysts, Sony lost around US$ 188 on every
PlayStation 2 sold in the US. In March 2001, Merrill Lynch estimated that Xbox would
breakeven only in 2005, and by then Microsoft would have lost US$ 2 billion on Xbox.

Some analysts opined that Microsoft’s intention in entering the gaming console market was
to pull Sony down from #1 position. They were of the view that Microsoft with its power and
position could easily take the lead over its competitors. However, by the time Xbox was
released, PlayStation 2 was well established in the market. In spite of providing better
hardware, it was difficult for Microsoft to make gamers shift their loyalties from PlayStation
2 to Xbox. Ultimately, Microsoft was unable to dethrone Sony from the top slot. The main
reason was the lack of popular games, which could be attributed to exclusive contracts that
Sony had entered into with several developers, due to which they were not able to give the
same games to Microsoft. Popular games like Grand Theft Auto were made exclusively for
PlayStation. By august 2003, Sony accounted for a share of 54 percent in the console market
as against Microsoft’s 27 percent.

Though Microsoft claimed that Xbox was three times more powerful than Sony PlayStation2,
game publishers felt that PlayStation, Xbox and Gamecube were all in the same league.
Industry experts also opined that though Microsoft had a good product, it went wrong in its
marketing. The company created PR buzz, and began selling the console at lower price, but
failed to get good games for the console. The marketing failure was attributed to Microsoft’s
lack of experience in this industry. Commenting o Xbox, Allard said,” we didn’t get the
controller right. The live experience wasn’t that seamless in the dashboard. We didn’t future-
proof it enough. If there’s one frustration that I look back on in terms of that, you know,
really rapid-fire entry into the market, I would say we had a lot of seams that showed.”
 THE NEW XBOX

In early 2002, Microsoft planned to launch the second version of Xbox. The project to
develop the new Xbox was code named Xenon. The company planned to create a seamless
experience to the customers by bringing in connectivity between gaming consoles and
personal computers and by providing access to digital music, videos, photos, for the gamers.
According to Allard,” If you think of Xbox I was painting, we mostly sketched in what we
wanted to do. So, in Xenon, what i wanted to do was really set out more like a sculptor would
and just marinate in the problem for a little bit...decide what it is, what singular vision we
wanted to have to shape.” The team for developing the new Xbox was clear that the project
should not be delayed and the new Xbox should be launched well ahead of PlayStation 3. The
team wanted to develop a high performance gaming console using hardware that should
become cheaper over years. Another aspect that the team wanted was to make the new Xbox
compatible with components like digital camera, MP3 players, video cameras, etc. The
essence was to make the new console an all-in-one console, and not just for gaming.
Microsoft decided on having two versions of the new Xbox, one for game enthusiasts and the
other for budget conscious gamers.

Development of the new Xbox was carried out at Millennium campus located at Redmond,
Washington, away from the Microsoft headquarters. This was a deliberate move on part of
the top management, who were involved in the development of the new Xbox. They were of
the view that as the product had to be developed at a faster pace and required interaction and
collaboration with different partners, its development should be carried out away from the
main office, in a culture that was completely different from that of Microsoft’s. According to
Peter Moore, In charge of Marketing Xbox,” They allowed us to set up a separate division
almost, that is physically, geographically, psychologically and spiritually different from what
Bill himself calls the Borg.”

Several engineers working on the project started studying computer architecture ranging from
supercomputers to portable gadgets. The team consulted several manufacturers of
semiconductors and decided not to manufacture the chip from scratch.
Instead, they opted for semi-custom chip design and used their own ideas for developing the
gaming console hardware. The top management decided that Microsoft would lead the
project for integrating the hardware, own the intellectual property, establish cost-reduction
schedules and manage its vendors closely. In all these ways, the company aimed at reducing
the product development costs considerably and expected to launch the product in the market
by 2005. Microsoft decided it would own the Intellectual Property (IP) Rights for the chips
created by other vendors for the new Xbox. From the beginning, Microsoft aimed to bring out
a console that was high on performance, and would not overheat easily.

Vendors like Intel and Nvidia, however were not in favour of Microsoft owning the IP rights
for the chips by them. Nvidia planned to make a chip for the new Xbox, if Microsoft agreed
to share the cost of developing a new chip. The new chip was totally different from PC
graphics chips it had been making earlier. However, IBM, which had entered into chip
engineering business, expressed its willingness to provide a customized game console
graphics chip for Microsoft.

The team involved in finalizing the chips was of the view that IBM and ATI Technologies
would be able to provide the required chips for Xbox and this view was conveyed to the top
brass of the company. Microsoft reaffirmed that it intended to retain IP. In February 2003, the
planning for the new Xbox platform began. In August 2003, ATI was formally assigned the
task of producing graphic processing control for the new Xbox. The chip from ATI had
embedded memory of 10 MB and had 48 processors to handle the details of colours, texture,
and surface features, of the objects. In September 2003, Microsoft entered into an agreement
with IBM to develop a triple core CPU.

IBM speeded up the process of manufacturing the chip in order to meet Microsoft’s
deadlines. The Engineering Technology Services Unit of IBM developed the chip in a short
span of time, instead of 30-36 months generally taken by other manufacturers. IBM’s chip
was ready by January 2005. However, ATI managed to ship the chips by April 2005. In the
same month, Microsoft decided to double the memory of Xbox 360 to 512 MB from 256MB
of GDDR3 chips (Graphics double data rate). Samsung and Infineon Technologies
(Qimonda) agreed to provide the GDDR3 chips.
During the development of the new console, Microsoft followed an integrated approach
where the marketing and sales teams, content developers and silicon designers were regularly
consulted. This resulted in a development manual that was called the ‘Book of Xenon’, which
addressed all the aspects of development the new Xbox. The book focussed particularly on
DEL or Digital Entertainment Lifestyle, which talked about the convergence of movies,
music, games, phones, television, PC and cameras. Microsoft decided to name the new
console Xbox 360; Allard explained, “If we were building another console in the 3D era,
we’d just call it Xbox 2. So, we estimated Xbox 2 from the list? So, the name that we came
up with was Xbox 360, because we are putting the gamer at the centre of the experience.”
 THE DESIGN

During the development phase of Xbox 360, one of the first problems that Microsoft
encountered was the design. The first version of Xbox received some bad reviews due to its
huge size, which was one of the reasons for its dismal performance in the Japanese market.
The next version was to be designed to be aesthetically appealing to its wide range of
customers.

Jonathan Hayes, Designer Director of Xbox, who was from Rhodes Island School of Design,
wanted Xbox 360 to convey power and grace. He approached several exclusive design
studios to design the new Xbox and zeroed on Astro Studies, a San Francisco-based design
firm and Hers Experimental Design Laboratory based in the venture. The fact that they didn’t
understand each other’s language and were working in different time zones, led to problems
initially, which were overcome subsequently. Each company was initially asked to design
something new-that would represent a machine that was more than just a gaming console.
The designers also worked with the engineers involved in Xbox and the manufacturer like
Flextronics, to ensure that the console could stand on its side or lie flat.

The result was a box that was 30 centimetres high and 7 centimetres wide, with curving
insides, which several analysts called ‘a feminine hint or an hourglass figure’. It was in off-
white and silver colour and the users could change the colours by replacing the faceplate.
Microsoft received good reviews for the design of Xbox 360. According to Moore, “we knew
we had finalized it when research came back from Japan. We asked people, ‘who do you
think designed this?’ And they said, ‘this has to be from either Sony or Apple.’ That was the
seminal moment.”
 THE FEATURES

Xbox 360 had a built-in Windows Media Center extender through which the console could
access data including movies, music, pictures, stored on the PC; these could then be streamed
on to a television connected to the console. Even when the devices were in different rooms
but connected through the same home network, the content on the PC could be streamed on
to on the television.

Similarly, audio files from the PC could be streamed on to a television or any other audio
output device, through Xbox 360. Xbox 360 had an Ethernet port to connect to the Internet.
Xbox 360 had three USB 2.0 ports to connect other devices like MP3 players, digital
cameras, etc. Photographs from PC, digital camera or other portable media could be accessed
through Xbox 360 by connecting the device to the console. Apart from the USB ports, Xbox
360 had two memory unit slots and could support four wireless game controllers. Xbox360
could be connected to home PC through Wi-Fi and the music and pictures in the PC could be
accessed.

The chip used in Xbox 360 had three cores, as against two cores used in most other devices
like personal computers. Each core operated at 3.2 gigahertz. With three cores, the chips were
able to split the tasks manageably, and speed up the process. At the same time, the use of
more cores reduced electricity consumption. Each core could handle two threads at a time.

Due to extra memory, loading did not take a long time, and several high definition graphics
could be stored without any constraint. The games could give a cinematic effect. Higher
memory also helped the game developers to bring out clearer images and enhanced game
play. The high polygon performances resulted in elimination of sharp edges, making the
images realistic. Another feature was 16 simultaneous textures, due to which the texture of
surface and the things are highly authentic.
The result was clearer picture and a better gaming experience. For example, in one of the
Xbox games, the grass appeared like a green carpet; but, in Xbox 360 each blade of the grass
could be easily seen clearly. Again, the trees were not a patch of green, but each leaf could be
seen swaying in the wind, each leaf had its corresponding shadow. The characters in the
games were life-like and each wrinkle and frown on their faces could be seen clearly, and
their emotions were clear, even to the beads of sweat on the brow.

Xbox 360 had a power button divided into four quadrants, called the Xbox 360 guide button
or Ring of Light. The Xbox guide button could be used to access features common to all the
Xbox 360 games. With a press of the button, users could turn on the Xbox 360, pause any
game they were playing and listen to music, chat with friends, download, etc, and then return
to the game by pressing the button again. The controller of Xbox 360 was also provided with
an Xbox guide button. Through a slot provided on the controller, users could set any headset
or mike.

Visual of Xbox 360

Source: www.news.com
 Visual of Xbox 360

Source: www.cespage.com
Xbox 360 had a ‘wireless binding button’ to be used for wireless controllers. By pressing the
button, all the wireless controllers could be detected and would be bound to the console.
Xbox 360 supported up to four wireless controllers.

Xbox 360 was released in two versions – Xbox 360 which consisted of game console,
wireless controller, cable to attach Xbox 360 to a television set, 20 GB removable hard disk,
headset and customised head plates. The basic version of the Xbox 360 consisted of console,
wired controllers and Xbox live subscription. Xbox 360 premium was priced at US$ 399 and
the Xbox 360 core system was priced at US$ 299. Additional accessories provided with Xbox
360 premium was Ethernet cable, Xbox Live Headset, Xbox Media Remote and subscription
to Xbox Live Gold, which had online gaming capabilities.

Xbox Live, a multiplayer gaming content delivery system, was launched in November 2002.
With Xbox 360, Microsoft planned to turn Xbox Live into a major online community on the
lines of eBay. Due to additional features available, users could meet other gamers online and
play with them. Xbox Live was also used by game developers to show the trailers of the
games being developed. Through Xbox Live, players could customize the gaming gear and
sell it to other users. Gamers could interact with other through voice chat, e-mail and instant
messaging. By attaching a camera, video conferencing with other users was possible.

As of June 2005, Xbox Live had more than two million subscribers. Xbox Live was also
modified to enable the users to choose their game partners by providing feedback. If the
feedback was negative, the users were not paired again and positive feedback enabled the
players to play with each other. Through this feature, one could choose the skill levels of
one’s opponents. Xbox 360 allowed users to always remain connected- the property was also
called ‘live wire’. Even while watching DVDs, or playing games, users could remain
connected to the Internet enabling them to interact with other players. A small window
popped up letting the users know that they were being invited to interact by their friends.
 Xbox Vs Xbox 360

XBOX XBOX 360

CPU Intel 733 MHz Pentium III Custom designed IBM power
One hardware thread PC based CPU
CPU Floating point 1.466 GFLOPS 115.2 GFLOPS
Performance
Graphics Processor 233 MHz custom designed 500 MHz custom designed chip
chip
48 parallel processing units
4 parallel processing units
Total Memory 64 MB 512MB, GDDR3 RAM
Memory Bandwidth Main Memory: 6.4 GB/sec Main Memory: 22.4 GB/Sec

Frontside bus: 1GB/Sec EDRAM rendering memory:

256 GB/Sec
Polygon Performance 116.5 million/sec 500 million/sec
Pixel Fill Rate 3.7 G/Sec 16 G/Sec
Input/output Game Controllers (X4) Wireless Game Controllers (4)

Ethernet Port USB 2.0 ports (3)

Memory unit slots (2)

Ethernet Port
Audio Channels 256 >256
Size 3.5” X 10.25” X 12.75” 3.27” X 10.16” X 12.17”
Weight 8lbs. 11 oz. 7lbs. 11oz
Source: Electronics Gaming Monthly, July 2005

THE LAUNCH OF XBOX 360

In the US, Xbox 360 was unveiled on November 22, 2005 on MTV, in a program titled
‘MTV Present: The Next Generation Xbox Revealed,’ hosted by Elijah Wood. Xbox 360 was
launched on December 02, 2005 in Europe and on December 10, 2005 in Japan. The launch
was supported by an advertising blitz on which Microsoft spent US$ 500 million. The
campaign ran over eight months across the world. During the holiday season in 2005, 1.5
million consoles were sold, with shortages reported due to higher demand from several
places. Along with Xbox 360, Microsoft also launched several games, and Call of Duty 2
became one of the best selling games of 2005. Other games that were launched with Xbox
360 were Amped3, Every Party, GUN, Kameo: Elements of Power, Madden NFL 06, NBA
2K6, NBA Live 06, Perfect Dark Zero, Tony Hawk’s American Wasteland, etc

Xbox 360 – Popular Games

Game Manufacturer

2006 FIFA World Cup EA Canada

Air Force Delta Storm Konami Studios
All Star Baseball Acclaim Studios
Batman Begins Eurocom
Call of Duty Activision
Gears of War Microsoft Corp.
Saints of Row THQ Inc.
Project Gotham Microsoft Corp.
Marvel: Ultimate Alliance Activision
Halo 3 Microsoft Corp.
Tom Clancy’s Rainbow Six Vegas Ubisoft Entertainment
Xbox Live Arcade Unplugged Microsoft Corp.
Compiled from various sources
Xbox 360 received positive reviews from the gamers and analysts. The consoles were pre-
booked and in several cases, they were sold at higher prices running up to US$ 600 on eBay.
Even at this price, Xbox 360 found many takers. While this was the scenario in the US and
Europe, in Japan, in first week after release, several consoles of Xbox 360 were left unsold.
Of the 159,000 consoles that were shipped to Japan, during the first week only 62,135
consoles were sold.

In September 2006, Microsoft launched Xbox Live vision camera priced at US$ 39.99. The
camera could be used for video chat and to chat while playing online games. Using the
camera, the gamers could take their pictures and post them on Xbox Live. The camera could
be connected to Xbox 360 through a USB connection. In November 2006, Microsoft
announced launch of a new service through which users of Xbox 360 could download and
view films. Microsoft came up with a software update through which an HD DVD player,
with an output of 1,080 p, could be used as an accessory. With the new software, streaming
video from any XP PC with media player could be played on Xbox 360. Prior to this, Xbox
360 supported streaming video only from Windows Media Centre PCs.

THE ROAD AHEAD

By December 2006, Microsoft had sold 10.4 million consoles of Xbox 360 in 37 countries
across the world. In the US market, for the month ending December 2006, Xbox 360 had
emerged as the winner of the console wars, selling 1.1 million consoles, followed by
Nintendo at 604,200 consoles and PlayStation3 with 490,700 consoles. Analysts attributed
the lower sales of PlayStation and Wii to supply restrictions. With the success of Xbox 360,
Microsoft’s next target was iPod and iTunes. In November 2006, Microsoft released ‘Zune’ –
digital audio player, and ‘Zune Market’ – online music store.

Industry analysts also opined that Microsoft could be well on its way to dominate the gaming
console market. They pointed out that no company had remained as a market leader for more
than one or two generations. In the first generation Atari was the leader, and it was replaced
by Sega in the next generation. By the third generation, Nintendo made its mark but was
overtaken by Sony PlayStation in the fifth generation. In the sixth generation, Microsoft
Xbox made its entry and in the seventh generation which began in 2004, Xbox emerged as
one of the top gaming consoles.

Analysts said that backward incompatibility was one of the drawbacks of Xbox 360 since
many games that were made for Xbox could not be played on Xbox 360. On the contrary,
games meant for PlayStation2 could be played on PlayStation 3. Only few of the games from
Xbox could be played on Xbox 360, this required the gamers to buy the new version of the
games, or the gamers had to connect to the website of the Microsoft to download additional
software for each title.

According to the market researcher iSuppli, in 2005, on each unit of Xbox 360, Microsoft
was incurring a loss of US$ 126. For the year ending June 2006, Microsoft had sold 5 million
units of Xbox 360, and the operating losses of the company’s Home and Entertainment
operating loss increased primarily as a result of a US$ 1.64 billion. According to Microsoft,
“Home and Entertainment operating loss increased primarily as a result of the number of
Xbox 360 consoles sold and higher Xbox 360 unit costs, partially offset by the revenue
growth. Our business model anticipates that while we currently sell Xbox 360 consoles at a
negative margin, product cost reductions and the future margins on sales of games and other
products will enable us to achieve a positive margin over the Xbox 360 console lifestyle.”

Microsoft remained positive about Xbox 360 and announced plans to launch Xbox 360 with
the Microsoft TV TPTV edition. According to Robert Bach, President, Entertainment and
Devices Division, “Our goal is to make entertainment more personal, more interactive and
more social. IPTV on Xbox360 and Xbox Live are powerful examples of ways we are
bringing together the worlds of gaming, TV viewing and community to make it easy for
people to access and discover their favourite content and share their personal experiences
with the communities they are part of.”

Best Selling Console Game Genres Others

Fighting

17% 11% Role-Playing

5%

8% Children and
family
9% entertainment
30% Shooter
9%
11% Racing

Action

Sports
 PC & Console Game Dollar Sale (in billion Dollars)

8
7
6
5
4
3
2
1
0
2004 2005

Console 6.2 6.06

PC 1.1 0.95

PC Console

Gender of Game Players

Female
38%
Male
62%

Female Male
 REFERNCES

 www.xbox.com

 www.microsoft.com

 www.gamespot.com

 www.icmr.icfai.org