Updates to Xbox Live, Microsoft's online gaming service for the Xbox console, will offer the ability to issue challenges via the .NET Alerts service, use voice communications even when games are not being played, and post game results to Web sites. The company also announced new pricing for the service and a software title that converts Xbox into a viewing and playback machine for digital media. Through these measures, Microsoft hopes to extend Xbox's shelf life, enabling the company to sell more games per console—necessary to turn Xbox into a profitable business.

Extending the console's life becomes even more important as prices continue to fall: Microsoft has cut the price of its console in North America from US$200 to US$180 in a response to Sony, which offered an identical price reduction on PlayStation 2 (PS2).

Xbox Live Updates

At the Electronic Entertainment Expo (E3) in May 2003, Microsoft announced that it would add the following features to Xbox Live over the next year:

Expanded communications. Xbox Live will integrate with MSN's .NET Messenger Service, so that when users log on to Xbox Live they will see a list of selected friends and the applications they're using (e.g., an Xbox Live game, a PC-based IM client, or a mobile device with the Pocket MSN service). Subscribers will be able send a one-way text message inviting their contacts to a game. To facilitate this integration, players' user IDs, or Gamertags, will become new Passport identities. Subscribers will also be able to use the contact list console to establish voice communications with other Xbox Live subscribers—a feature previously available only from within games.

In response, AOL announced it would offer the complete services of AOL Instant Messenger—including two-way text messaging and voice communications—to PS2 gamers early in 2004. This could spur Xbox Live to offer more extensive communications functionality in the future.

Web site APIs. New APIs will enable games to post information collected during Xbox Live games to a Web site. For example, players will be able to create a Web site that defines leagues with rules (such as how many games constitute a season) and post messages for upcoming opponents; results and statistics will then be automatically posted to this Web site as games are completed.

During 2003, Microsoft will begin to release a line of games, XSN Sports, that support the new APIs. The XSN franchise will help Microsoft compete with Electronic Arts, which owns many of the most popular sports titles, such as Madden NFL, but has signed a one-year deal to deliver online games exclusively for Sony's PS2. (Electronic Arts will continue to develop offline games for Xbox.)

Pricing, New Countries Announced

Subscription renewals for Xbox Live users will cost US$50 a year or US$6 a month. New subscribers will have to pay more for the service, however: the U.S. price of the Xbox Live Starter Kit, which includes a one-year subscription and an audio headset, will go up from US$50 to US$70 in fall 2003. Microsoft will also begin offering a two-month free trial to customers who buy any XBox Live-enabled game and a US$30 standalone headset, and will sell Xbox Live subscription cards (analogous to prepaid phone cards). The standalone headset and the subscription cards could draw gamers into retail stores, where they are more likely to pick up a new game at the same time.

Pricing outside the United States has not been announced, but Microsoft intends to roll Xbox Live out to 10 more countries in the next year, including Australia, South Korea, Taiwan, and six European countries.

Beyond Gaming

Microsoft also used E3 to show off games it is developing for the console, including Halo 2 (expected in 2004), the Live-enabled sequel to the most popular Xbox game so far; Conker and Grabbed by the Ghoulies, the first Xbox titles from game developer Rare, which Microsoft acquired in Sept. 2002; and Fable, a role-playing title from well-known game developer Peter Molyneux.

But a new US$40 Xbox title, Music Mixer, shows that Microsoft is thinking of Xbox as more than a gaming machine, and points out how software and hardware peripherals could eventually be used to add other functions to Xbox, extending the console's life. Music Mixer allows users to transfer Windows Media audio files and digital photographs to the Xbox's hard drive via a network or recordable CD, then create slide shows that combine their photos and music. Music Mixer also comes with a microphone and can automatically lower the volume of the vocals on a song, allowing for karaoke-type sing-alongs.

Resources

For more background on the business model for Xbox and the role of Xbox Live, see "Network Vital to Xbox Success" on page 15 of the July 2002 Update.

For more information about Xbox, Xbox Live, and game titles, see www.xbox.com.