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Microsoft Targets Europe After Failing to Woo Gamers in Japan

By Pavel Alpeyev

Sept. 21 (Bloomberg) -- Microsoft Corp. will target video gamers in Europe after failing to take advantage of a one-year head start on rival consoles from Sony Corp. and Nintendo Co. in Japan's $5.9 billion gaming market.

``The No. 1 objective is to win on a global basis and that may mean winning some markets and losing others,'' Aaron Greenberg, Microsoft's group product manager for the Xbox game console business, said in an interview at the Tokyo Game Show yesterday. ``Europe is our priority focus right now.''

The comments suggest the Xbox 360 maker may be running out of ideas to woo players in the world's second-largest gaming nation after the U.S. Even after cutting prices and increasing the number of local game titles, Microsoft's console is outsold by about eight to one by Nintendo's Wii and three to one by Sony's PlayStation 3 since the Japan launch in December 2005.

``It's difficult to see Microsoft capturing a significant share'' in Japan, said Hiroshi Kamide, a Tokyo-based games analyst at KBC Securities Japan. ``After two years on the market, Xbox's position in the country is such that it makes you wonder whether further efforts are even worth it.''

The European game software market was worth $7.8 billion in 2006, a 16 percent decline from a year earlier, as Sony delayed the release of PlayStation 3 there, according to Tokyo-based researcher Enterbrain Inc. The global game software market expanded 23 percent to about $24.7 billion in 2006, it said.

Redmond, Washington-based Microsoft last week said it plans to increase the number of game titles in Japan to 250 from 170 as of August. They include ``Halo 3,'' the latest Xbox-only installment of a biologically-engineered soldier's battle against an alien race, and ``Lost Odyssey,'' produced by ``Final Fantasy'' creator Hironobu Sakaguchi.

Difficulties in Japan

The company has faced difficulties in Japan before. The original Xbox console, released in 2003, was outsold 24-to-1 by Sony's PlayStation 2 and 6-to-1 by Nintendo's GameCube in Japan over four years because of a lack of game titles, according to Tokyo-based researcher Enterbrain Inc.

Microsoft has sold 446,201 Xbox 360s since 2005, accounting for 8.7 percent of the new consoles in Japan, as of Sept. 9, Enterbrain said. More than 3.49 million Wii and 1.17 million PlayStation 3 consoles were sold since their launch in late 2006.

Competition from the Wii and PlayStation 3 in the U.S. and European markets will make Japan a lower priority for Microsoft, Kamide said. The company sold 277,000 Xbox 360s in the U.S. last month, compared with 404,000 Wii players and 131,000 PS3s, according to researcher NPD Group Inc.

In August, Microsoft cut prices in the U.S. to compete with the $250 Wiis and $500 PlayStation 3s. The company also reduced the European retail price of some Xbox 360s by 50 euros to 350 euros ($495) last month.

Kyoto-based Nintendo has led global sales of the latest generation of home video game consoles by marketing the Wii's simpler games and a motion-sensor controller that can be swung like a tennis racquet or thrust like a sword.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net
Last Updated: September 21, 2007 03:09 EDT