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Analysts Question Release Timing and Power of Xbox 360
The next-gen Xbox is about to make its official debut on MTV starting tonight, but some analysts think that launching a next-gen system this year may be too soon and that the market may not quite be ready. Some also believe that the technological leap from Xbox to Xbox 360 won't be as big as some would think, leading people to label the system Xbox 1.5.
As the world gets ready to check out Microsoft's next-gen Xbox for the first time on MTV (the infomercial airs tonight at 9:30PM) some in the industry are questioning whether a 2005 launch is too soon to debut a next-gen console, and exactly how big the technological leap from Xbox to Xbox 360 will be.
Launch too soon?
Because of MTV's on-air schedule listing for the program, it is now widely believed that the next Xbox will ship sometime this November. A November launch for the 360 would mean only a 4-year console cycle for the original Xbox, while the typical console cycle has historically been 5 years. One of the drawbacks of this is that developers may never truly max out the potential of the platform. The deeper into the cycle game creators get, the more familiar they are with the intricacies of developing for that platform. Some of the best-looking titles are often created near the end of a console's lifespan. After all, look at what developers have been able to do lately with the aging PlayStation 2 hardware. Games like Gran Turismo 4 and God of War could almost pass for Xbox titles.
[ "This is more an Xbox 1.5 than an Xbox 2. It's like an Xbox with a broadband cash register built in," PJ McNealy, American Technology Research ]
Although Microsoft is trying to build up hype levels in the mainstream by showing its new system on MTV, some argue that the market may not be ready for a next-gen system this year. "I question whether Microsoft might be coming out too soon with the next Xbox," IDC analyst Schelley Olhava told The Washington Post.
Sharing Olhava's concern, Wedbush Morgan Securities analyst Michael Pachter added, "I wonder if there's going to be enough time to get consumers really excited."
It was Pachter, remember, who said that the current-gen cycle wouldn't end until the PS3 launches. "...we expect the launch of Sony's PS3... to mark the beginning of the next cycle, and think that rapid sales growth will not materialize until 2007," he said. Pachter told GameDAILY BIZ, "I actually don't think the Xbox 360 launching is any different than the PSP launching. It's not going to cause PS2 owners to buy less software."
Publishers, too, would probably have liked Microsoft to wait until 2006 to launch the 360, as preparing titles for a brand-new platform automatically means a huge investment in research and development. Already we've seen bigger losses or lowered profits in the earnings reports of some publishers who have cited spending on R&D for the next generation.
What kind of visual improvement will there be?
Then there's the issue of how big a leap the Xbox 360 will bring to video games. Sony spokeswoman Molly Smith recently told BusinessWeek, "We look at delivering a quantum leap in technology, not just Xbox version 1.5." While you'd expect Sony to belittle its closest competitor, others in the industry have expressed similar sentiments about the next Xbox.
American Technology Research analyst PJ McNealy believes that the Xbox 360 will offer more in the way of online options (e.g. customization, microtransactions, etc.) but that its graphical capabilities will not represent a huge jump over the current Xbox. "This is more an Xbox 1.5 than an Xbox 2. It's like an Xbox with a broadband cash register built in," he said.
Seamus Blackley, one of the main figures behind the design of the original Xbox and now an agent for Creative Artists Agency, doesn't think there will be a large visual leap either but he doesn't limit his comments to the Xbox 360. According to The Washington Post, he believes that the entire next generation "will see a more incremental increase in technological wizardry compared to previous turning points in the video-game industry."
Backwards compatibility is key
Another critical issue for Microsoft could be (the lack of) backwards compatibility. Sony's PS3 will almost certainly play PS2 games and Nintendo has already confirmed that the Revolution will be backwards compatible with the GameCube, but Microsoft has not been willing to talk about it. "If they decide not to be backward compatible I question their judgment," Pachter told us in a prior interview. In his report, "Xbox 360 Debut Tomorrow: Answering the $2.4 Billion Compatibility Question," Pachter elaborated on the topic.
"Should the Xbox 360 be incompatible with the current generation Xbox, we think that publishers will face a dilemma. Most will plan to produce SKUs for the PS2, PSP, and Xbox 360, but will be faced with a decision whether to produce future games for the current generation Xbox," he said. "If the Xbox 360 is incompatible, sales of current generation Xbox hardware are likely to rapidly decline, making the support decision even more difficult. Further complicating the decision is the cost of next generation software development, expected to be $10 - 15 million per game, compared to $3 - 5 million for current generation software development. In order to support both the current and next generation Xboxes, publishers will be required to spend $13 - 20 million per game chasing a combined installed base that is not assured to grow over the first few years without backward compatibility."
Pachter also thinks that the growth of the industry itself could be adversely affected if Microsoft decides not to include backwards compatibility because publishers may have no choice but to drop support for the current Xbox. "In the event that publishers choose to abandon development of current generation Xbox games in 2006, the negative impact on industry sales growth could be even more dramatic... We think that the outcome of the backward compatibility issue will go a long way toward determining industry sales growth in 2005 and beyond, and we believe that a negative decision could negatively impact share prices for the U.S. publishers."
Link http://biz.gamedaily.com/features.asp?article_id=9619&section=feature&email=<EMAIL_ADDRESS>
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