Xbox 360 makes play for the living room

With Xbox 360, Microsoft also is hoping that a more aesthetically pleasing design will help convince Americans to move the game console from the den to the living room.

The first Xbox, a boxy black console tethered by cumbersome wires to a big controller, has been replaced by a sleek white design coupled with a smaller, wireless controller. Users can also eliminate more wires in the living room with a $99.99 wireless adapter.

Microsoft hopes to eventually break even on the consoles —  which will initially sell for $399.99 in North America, or $299.99 for a version that doesn't include features such as the 20-gigabyte detachable hard drive and wireless controller.

The goal is to make money on add-ons, such as games and Xbox Live, which is also yet to be consistently profitable.

"We still think in a way the console isn't the way to make money," Bach said. But he added that the company also thinks it's important not to lose as much money as it did when it rushed the first Xbox to market in the face of intense competition from Sony Corp.'s PlayStation 2.

Bach said the benefit of hindsight — and a little more time — also allowed Microsoft to correct some other missteps, such as a failed strategy for getting into the Japanese market.

Despite the popularity of gaming in Japan, Microsoft has not been able to overcome the home-court advantage of Sony's PlayStation franchise. In addition to redesigning the Xbox to better appeal to Japanese tastes, Microsoft has struck new partnerships to develop games it thinks will draw in more Japanese gamers.

In the U.S., Microsoft also is trying to soften its image a bit.

"The first version of Xbox was about building credibility and proving to the core gaming audience that we got it," Bach said. "We've done that in spades with the Xbox. In a way, we're almost too associated with (hardcore) gamers."

The company has added more overt parental controls to prevent younger children from accessing violent or sexually explicit games. And it is tweaking its popular Xbox Live service to make it easier for people to play with others sharing the same skill level.

PlayStation 3 looms
Xbox Live gives Microsoft a key advantage over market leader Sony, which is due to release its PlayStation 3 sometime next spring. But analysts say the new PlayStation's debut could still sap momentum for the Xbox. While details are still scant, some suspect that the rival system could even offer more digital entertainment capabilities than the Xbox.

Gartner estimates that PlayStation 2 currently has about 51 percent of the worldwide market for the most recently available consoles, compared with about 34 percent for the first Xbox and 15 percent for Nintendo Co.'s GameCube.

"Microsoft is kind of an underdog, but they've also come a long way with the Xbox," said Schelley Olhava, a gaming analyst with IDC.

"They learned a lot of lessons along the way, but that doesn't mean that they're going to be able to take over the market, because Sony is so strong."

MORE FROM GAMES

Games Section Front

10 best Xbox 360 games of 2009 10 best PlayStation 3 games of 2009 Dungeons & Dragons fight: Hasbro vs. Atari Top 5 reasons to keep playing your PS2   'The Saboteur' is stylish but not strong 10 best Wii games of 2009   Game designers take aim at Tiger Fitness video games are reshaping medium November video game sales slump at retail   Harry Potter is back, with a LEGO update Games Section Front   Add Games headlines to your news reader: