Microsoft Corp. has pushed back the debut of its Xbox video game console in Japan until next year, the latest sign that the software giant is stumbling with the launch of its most expensive hardware project.
Problems have plagued Microsoft as it attempts to carve out a larger niche in the fiercely competitive $20-billion worldwide video game industry. Xbox represents one of the company's most aggressive efforts to expand Microsoft's reach into the living rooms of consumers.
But many watching the evolution of Xbox caution that the company risks bungling the launch and alienating consumers with a system that fails to live up to Microsoft's hype.
Until now, Microsoft executives have insisted that the company would release Xbox in Japan and North America this year, holding Europe off until 2002. Sources within Microsoft, however, confirmed Thursday that the high-powered game machine will not debut in Japan until early 2002. Microsoft executives declined to comment, saying only that the company will unveil details of its Japanese plans on Monday.
Though Xbox is still on track for a Nov. 8 launch in North America, Microsoft's $10-billion plunge into the game console business is hitting numerous snags--including delays in production, complaints from consumers about retailers' plans to pre-sell the Xbox as part of bundles that cost as much as $1,199, and a lineup of games that has failed to impress hard-core gamers.
Delays are nothing new to the video game industry. Nintendo Co., whose Nintendo 64 console was nearly a year late for its 1996 debut, on Thursday announced it will postpone the launch of its new Gamecube console in the United States by two weeks to Nov. 18.
Analysts said the delayed Japanese launch will cost Microsoft, but Nintendo's slippage will not hurt sales of the Gamecube in the United States because the console will be on store shelves before the start of the holiday shopping season. Nintendo executives said they put off the launch to have 25% more units available. The company plans to have 700,000 Gamecubes on Nov. 18, shipping 1.1 million units by Dec. 31.
"It doesn't really matter because kids will still be screaming for the Gamecube 14 days later," said P.J. McNealy, senior analyst with Gartner Group Inc. in San Jose. But for Microsoft, launching late in Japan "will definitely take some wind out of their sails."
Last week, Wall Street investment firm Thomas Weisel Partners reported that production for Xbox was three to four weeks behind because of flaws with the system's microprocessor. Microsoft denied having any issues with the chip.
But company executives privately acknowledged delays stemming from problems in making sure all the components worked smoothly together, among other things.
Several days later, retailers confirmed that they will take early orders for Xbox consoles, but only if consumers agree to pay $499 to $1,199 to buy bundles that would include higher-margin Microsoft-published games, extra controllers, peripherals, warranties and other products. The system's retail price will be $299.
Lukewarm Reception at Electronics Expo
Microsoft began losing momentum in May, when it failed to generate buzz for its suite of games shown at the Electronic Entertainment Expo, or E3, an annual industry conference for retailers and media. Microsoft covered its bases with titles in every genre from racing to adventure games, but none rose above the noise as a must-have title.
The Xbox's design also drew criticism for being bulky and its controller too clumsy, prompting veteran game journalist Todd Mowatt to call it "the George Foreman Grill of consoles."
The lukewarm reception stung Microsoft executives who walked into the conference confident that the Xbox would dominate the show as a credible rival to Sony Corp.'s PlayStation 2, the current reigning console champion. Instead, Nintendo stole the show.
"Going into E3, there was a lot of buzz about Microsoft versus Sony. That was going to be the big battle," said Geoff Keighley, editor of GameSlice, an online game publication. "But Nintendo came out as the golden child that could do no wrong. The Nintendo booth consistently had 15 to 20 people lined up to play each game. That wasn't true of the Microsoft booth. There's no question that Microsoft's showing at E3 was less than stellar, to put it mildly."
In the September issue of Next-Gen, a magazine for game enthusiasts, a story featured a photo of a lemon with the Xbox logo and the headline, "Has Xbox gone sour?"
Tom Russo, editor of Next-Gen, blamed Microsoft's inexperience in the industry.
"They've built incredible hardware, but they're still really new to the console business," Russo said. "Just getting their ducks in a row is going to be difficult for them. And any mistakes they make will be far more scrutinized than, say, with a small game publisher, just because they're Microsoft."
Adding to that is the perception that Microsoft labors under a legacy of missed deadlines and disappointing first showings.