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'Halo 3' video game smashes sales records

The Microsoft product racks up $170 million in retail sales in its first 24 hours at U.S. stores.

September 27, 2007|Alex Pham | Times Staff Writer

Microsoft Corp. claimed one of the biggest opening days in entertainment history Wednesday, saying its "Halo 3" video game rang up $170 million in U.S. retail sales in the first 24 hours.

The tally, which didn't include international sales that will add millions more, outpaced Microsoft's prediction of $150 million. It also beat the all-time grossing box-office movie release, "Spider-Man 3," which racked up $151 million during its opening weekend in May.

"Spectacular," said Michael Pachter, an analyst with Wedbush Morgan Securities. "They covered all of their development, marketing, manufacturing and overhead expenses for the game in one day. Going forward, there will be huge profits."

Analysts say strong sales of "Halo 3" could be enough to tip Microsoft's Entertainment and Devices Division into the black for the quarter ending Sunday. A profit would be significant for Microsoft, which has lost billions of dollars on its video game business since it introduced the Xbox console in 2000.

"For Microsoft, it's critical that this title sells well," said Colin Sebastian, an analyst with Lazard Capital Markets.

Goldman Sachs predicted that Microsoft would sell 4.2 million copies of the game just in September. The game's previous installment, "Halo 2," grossed $125 million its first day out in 2004.

"Halo 3" costs $59.99, though Microsoft also sells collectors' versions for $69.99 and $129.99.

In addition to helping Microsoft turn around its video game business, "Halo 3" is regarded as a crucial component in the company's race against Sony Corp. and Nintendo Co.

Through August, Microsoft sold 6.3 million Xbox 360s in the U.S. compared with 1.75 million PlayStation 3s for Sony and 4 million Wiis for Nintendo, according to market research firm NPD Group.

The video game market operates much like the razor and razor-blade business. Consoles are sold at a loss to get them into as many hands as possible so companies can make money by selling games, which generally carry high profit margins.

For Microsoft, the margins for "Halo 3" are expected to be between 80% and 90%, according to analysts.

The game confers another benefit: Microsoft, which has spent millions of dollars in a marketing blitz to promote "Halo 3," is betting it will spur consumers to buy its Xbox 360 console and play the game online through the company's Xbox Live service, where it can sell them more games and products.

"Within the first 20 hours alone, we've seen more than a million Xbox Live members come online to play 'Halo 3,' " said Shane Kim, corporate vice president of Microsoft's game studios.

Tuesday's "Halo 3" launch did not go off without a hitch. Some players reported problems signing on to Xbox Live and getting updates. In addition, some customers reported receiving scratched game disks. Microsoft said it would replace damaged disks for free.

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alex.pham@latimes.com

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