Xbox One Doesn’t Have to Be the ‘Best’ Gaming Console to Win

Quick, besides the Xbox can you name one hardware product Microsoft (NASDAQ:MSFT) developed that was a success? Tick, tick, time’s up. The company will be releasing the Xbox One this year but faces competition from Sony’s (NYSE:SNE) coming PlayStation 4 and Nintendo’s (FWB: NTO) already released Wii U. The unveiling of the Xbox One last month has stirred a lot of talk about how Microsoft is “abandoning” gamers because of the presentation’s focus on what the new Xbox can do besides games. Microsoft is not counting the Xbox One being the best gaming console to win this generation of the console wars. The living room experience will be at least as important.

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Microsoft put on a huge show when it showed the Xbox One off for the first time. (Sony still has not shown a picture of what the PlayStation 4 will look like.) Some very big claims were made on stage, including that the new, Kinect “2.0″ motion sensor can actually read a user’s heartbeat and that the server farm that will power Xbox Live for the new console has more computing power than all the computers in the world did in 1999. As far as we know, these claims are true. In fact, these claims should be true — they are a key part of Microsoft’s strategy to win this round of the console wars. Microsoft loves the largest screen in the house and will pump as much money into making sure the Xbox One is a success as is necessary.

“The reason the Xbox 360 has had such a long and healthy life is precisely because people have been using it for things other than games. Last month, it sold 130,000 units in the U.S., and was the best-selling console for the month—again,” Ishaan Sahdev — managing editor of gaming news website Siliconera – told Wall St. Cheat Sheet. ”It’s natural that Microsoft wants to play those features up for Xbox One. The difference is that Xbox 360 was designed to be a game console specifically, and retroactively had things like Netflix and Hulu added on top of games. With Xbox One, since they know they’re going to be doing those things anyway, they’re including them in their development plans and marketing right out the gate. Sony and Nintendo have been doing it, too.”

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So why has Microsoft been receiving so much hate from critics? The unveiling of the Xbox One did not focus enough on the games. Sure, they talked about sports titles and the Call of Duty game for the year but everyone already knew they would be coming out for the Xbox One. Yes, the new titles will look better because of the much more powerful hardware in the Xbox One compared to the Xbox 360 but if a gamer is truly concerned about graphics, they are playing their games on a high-end gaming PC.

There is also the issue of the Xbox One requiring an Internet connection and the very real possibility that the company is shutting down the market for used games on its new console. “Microsoft should have been aware enough to not drop every piece of bad news on the same day. No used games coupled with the focus on services all on the same day was too much for people that just wanted to see exciting games,” said Sahdev. “That said, the games shouldn’t be a problem. They’ll be at E3. Microsoft is a company with a lot of money, and they know how to use it.”

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Microsoft is counting on the content streaming experience being the main driver of sales of the Xbox One. The Xbox One just has to be the best media experience of the next generation of consoles, not the best gaming machine to be a success. As you can see in the chart below, the unveiling of the Xbox One boosted Microsoft’s stock price. We’ll see where the market goes once the Electronic Entertainment Expo (E3) starts on June 11.

Microsoft stock price 1 month 6-2-2013

(Graph: Yahoo! Finance)

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