The Future of The Xbox Brand and Shifting Marketing Strategies In The Gaming Industry

Too often we berate companies like Microsoft for being out of touch with what their consumers actually want, for exhibiting an utter lack of introspection. In the latest Microsoft Blog, however, it has becomes clear that this isn’t the case at all: Microsoft is very much in tune with ‘the reality’ of the situation. First, they establish some numerical context, relayed here via bullet points:

• 53 million Xbox 360 consoles have been sold world-wide
• There are 30 million Xbox LIVE members–that’s almost 60 percent of the userbase.
• 10 million Kinects sold–that’s almost 20 percent of the userbase, in just seven months.
• And, the big, big kicker: 40 percent of all activity on the 360? Is ‘non-gaming’. (For example, per Xbox, there are 30 hours of video consumed every month)

That’s almost half of all time spent on the Xbox spent not gaming, and that number is rising. Recall the backlash a few months ago regarding the price hike–the comments that nobody even uses the services that they’re charging more for? Bunk according to these numbers. Given this context, it’s not surprising that Microsoft is looking to the future with the hope of establishing itself as more of an entertainment service, not just a gaming platform.

Typically, we think of the Xbox brand and our mind defaults to Master Chief, to Marcus Phoenix. Ask Microsoft, though, and this is their vision: “Xbox = entertainment and is core to our entertainment strategy.” To this end we’ve seen the integration of various entertainment devices for the console–most notably PCs and Windows phones–but Microsoft teases by stating that we can expect “other devices to come.”

So then, what can we expect from E3 2011 from Microsoft? Unsurprisingly, they aim for the Xbox being “marketed more as an entertainment brand this year.” The Kinect and services such as Hulu and ESPN are only the start of a broader entertainment vision.

Microsoft is not alone in such an approach, either. The Wii, as we already know, currently markets itself with the blue ocean strategy–where it is less in competition with traditional ‘gaming’ hardware than it is with devices such as the iPad. The PS3, similarly to the 360, has tried following suit via adoptation of its own motion controls–Move–as well as similar services as those on the 360 (Netflix, for example).

Where last E3 we saw the PS3 shifting gears and setting its sights on a wider audience, this E3 we can probably expect–should they be serious about the endeavor–to see a well-developed road map for moving forward with motion controls and entertainment services, like Microsoft has.  “It only does everything” lends itself nicely to such a pursuit, should this be the case. Nintendo, on the other hand, is rumored to try to appeal to its gaming ‘roots’ via Project Cafe, which is supposed to have the graphical fidelity and third party support that gamers clamor for.  Of course, we still don’t know what Nintendo has up their sleeves, as most of these are but idle rumors.

Couple this with the increased catering to ‘casual’ consumers–think Zynga, The Super Guide and devices such as the iPod Touch–it’s clear that the gaming industry is in the middle of a massive evolution. Needless to say, if E3 2010 set the groundwork for the shift in marketing strategy and target audience for the gaming industry as a whole, E3 2011 will most likely see further development of the shift.