Japanese video-game makers such as Sega Corp and Tecmo Ltd expect Microsoft Corp's decision to slash the price of its Xbox game console to increase sales of game software in the US and Japan.
Microsoft, the world's largest computer-software maker, this week cut the price of its Xbox console by 33 percent in the US and 29 percent to ?24,800 in Japan beginning May 22, matching Sony Corp's reduction in the price of its PlayStation 2 console.
Since its November debut in the US, Xbox has lagged PlayStation 2 sales, particularly in Japan where Sony is based.
PHOTO: AP
Software developers say the cuts make the consoles more affordable to a new audience of players, thus increasing their chances of selling more game titles for the Xbox.
"The price cut is welcomed," Sega President Hideki Sato told a meeting of video-game developers this week. "We expect the cuts to boost hardware [Xbox] sales, stimulating the industry to our benefit."
Sega, which has so far released two games for the Xbox, plans to make seven more titles for the console, including this year's release of racing games Crazy Taxi 3 High Roller and Sega GT 2002.
Microsoft expects Xbox sales to reach as many as 4 million units worldwide by the end of June. While that's comparable to rival Nintendo Co, which expected to ship a similar number of its GameCube consoles by the end of March, it pales to Sony. The maker of the Sony Walkman has sold 30 million PlayStation 2s since the slim, black game player debuted in Japan two years ago.
More is at stake for Microsoft than just selling game machines. Though analysts reckon Microsoft loses money on each Xbox it sells, the real gains for video-game companies come from software, where margins are much wider.
Last fiscal year, Sony attributed much of its game business's ?83 billion (US$651 million) operating profit to a more than tripling in shipments of PlayStation 2 games, an increase in gross margins of software and lower costs to produce the console.
Higher console sales may also encourage game developers to make original titles exclusively for the best-selling boxes. Sega was forced to scrap its console business a year ago after software makers turned away from developing games for the company's Dreamcast machine. By the time it threw in the towel, Sega had sold 8.2 million Dreamcasts.
Even so, an Xbox price cut alone may not guarantee higher game sales since Sony, the world's largest video-game maker, cut the price of its PlayStation 2 in the US at the same rate as Microsoft. Sony also dropped the ?29,800 fixed price in Japan, leaving retailers to set their own price.
While the cut makes Xbox more affordable, it may not make the machine any more attractive to game players, analysts and game developers say. Sony has a game library of about one thousand of titles for the PlayStation 2 while Microsoft has less than 100 for the newer Xbox.
Moreover, just one or two games are made exclusively for Xbox, meaning users can play similar versions of some Xbox games on Sony's PlayStation 2. For example, Capcom Co's samurai action game Genma Onimusha for Xbox is almost an exact duplicate of the Onimusha game the company released for PlayStation 2 more than a year ago. The Xbox version of the game differs only in that it has a slightly different plot and settings.
"The Xbox price cuts were a necessary measure for us to continue making games for the console," said Arihiro Nakamura, chief executive and president of gamemaker Tecmo. "But it's not certain whether the move was sufficient" to boost sales.
Tecmo released Dead or Alive 3, the latest version of its best-selling Dead or Alive series of fighting games, only to Xbox. The company sold about 1.1 million copies of the game worldwide by the end of March 31, it said, exceeding the one million mark seen as a best-seller.
In Japan, Xbox sales in the week ended May 12 totaled about 3,400, less than one tenth the 55,000 PlayStation 2s sold in the same week, according to video-game research house Media Create Co.
Sales of Xbox video-game software in the week totaled more than 8,300 copies, less than one 30th the 267,000 copies for Sony's console, the researcher said.
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