The holiday shopping season has been good to Microsoft whose next-generation video game console has sold over two million units. This is somewhat less impressive when you consider the fact that rival Playstation 4 is keeping pace just fine, however early expectations were that Microsoft would trail Sony significantly, which has proven to not be the case. The Xbox One has been advertised as an all-in-one media solution, however, while the Playstation 4 is mainly focused on gaming- so they are not necessarily going after the same market.
Microsoft has managed a strong launch for the Xbox One. The real test for the console--and the company's commitment to it--comes next year.
Xbox One sales have crossed the two-million-unit mark less than three weeks after its launch. That pace is more or less on par with the rival PlayStation 4 from Sony which last week reported passing a similar milestone. The two appear to be running neck-in-neck into the final part of the holiday-shopping season, buoyed by pent-up demand from hard-core gamers who haven't seen a new Xbox or PlayStation in seven years.
But Microsoft clearly built the Xbox One to appeal to a much bigger audience than videogame devotees.
Xbox One is designed to be the command center for home entertainment, with users able to skip from a game to a movie to a live TV program with simply a voice command. Terry Myerson, who runs Microsoft's Windows business, told a Credit Suisse conference last week that the ability to "innovate and delight" customers in the living room "is just an important opportunity for us."
That audience may take more time to materialize. Nongaming consumers have usually been hesitant to spend money on consoles simply for their other entertainment capabilities--and the $500 introductory price tag on the Xbox One may limit its appeal to them. Microsoft has committed to keeping the Xbox One around break-even levels on pricing, so its ability to lower prices to widen the audience looks limited. And competition will get even tougher--especially if Apple manages to launch a TV set in 2014, which many expect will happen.
In the meantime, Microsoft will need a strong slate of exclusive game titles to help sell the console. "Titanfall" comes out in March, and Colin Sebastian of Robert W. Baird predicts it will be the first real "drive title" for the Xbox One, similar to the way the "Halo" franchise helped to sell the Xbox 360.
Some investors feel that Microsoft should spin off the Xbox business. Spreading the console's appeal beyond gamers offers a compelling counterargument to this. But it is unclear how many nongamers will surface before Microsoft's next chief executive is pressured to hit the reset button.