Sony Twisted the Knife, but Microsoft May Have Shot Itself in the Foot

By Jake Barach  JUN 12, 2013 12:51 PM

In the ongoing battle between console makers, a Microsoft executive made a poor choice of words.

 


In the video game industry, the consumer almost always speaks loudly and clearly. When questions are fired, companies need to have answers, lest they face the wrath of gamers scorned.

If no good answer comes to mind, though, it may be worth thinking one through before speaking.

Unfortunately, Microsoft Corporation’s (NASDAQ:MSFT) Don Mattrick, the president of interactive entertainment business for the company, took another route when it came to addressing gamers' concerns that the Xbox One requires a constant Internet connection, allowing for only a 24-hour period of offline play before games become unplayable.

“Fortunately, we have a product for people who aren’t able to get some form of connectivity, it’s called Xbox 360,” said Mattrick in an interview with Spike TV’s Geoff Keighley on June 11.

This blunder may be the fatal self-inflicted wound in Microsoft’s weeks-long crash and burn.

With most media pundits (myself included) quick to throw around battle metaphors, its easy to forget that, in the end, this is about which black box sits under most living room televisions. With stakes as high as they are, however, it's important that console makers don't cede any ground to their enemies. (See? The war idioms just can't be avoided!).
 
Microsoft squandered its opportunity to one-up Sony Corporation (NYSE:SNE) at its May 21 reveal. Despite displaying the physical Xbox One, something Sony refrained from doing with its PS4 when it was first announced, Microsoft failed almost entirely to mention anything about video games. While the Xbox One is intended to be an all-in-one entertainment hub, gamers were looking to see features more relevant than seamless channel flipping via voice commands.

When later releases brought to light that the Xbox One would require a near-constant Internet connection, and that the ability to share and loan games would be restricted, Microsoft officially stepped out of the pan and into the fire.

Luckily for Microsoft, its two-hour press conference at the Electronic Entertainment Expo, or E3, on June 10 provided an opportunity to soothe every lingering concern. However, it opted instead to present a laundry list of admittedly impressive-looking games, only to shirk the other pressing issues entirely.

When Sony’s conference that evening slowly and pointedly shredded every fault that Microsoft failed to address, only to deliver the crushing blow of its PS4’s price point of $399 (a full $100 less than that of the Xbox One), the damage had been done. E3 sets the tone for the gaming industry in the year to come, but when a new generation of consoles is released, the conference can conceivably determine the console market leader for the next five years or more.

Now, having exhausted just about every opportunity he could have asked for to set things right, Mattrick has told those who don’t like the new policies of the Xbox One not to buy it. As boneheaded as that tactic is, suggesting that people stick with the Xbox 360 rather than purchase a new generation console is a horribly veiled attempt to prevent consumers from switching to Sony.

Everyone knows that the go-to alternative to the Xbox One is the PS4, but Mattrick’s not-so-choice words are basically a neon sign signaling frustrated Microsoft loyalists and undecided consumers to jump to Sony.

With Nintendo Co. Ltd. (OTCMKTS:NTDOY) previewing the newest iterations of its Super Smash Brothers, Mario Kart and Zelda series, it too may be ready to climb right back into the video game fray.

It will be up to Microsoft to bandage up its Sony and self-inflicted wounds before the two companies’ newest consoles launch for the holiday season later this year.
No positions in stocks mentioned.