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Saturday, January 28, 2006

Microsoft Xpod?

I had thought that the concept of a Microsoft handheld was more mumblevine fruit than truth, but BusinessWeek sits down with Peter Moore and brings back this crop:

What would it look like? Xbox boss Peter Moore says any Microsoft media device would have to leverage the company's most significant consumer strength, video gaming. "It can't just be our version of the iPod," says Moore, who nonetheless would not confirm that Microsoft is considering making such a device. So in addition to playing music and videos, a Microsoft device would include games. Microsoft would probably use the Xbox brand to market the gadget. "I think the brand is an opportunity," Moore says.

True, perhaps, but also risky. If the new device comes with the Xbox brand, most consumers will view it as a game player, like Sony's (SNE) PlayStation Portable. That might limit its appeal, since the portable gaming market is much smaller than the one for digital media.
-- The Bug in Microsoft's Ear

Risky? Gahh yeah. Such a device would go up against the iPod, the PSP and the Nintendo GBASP/DS. Yikes. Sure, Microsoft could always use it's tried and true "burn as much money as Bill left laying around and give the consumer a $600 device for $2.50" ... and that would probably always work. Still, they've been losing bundles on the Xbox for years now, just went through a brutal holiday season with the 360 and have serious competition on just the console front for 2006.

Is there any benefit to Microsoft doing this? Well, naturally there is the "satellite" theory of electronic purchases. If I buy an Xbox, I'd be more likely to buy an Xpod and vice versa. Nintendo and Apple have used this strategy to good effect, and Sony will definately be making the PSP integral to the PS3 experience. Looking that way, Microsoft is the only one out of this particular game.

Course, Nintendo and Apple keep healthy profit margins on their hardware. Sony is, I think, more break even with the PSP and will definately lose out with the PS3. Would Microsoft be willing to risk their proposed profitability by 2007 to get into this particular game?

Perhaps. It would be interesting at the very least. Handhelds are a lot trickier to design than consoles. Microsoft has learned a lot since they released the "this controller is too big for your fist" ... reviews of the 360 controller rate it one of the best to be released for a console. Would they be able to bring that over to something with a screen in the middle?

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