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Can Microsoft Score in Mobile Gaming?

Now that Microsoft has unveiled its new Xbox 360 gaming console, what's next? Games for the small screen. The Redmond giant is getting ready for yet another entertainment push, this time into mobile-phone games. Until recently, Microsoft (MSFT) has licensed its successful titles, such as Halo, to specialized mobile-game publishers like In-Fusio, which churned out smaller, simpler versions of the games for cell phones.

But Microsoft wants a bigger slice of the fast-growing market. Researcher In-Stat estimates that the mobile-game business is poised to leap from $203.8 million in 2004 to $1.8 billion by 2009. So during the first half of next year, the company will unveil a major mobile push, says Chris Early, studio manager for Microsoft Casual Games Group. Expect to see a lot of marketing buzz -- and yes, new mobile games, such as Hexic and Mozaki Blocks, for cell phones.

Microsoft's has an ambitious agenda. The company plans to sweep up the best mobile games around (aggregators Mforma and Jamdat, beware!). It also hopes to completely change gaming as we know it by connecting mobile, Xbox-based, and PC-based gameplay into one coherent experience (see BW, 11/28/05, "Robbie Bach is Ready to Rumble"). Microsoft's Early discussed the company's vision and strategy with BusinessWeek Online reporter Olga Kharif. Here are edited excerpts of their conversation.

How will Microsoft's approach to mobile games change in the coming year?

To date, Microsoft's gaming experience in the mobile space has been opportunistic. It has been based on licensing. It hasn't been a coordinated effort.... But next year, you'll see our first coordinated effort moving into the mobile space, and we'll want to make sure that as many people as we can reach are aware of it. We'll have a marketing campaign around this push.

Will Microsoft be making more mobile games itself?

Our approach with mobile games will be similar to our approach with Xbox Live Arcade games [casual games, designed for people who aren't hardcore gamers and available for download onto the Xbox console] and with MSN Games.

We plan to make our own casual mobile games, but we also plan to aggregate games [made by others]. It would be foolish of us to think that we can make all the best games in the world. Our primary focus is on the player. And so in order to provide the best experience possible, we're going to pull all the best games from around the world together.

Does Microsoft want to be a mobile-games aggregator, like Mforma (see BW Online, 4/29/05, "Games on Call")?

What we want to do is to offer the mobile community access to games that they're familiar with -- that they've played on MSN Games or the Xbox -- on a mobile device. What will also be key to the Microsoft mobile-gaming experience is that you'll be able to be part of the Microsoft gaming community whether you're on your PC or your Xbox or your mobile phone.

What we're looking to do from a casual-games standpoint is let people have one game experience across any device where Microsoft software works, be it the Xbox, their PC, or their cell phone. They will have one gaming identity on all those devices. They'll be able to play across all those devices.

You can imagine playing chess on your mobile phone -- it has a certain look to it -- but your opponent is actually on the Xbox and is seeing much more advanced, three-dimensional graphics and sounds.

As I understand it, that's a long-term vision. What's more near term?

You can think about how it might be possible to do some form of game management or configuration on a phone that would allow you then to play the game on the Xbox when you get home. So you would be able to design a car with the perfect power and the right engine on your phone and then race it when you get home on your Xbox. Or you could decide which weapons to put on your gladiator so it's all ready by the time you get to your Xbox and play a battle. There would be more complimentary play.

How will your mobile content be different from what's out there already?

Today, there's nothing out there that allows someone who's part of the Microsoft gaming community to extend the game -- their scores, presence -- into the mobile space. We would allow people to add to their total game score no matter whether they play the game using their cell phone or a PC or an Xbox. Competing against people playing on other platforms from Microsoft will be part of the mobile experience we'll offer as well.

Today, lots of mobile games are of very low quality. How will you change that?

I've seen my share of completely amazing games and some that, well, should be retired soon. The real question at this point is: How do you find those gems? They're out there. This is what we and the mobile industry have been struggling with for some time now. The way the mobile market works today is: You buy [a game] and then try [it]. You might get lucky and buy a gem, or you might get completely soured on the experience.

Will you be offering free mobile-game previews, as you already do on MSN Games?

I can't say very much, except that that's the primary issue we want to address.

Today, Microsoft makes money on games through sponsorships, advertising, and subscriptions. How do you see the business model evolving?

The biggest change that I think we'll see in the next year is in microtransactions becoming a viable method of purchasing games and new game levels. You'll be able to use micropayments to pay for downloads within Marketplace and Xbox Live Arcade. You'll be able to purchase points at a retail store or online with a credit card and to purchase games with those points. You'll also be able to earn points for gameplay.

Why are you moving into micropayments?

This allows us to have a much finer granularity in what people can purchase. You can't purchase five cents worth [of products] on your credit card -- fees make that prohibitive. We also want to offer a payment mechanism for people who don't have credit cards.

What demographics are you targeting with that offer? The idea seems similar to prepaid phone cards available at retail stores.

If you look at the Xbox demographics, there's a segment of Xbox players that don't have a credit card, and yet they're consumers of games. They're out shopping with mom and dad. And sometimes, mom and dad are O.K. with putting their credit cards online, but more often we see that they aren't. Our points will allow those gamers access.

However, that's not the only reason points were created. They were primarily created to work across all Microsoft properties, not just the Xbox. They're something that's supported from Messenger or Mail or Marketplace.


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