Microsoft Xbox One Console Rolls Out in China in Fall

Photographer: Patrick T. Fallon/Bloomberg

A visitor's shadow falls on a logo as he plays on an Xbox One video games consoles during the Microsoft Corp. midnight launch event in Los Angeles, California. Close

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Photographer: Patrick T. Fallon/Bloomberg

A visitor's shadow falls on a logo as he plays on an Xbox One video games consoles during the Microsoft Corp. midnight launch event in Los Angeles, California.

Microsoft Corp. (MSFT) will begin selling its Xbox One video-game console in China in September after a 13-year ban on such equipment was lifted in January.

The device will be sold through Microsoft’s partnership with BesTV New Media Co. (600637), a unit of Shanghai Media Group Inc., the company said yesterday in an e-mailed statement. Microsoft didn’t provide details on game titles for the Chinese market, except to say the venture will invest “to establish an innovation program that will enable creators and developers to build, publish, and sell their games on Xbox One in China.”

China’s video-game industry will generate about $10 billion in sales next year, according to PricewaterhouseCoopers LLP, and the rule change has set off a flurry of activity. TCL Multimedia Technology Holdings Ltd. said this month it will make a game player, and ZTE Corp. announced plans for its Fun Box in March. Sony Corp. and Nintendo Co. are also weighing Chinese entries.

“China took over as the No. 1 consumer of TVs in the world ahead of the U.S. last year,” said P.J. McNealy, analyst and CEO at Digital World Research in Natick, Massachusetts. “Having an entertainment console attached to follow those coattails makes a lot of sense.”

To succeed, Microsoft will have to lower the Xbox One’s $499 price for the Chinese market and line up game titles between now and September, McNealy said.

Microsoft’s Challenges

“Hands down the two biggest challenges for Microsoft are content and pricing,” he said. “Right now they don’t have a clear value proposition of what content they are going to sell on the gaming front, the music front, the TV front or the movie front.”

Microsoft formed the $79 million venture with BesTV in September to enter the Chinese market. Microsoft will make an official announcement tomorrow in China about the Xbox debut.

Consoles such as the Xbox, Nintendo’s Wii U and Sony’s PlayStation were banned under a 2000 rule to protect youths from the perceived corrupting influence of video games. China announced last year that the ban would be lifted within the Shanghai free-trade zone, which opened in September.

In January, China’s ruling State Council temporarily suspended the ban for the entire country and said it will draft new rules.

BesTV invested $40.3 million for a 51 percent stake in the joint venture, while Microsoft put in $38.7 million for the rest, according a September filing.

The Xbox One, which went on sale in November, has been outgunned in U.S. sales by Sony’s PlayStation 4 for three consecutive months, according to market research firm NPD Group Inc.

Sales of the $399 PlayStation 4, also released in November, have surpassed 7 million units worldwide through April 6, Sony said in an April 16 statement. Microsoft has sold more than 5 million of its $499 Xbox One units, according to an April 17 blog posting on its Xbox site.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Stephen West, Ben Livesey

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