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Microsoft

Xbox One to Launch in 29 New Markets: Why It Matters

Sep 03, 2014

Today, Microsoft's Xbox One lives in 13 markets worldwide, whereas you can officially buy Sony's PlayStation 4 in 72.

That's neither as vast a difference as simple subtraction makes it look, nor one as trivial as some seem to believe. It's also a divide that's about to get significantly smaller for the first time since the Xbox One debuted a little over nine months ago.

Xbox group honcho Phil Spencer said in an Xbox Wire brief that Microsoft will bring the Xbox One to 28 new countries (totaling 29 markets: Taiwan's on the list) in September, with a 29th country -- Argentina -- in the offing near-term. When September goes, that'll bring the Xbox One's tally to 41 countries.

Sony moved much faster than Microsoft off both consoles' November 2013 launches, deploying PlayStation 4s across the planet starting in Canada and the U.S. on November 15, then sweeping through Europe, the U.K., Russia, Australia, New Zealand, Central America, South America, the Middle East, South Africa, several Asian countries and Japan by February 2014. Microsoft's 13, by contrast, include the U.S. and Canada, the U.K., a smattering of European countries (Austria, France, Germany, Ireland, Italy, Spain), Australia, New Zealand, Mexico and Brazil.

The PlayStation 4 lays claim to over 10 million units sold worldwide, according to Sony. When last we heard from Microsoft way back in April, the Xbox One had shipped (as opposed to sold) 5 million units worldwide, the latter still a perfectly respectable figure: significantly higher than Xbox 360 sales for the same period, and contrasted against a runaway-popular system even Sony admits is selling way above its own wildest best-case estimates.

Since then, Microsoft has said Xbox One sales "doubled" off the console's $100 price drop in early June, but we're still in the dark on units shipped worldwide, suggesting Microsoft is unhappy enough with the Xbox One's sales performance to play dumb (remember when it couldn't help but brag monthly and precisely for years about Xbox 360 sales?), making direct sales comparisons impossible.

A word about unit sales comparisons, for those who find them tedious or silly: Console sales matter for the same reasons anything to do with volume matters in a market economy. Publishers and studios, indie to mega-corporate, are each and every one gambling with demographics each time they heap piles of cash into whatever company's developmental framework. What we're able to play and where thus depends heavily, if not exclusively, on publisher-studio projections about platform adoption and investment return.

The sales-crippled Wii U's dearth of third-party games exemplifies what happens when you have a perfectly interesting and logistically competent piece of technology, but can't secure publisher commitments to assure potential buyers they'll be able to play multi-platform, mega-popular games like Tomb Raider, Borderlands 2, Grand Theft Auto V and the latest Battlefield or Call of Duty. Contrast with the inverse content deluge for the Wii during its halcyon years (and it had plenty of those before it fizzled), a system significantly less powerful than either the PlayStation 3 or Xbox 360, putting the lie to arguments that these things boil down to raw calculative potential.

The Xbox One's 29-market expansion stands to shore up at least some of Microsoft's sales disparity with Sony, putting Microsoft's console in two more South American countries, Chile and Columbia (September 2), Japan (September 4), a slew of European and Middle Eastern countries (September 5), Israel (September 15), several Asian countries, China and South Africa (September 23), and Russia (September 26). The console will still be short of Sony's total by several dozen markets, but for the first time in its lifecycle, it'll be in places the PlayStation 4 isn't yet, specifically Israel and China.

Israel accounts for a fraction of global gaming revenue (crazily, the Xbox 360, which launched worldwide in 2005, debuted in Israel just two years ago). But China is a behemoth, currently on the verge of surpassing the U.S. as the greatest source of annual gaming revenue in the world, according to a report published by researcher Newzoo in early June.

Predicting precisely how much money one new market or another's going to add to Microsoft's coffers is a fool's errand, of course. Unless you're pouring buckets of cash into statistical models fueled by troves of sufficiently accurate longitudinal per-market data, you might as well pull out a bow and lob arrows at the moon. Even the public version of Newzoo's report is problematically diffuse for predictive purposes: a macro-level aggregation of game revenue that pulls everything into all-encompassing figures, without differentiation between platforms.

Newzoo says its figures tap "consumer revenues generated by companies in the global games industry and excludes hardware sales, tax, business-to-business services and online gambling and betting revenues." So at least we're not muddying the waters with online gambling and betting, which by itself has been estimated to draw in the tens of billions revenue-wise annually. But Newzoo's figures also exclude "hardware sales," thus physical platforms -- including video game consoles -- are off the books. We're left with a general sense of overall game activity in these countries.

Considering other sources narrows the focus slightly: According to this GameSummit infographic culled from a global gaming report by research firm IDATE, in 2013 console sales, North America accounted for about 10 million units; Europe, the Middle East and Africa accounted for between 8 and 9 million units; the Asia-Pacific region tallied between 4 and 5 million units; and Latin America was somewhere between 1 and 2 million units.

Of all the Xbox One's new markets, China's is the most intriguing, mostly because it's terra incognito, console-wise. China banned foreign console sales 14 years ago, claiming (ridiculously) that they were impacting the mental health of players (it lifted the ban in January). And so today, PC and mobile games are dominant in the country. Game consoles have been available through China's gray market, but we don't know what that slice of the pie amounts to, nor where demand for consoles versus PC games and mobile games is today, nor what impact the gray market may (or may not) have rolling forward with regard to demand for state-legitimized systems.

Price sounds like it'll be a factor in the latter case, because what Microsoft's asking for the Xbox One without Kinect in China sounds exorbitant: 3,699 yuan, or just over $600 (the Kinect-less Xbox One currently goes for $400 in the U.S.), though some of that's down to China's 17% tax on imported goods. But it stands to reason -- given estimates that the average annual Chinese private-sector worker salary amounts to 28,752 yuan a year (about $4,682) -- that a lot of would-be Chinese Xbox One buyers are going to balk, even with Microsoft's pledge to sell games for less, from 99 yuan to 249 yuan ($16 to $41).

According to an online poll of more than 5,000 respondents conducted by Chinese news site Sina Tech (via Wall Street Journal) at the end of July, 59% said they wouldn't buy a Chinese Xbox One, while just 22% indicated they would. If you're making just 28,752 a yuan a year, would you spend roughly 13% of your annual take-home on a game system? If you could buy the same system for significantly less through back channels?

Sony plans to sell the PlayStation 4 in China as well, and announced a manufacturing partnership with a Shanghai-based company to do so back in May. But as of today, we have no idea when the console will launch, or where it'll clock in price-wise.

The other market of interest is Japan, which has roughly one-third the population of the U.S., but relatively high per-capita console sales. Historically, Microsoft's Xbox consoles have fared very poorly in Japan: a mere 1.6 million, compared with over 10 million PlayStation 3 units (and surpassed last February by Nintendo's Wii U). The original Xbox, launched in 2001, couldn't even muster half a million.

At least the Japan launch price for the Kinect-free Xbox One isn't out of the ballpark: 39,980 yen, or about $381. That, and Sony's had a tough time moving PS4s in Japan, totaling (as of mid-July) about 620,000 units since the console's February launch. Sony chalks that up to poor Japanese developer support pre-launch (no one expected the PS4 to be so successful, says Sony, which actually sounds plausible given Sony's own sales underestimates).

Assuming Sony's claims are correct, the corollary, of course, is: Does Microsoft have Japanese developers lined up for the Xbox One? The company wants us to think so. In April it laid out 48 "regional" companies signed up to develop for the system ("regional" meaning a mix of native Japanese as well as Western developers with Japanese branches), then expanded that list by several dozen in June. But the 29 launch titles are decidedly Western-biased (Polygon has the full list here), and it's hard to see any of those games -- many of them already availably on the PS4 in the country -- driving the system to stratospheric heights.

Microsoft's greatest challenge selling Xbox Ones at this point is psychological. There's the narrative about the Xbox One's horsepower, given its inability early on to match the PS4's output in multi-platform games pixel for pixel. There are presumptions about the console's lackluster unit sales (fueled by Microsoft's sudden reluctance to provide specifics). There's the confusing Kinect-as-initially-pivotal-but-now-peripheral boondoggle, the system's imposing physical footprint (it's ginormous compared to the PS4, as big as an old-school desktop computer), and there's the lingering miasma from a cavalcade of walked-back "features," ranging from hypothetically intrusive Kinect-related activities to truly awkward, customer-unfriendly DRM policies.

At least two of those issues are behind the system at this point. The Xbox One has been at price parity with Sony's PS4 since June, and the removal of Kinect ostensibly freed up horsepower to help developers wring a little more from the system. But the system's biggest hurdle at this point is perceived momentum. And while the mainstream's going to focus (not wrongly) on the system-sales-bolstering impact of exclusives like Halo: The Master Chief Collection, Forza Horizon 2 and maybe (make that an emphatic maybe) Sunset Overdrive in all the established markets this fall, it'll be interesting to see the launch returns in the coming months.

Some of these new markets have enormous sales potential. The question is whether Microsoft in 2014 has the marketing savvy and catalog appeal to drive those sales home.

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