Recent Work - Microsoft Xbox

Microsoft adjusts its game plan
to market the Xbox

With fierce competition in the video game world and in the unfamiliar position of not being the dominant player in the market, Microsoft is altering its PR tactics to sell gamers on the Xbox

By Alvin M. Hattal
(Published In PR Week Magazine)

A country whose attention is currently consumed by war has a “braking” effect on the marketing of computer and video games, of course, but escapism also plays a part in the market.

Since its introduction 17 months ago, some eight million Xbox consoles have been sold, primarily in North America, Australia, New Zealand, and many parts of Europe and Asia, including Japan--14 countries in all, says Charlotte Stuyvenberg, PR director of the Home and Entertainment Division.

The Xbox has been fighting for market share since Bill Gates and The Rock, the well-known wrestler, premiered it for the trade at the Consumer Electronics Show in Las Vegas in January 2001. “By last August, before a single dollar had been spent on advertising, the game had reached 74% awareness level, research showed,” says Graham Crow, a vp at Edelman PR, Microsoft’s agency for that division. Today, he says, awareness is in the 90s.

Going live with a new PR plan

This year, the focus of the company’s usual May kickoff of its Christmas holiday PR program at the Electronic Entertainment Expo in Los Angeles will be on Xbox Live, the online game service. Introduced to the public in North America last November, it has about 350,000 subscribers and has just launched in Europe and Japan.

“It’s changing the face of video gaming” says Stuyvenberg, who has been in the entertainment industry for some 20 years, most of it in the video game segment, “because it allows people to play games via a broadband connection on which they can talk to people live.” At $49.99, the subscription fee “has met less resistance than pundits predicted,” she adds.

One of the PR challenges Microsoft faced with Xbox Live, says Stuyvenberg, was getting people to understand it. It’s a little complicated to explain without a demonstration. So product demonstration, as well as branding, was one of the company’s main objectives.

“Before we launched this product,” says Stuyvenberg, “we started with an education tour in which we went to members of the analysts community, the gaming press, and the consumer press. We also put together a group of consumers, taught them how it works, and let them beta test it.

“From a PR standpoint,” Stuyvenberg says, “it worked very well because they eventually became advocates.”

At the launch, the company did something unusual for Microsoft, says Stuyvenberg. “We went down to Hollywood and threw a premiere party at the Sunset Room, inviting actors, the paparazzi, and a lot of the media that cover Hollywood. We rolled out the red carpet for the stars to walk down and introduced them to Xbox Live that evening.

But there’s considerable risk for Microsoft in such a venture, Stuyvenberg says. Since the company was hardly associated with the entertainment industry and the Hollywood scene at that point, she explains, there might have been some confusion in the mind of the company’s typical customer.

“Fortunately,” Stuyvenberg adds, “all of the ‘pre-work’ we had done was really successful in building ties. By the time we got to Hollywood, many people knew of Xbox Live, believed it was going to be a success, and wanted to be associated with it.”

Without being specific, Stuyvenberg says the game has a multimillion-dollar, worldwide budget. And that’s likely to increase, she adds, “because Microsoft considers public relations a very, very important tool for marketing and branding, which helps make it a pleasure to work here. I’ve worked at companies where PR was considered as an afterthought. In fact, both Bill Gates and Steve Ballmer are quite engaged in this end of the business.”

Making inroads in difficult markets

On the other hand, Japan remains a difficult market for Xbox to break into. Sony and Nintendo are very ingrained in the market and still lead the way there. In fact, as a member of Sony’s Play Station team, Stuyvenberg helped the company gain its leadership position in the industry before she joined Microsoft 18 months ago.

“It’s important,” says Stuyvenberg, “for us to develop a unique focus for Japan, unlike any other market we distribute our products in. In Japan you have to be very consumer-focused. You also have to be very specific about what your offerings are. With some products in some markets, customer service and customer feedback are usually among your priorities. In Japan the strategy is to make it the number one priority

“We’re developing a new strategy for growing the business there” Stuyvenberg says. “But we’re still about nine months away from divulging details about it.”

Asked if the Xbox crew had made any mistakes along the PR way, Stuyvenberg said, “Rather than following Microsoft’s customary way of marketing a product, we really had to learn to take more time, in the beginning, to educate the media about our objectives—why we were in this business. Our people, who had no marketing background, had to quickly learn how to do consumer marketing. We had to take a look at this business in a very fresh way.

“We also got so excited about the products that we showed them to the media prior to the Expo and then didn’t have enough new products to introduce at the show itself, which is a premier event for that industry. So now our strategy is to hold back, as many companies do, for the main event.

For the first time in years, Microsoft is competing in markets where its dominance—if not monopoly—in the operating system and desktop applications segments don’t help. CEO Steve Ballmer has positioned the company to pursue new growth markets such as video games, home entertainment and consumer relationship management software.

Although neither product is profitable yet, Stuyvenberg is supremely confident in their future and points out that Xbox, after only 18 months, has just surpassed Nintendo. And both Nintendo and Sony lack Xbox’s powerful hard drive and graphics technology. But Microsoft lacks enough exclusive game titles, according to analysts cited in a recent Wall Street Journal story, which reported that Microsoft and videogame giant Electronic Arts Inc. were separately trying to buy all or parts of faltering Sega, which now creates titles for the three game-industry leaders. Acquisition of Sega’s Visual Concepts could give the Redmond-based company “access to exclusive game titles” that could help fill that void and also “give Microsoft a strong boost in Japan, where a dearth of Xbox titles that appeal to Japanese gamers has left the company with a vast stock of unsold machines.”

Stuyvenberg declined to comment on the story, dismissing it as “total rumor.”

Xbox will evolve

Meanwhile, Microsoft is hosting more than three million Xbox Live game sessions a week and users spent more than 15.7 million hours playing online in the service’s first three months. Usually, says Stuyvenberg, at 8 in the evening. Those numbers may change, analysts say, as Xbox evolves—ultimately to include digital-media capability, a year or two down the road.

Matt Russo, an industry analyst who tracks the company, says, “The next version of Xbox will probably be loaded with digital media capability, including video recording or the ability to store video and audio clips downloaded from the Internet or another PC. Microsoft wants Xbox to be a more diverse entertainment console. But that won’t happen before at least 2004.”

Nevertheless, Microsoft will keep on fighting until it’s game over for the competition.

PR contacts

Director of PR & Events,

Home & Entertainment Division

Charlotte Stuyvenberg

Manager, Corporate PR

Molly O’Donnell

Manager, Corporate PR

Stacy Drake

Director, Corporate PR & PA

Mark Murray

VP, Edelman PR Worldwide

Graham Crow

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