Microsoft’s Xbox One
Marketing Plan
EXECUTIVE SUMMARY
As the video game industry continues to grow steadily, Microsoft is trying to establish
themselves as a leader in the video game industry through their third-generation console: the
Xbox One. However, Microsoft (and other console manufacturers) face many challenges, as
the demand for smartphone and tablet apps also grows steadily. Additionally, video game
console costs limit their availability for certain markets. Despite this limitation, new
opportunities in the video game industry are evolving (for example, gaming women and older
adults), and Microsoft will need to find ways to maintain a competitive advantage with their
Xbox One console over other popular alternatives, such as Sony’s PlayStation 4. The
company has already branded their console as an all-in-one home entertainment system, but
in order for it to change the way people experience home entertainment, Microsoft must:
continue to innovate with the Xbox One to differentiate it from competitors, design exclusive
new video game titles, develop promotions that will help position the console as a leader, and
work with distributors to maintain control over costs.
SITUATIONAL ANALYSIS
2014 saw the release of the eighth generation of video games consoles. This includes the
Xbox One (Microsoft), the PlayStation 4 (Sony), and the Wii U (Nintendo). Although these
companies compete against each other for market leadership, they also face competition
from smartphones, tablets, and even smart TVs. Some analysts have predicted that the eighth
-1
, MICROSOFT’S XBOX ONE
Marketing Plan
generation will be the last generation of home consoles due to the rise of these other
devices.
The Xbox One had a decent first year of sales, with 3 million units sold by December
31, 2014, and 5 million units sold by April 18, 2014 (Xbox, 2014). However, the PlayStation 4
has led the video game market in units sold. Microsoft has tried to redefine their new console
for more than just a video games, as an “all-in-one entertainment system,” resulting in little to
no success. This marketing plan will evaluate opportunities to strengthen the brand in order to
improve the position of the Xbox One and increase growth in sales. Microsoft must also be
prepared to deal with threats from its primary competitors (Nintendo and Sony) along with
secondary competitors such smartphones and tablets.
MARKET ANALYSIS
In September of 2014, nearly 60% of adults reported that that they’ve played video games
within the past month on at least one platform, indicating that video games have become a
prominent source of entertainment for the majority of consumers (Harland, 2014). However,
the market has also undergone shifts in the past several years with the explosion in popularity
of mobile games and the rise of digital distribution, especially within the PC gaming segment of
the market.
In the five years leading up to 2014, industry revenue increased at an average annual rate of
0.7%. In 2014, the revenue is expected to reach a total of $40.9 billion, well below the peak of
$42.9 billion prior to the “Great Recession”. Due to the long wait between new video game
console releases, the industry has long been dependent of add-ons and accessories to retain
consumer interest. The release of the Kinect, a motion sensor for the Xbox 360, partially offset
-2
Marketing Plan
EXECUTIVE SUMMARY
As the video game industry continues to grow steadily, Microsoft is trying to establish
themselves as a leader in the video game industry through their third-generation console: the
Xbox One. However, Microsoft (and other console manufacturers) face many challenges, as
the demand for smartphone and tablet apps also grows steadily. Additionally, video game
console costs limit their availability for certain markets. Despite this limitation, new
opportunities in the video game industry are evolving (for example, gaming women and older
adults), and Microsoft will need to find ways to maintain a competitive advantage with their
Xbox One console over other popular alternatives, such as Sony’s PlayStation 4. The
company has already branded their console as an all-in-one home entertainment system, but
in order for it to change the way people experience home entertainment, Microsoft must:
continue to innovate with the Xbox One to differentiate it from competitors, design exclusive
new video game titles, develop promotions that will help position the console as a leader, and
work with distributors to maintain control over costs.
SITUATIONAL ANALYSIS
2014 saw the release of the eighth generation of video games consoles. This includes the
Xbox One (Microsoft), the PlayStation 4 (Sony), and the Wii U (Nintendo). Although these
companies compete against each other for market leadership, they also face competition
from smartphones, tablets, and even smart TVs. Some analysts have predicted that the eighth
-1
, MICROSOFT’S XBOX ONE
Marketing Plan
generation will be the last generation of home consoles due to the rise of these other
devices.
The Xbox One had a decent first year of sales, with 3 million units sold by December
31, 2014, and 5 million units sold by April 18, 2014 (Xbox, 2014). However, the PlayStation 4
has led the video game market in units sold. Microsoft has tried to redefine their new console
for more than just a video games, as an “all-in-one entertainment system,” resulting in little to
no success. This marketing plan will evaluate opportunities to strengthen the brand in order to
improve the position of the Xbox One and increase growth in sales. Microsoft must also be
prepared to deal with threats from its primary competitors (Nintendo and Sony) along with
secondary competitors such smartphones and tablets.
MARKET ANALYSIS
In September of 2014, nearly 60% of adults reported that that they’ve played video games
within the past month on at least one platform, indicating that video games have become a
prominent source of entertainment for the majority of consumers (Harland, 2014). However,
the market has also undergone shifts in the past several years with the explosion in popularity
of mobile games and the rise of digital distribution, especially within the PC gaming segment of
the market.
In the five years leading up to 2014, industry revenue increased at an average annual rate of
0.7%. In 2014, the revenue is expected to reach a total of $40.9 billion, well below the peak of
$42.9 billion prior to the “Great Recession”. Due to the long wait between new video game
console releases, the industry has long been dependent of add-ons and accessories to retain
consumer interest. The release of the Kinect, a motion sensor for the Xbox 360, partially offset
-2
