Microsoft Focusing On Xbox Games, Not Price

SANTA MONICA, CALIF. — Microsoft spoke about games, not a price cut for Xbox 360 and certainly not about its recently announced billion dollar warranty program for the system, during its Electronic Entertainment Expo (E3) press conference.

While rumors circulated that the company might announce a price cut of its Xbox 360 gaming console, Microsoft VP Peter Moore was mum on the subject. Instead the focus was squarely on the upcoming games, notably Halo 3, the latest in the series of the popular space opera.

The event, which was held at Santa Monica High School's open air arena and was a far cry from past posh locales such as the Shrine Auditorium, kicked off with musical group Five Halo Fans playing a classical crossover rendition of the Halo theme music, before Moore announced that the "epic work of gaming fiction" would arrive in just 11 weeks.

Microsoft further reiterated their commitment to the franchise with the announcement of a Halo 3 Special Edition console would also arrive this September, along with a line of Halo 3-themed accessories. "This could become a billion dollar franchise and is this generation's epic," said Moore.

Microsoft also unveiled their upcoming lineup for the rest of 2007, and promised to have the largest library of games on any console this coming holiday season, with a greater focus on family-friendly titles. Among these upcoming titles will be the first video game version of the popular Scene It series, and this game will feature a new special controller.

Clearly, however, Microsoft is committed to the hardcore game audience — and with a holiday lineup that will include not only Halo 3, but also the latest Madden football title and the latest Grand Theft Auto game — Moore said that the Xbox 360 could have the potential to drive one-third of all new game sales. Grand Theft Auto IV will ship in North America and Europe in October, with additional exclusive Xbox 360 content released next spring.

Microsoft also reaffirmed that the Xbox 360 is much more than a game machine, with their announced deal with Disney to bring the Mouse House's library of content to the Xbox Live service, and this would include films and other content. Among those available now in both standard- and high-definition formats were animated films such as "Tarzan," "Hercules" and "The Emperor's New Groove," as well as live action films from various Disney studios including "Unbreakable" and "The Queen." As part of the deal all future movie releases from Disney will follow on the Xbox Live service.

The Xbox Live Marketplace will debut in Canada and Europe later this year, and Microsoft announced the Xbox 360 Elite version, with a larger hard drive and HDMI outputs, would be available in Europe at the end of August.

The Microsoft event came days after it expanded its global Xbox 360 warranty coverage that is expected to cost $1.05 billion to $1.15 billion in pre-tax charges for what it called an "unacceptable number of repairs to Xbox 360 consoles."

Microsoft is now offering a three-year warranty from date of purchase to any Xbox 360 customer who experiences a general hardware failure. The pre-tax charge to its earnings is for the quarter ended June 30 to cover the anticipated costs of carrying out the new warranty policy.

Under the new warranty, the company said it will repair or replace any Xbox 360 that experiences the "three flashing red lights" error message within three years from the time of purchase free of charge, including shipping costs. It also said that it will retroactively reimburse any customer who has previously paid for repair expenses related to this error message.

Microsoft said it has identified a number of factors which can cause general hardware failures and has made improvements to the Xbox 360 console. — Additional reporting by Colleen Bohen