360

Microsoft Xbox 360

It says a lot about a console that, after getting hit with a huge publicity scare, has seemingly come through unscathed. We are, of course, talking about the whopping $1 billion charge that Microsoft took in late June after increasing its Xbox 360 warranty to three years, refunding owner's repairs on the "three red lights" hardware issue and releasing new consoles to stores that won't have as many hardware failures (so far their efforts have been mixed with unconfirmed reports saying that there is still a lot of Xbox 360 console owners dealing with hardware issues). Despite analysts' predictions of lower sales following Microsoft's efforts, the Xbox 360 still manages to sell higher than the relatively issue free PS3.

After two years, however, Microsoft is dealing with Nintendo's resurgence as the top selling hardware console. Microsoft three different Xbox 360 versions (to be joined by a fourth this month with the limited edition Halo 3 version) still can't outsell the Wii on a per month basis. However, sales should increase thanks to a recent price drop (especially the $50 price drop of the 20 GB version to $349) .

Microsoft's biggest asset is its upcoming games. It already has a big console exclusive title with the third party game BioShock and in just three weeks you won't be able to get away from seeing Bungie's sci-fi shooter Halo 3 everywhere you look. With Microsoft claiming that the game has already gotten one million pre-orders you can expect a lot of copies to fly off the shelves on Sept. 25. Upcoming first party games like Project Gotham Racing 3 and especially BioWare's long awaited sci-fi RPG Mass Effect should also help the Xbox 36 0 console sales along with exclusive third party games like Ace Combat 6 and Beautiful Katamari.

So can Microsoft get ahead of Nintendo? Yep. Here's how we think they can win the console war at this stage:

Get rid of the Core version of the system
We think that the time has come for Microsoft to just dump the hard drive-less Core system outright and simply sell the 20 GB Premium version and the 120 GB Elite version (the Halo 3 version is supposed to be a limited edition). Less confusion in the marketplace means more sales overall.

Keep improving hardware support
The change in warranty was a good start to getting the Xbox 360's reputation as an unreliable hardware device fixed but Microsoft needs to quickly deal with existing issues on their previously released versions as well as make sure that the new systems coming off the assembly line don't have as many "three red lights" failures.

Make sure Halo 3's launch is perfect
Even though the game has gone gold there are still things that could happen that could make the launch an issue. There could be copies of the game that are unplayable due to issues in manufacturing. Pirates could gain access to the game early. A rush of online players on Xbox Live on launch day could cause slowdowns in the network. Microsoft has pretty much everything riding on Halo 3 being a huge success. It can't have anything happen that could cause the Xbox 360 as a whole to suffer.

Emphasize Xbox Live features
Microsoft has by far the best online service for any console and as we said earlier Xbox Live has new content being released on nearly a daily basis. With the fall/holiday season people will want to download new demos, new Xbox Live Arcade games and other new content. In a recent study it was shown that not many Xbox 360 owners were even aware of downloadable Xbox Live Arcade games. Microsoft might get more customers by going on a campaign to really push their online service as the big difference between its console and the competition (we are also guessing that Microsoft has a major fall Dashboard update upcoming that will add even more features).

Outlook-Solid
Microsoft might find itself behind Nintendo's Wii in sales but if they can overcome the hardware issues and have a successful Halo 3 launch (among other things), the Xbox 360 will still have a successful fall/holiday season in the US and Europe (we won't talk about Japan).

Conclusion

So what will the console war bring as we head into this all important fall shopping season? We will take a look in mid-December after the season ends and give you a fourth report on the war. In the meantime let us know what you think might happen in the comments page and on The Matrix.