Five years ago yesterday I was one of about 2,000 people who spent 30 very cold hours inside a giant hangar in the Southern California desert celebrating the launch of this brand new video game console. The so-called "Zero Hour" event was the start of something that has helped change the industry forever.
It's hard to believe that five years has gone by so fast, but sure enough, the Xbox 360 has officially reached the age at which previous generations of video game consoles would be retired in favor of the next round. But the new Xbox was the first to hit the playing field of what quickly became known as the "next-gen" consoles: the Xbox, Sony's PlayStation 3 and Nintendo's Wii, the latter two of which would be released in November 2006.
Amazingly, on that frigid Nov. 21, 2005, Sony's flagship console was still the PlayStation 2, and no one had yet even heard the name "Wii."
Along the way, the Xbox 360 has become a major part of Microsoft's stable of products, and has helped spawn (or enhance) some of the biggest and most important exclusive titles and accessories in video game history: the Halo, Gears of War, and Fable franchises, among many others; the Kinect motion-sensitive controller; and of course, the massively popular Xbox Live service.
But the Xbox has also had issues, most notably the infamous Red Ring of Death failures, and the resulting $1 billion warranty program Microsoft instituted to handle the resulting thousands of dead Xboxes. Many gamers also scoffed at its original behemoth power supply.
Yet Microsoft came away from that episode looking smart--instead of denying the problem, the company embraced it and won the goodwill of a lot of people by agreeing to replace their consoles for free for up to three years.
And while few predicted the incredible success of the Wii, which has long led the next-generation console wars, few others saw how thoroughly the Xbox would outpace the PlayStation 3 in the first years of the generation. Month after month, the Xbox outsold the PS3, and games available for both consoles frequently sold far better on Microsoft's platform than on Sony's. Though that gap has narrowed in the last year or so, Sony still has a long way to go to catch up.
And the Xbox 360 itself has gone through several iterations. When it launched in 2005, it was a somewhat barebones machine with a bolt-on 20GB hard drive and neither a built-in DVD drive nor integrated Wi-Fi. Over the years, Microsoft has released several new versions of the Xbox--first the Xbox 360 Elite in 2007, which came with a 120GB hard drive and an HDMI (High Definition Multimedia Interface) port, an HDMI cable, and a wireless remote; and later the Xbox 360 Slim, which features a 250GB hard drive. Over the years, the price of the core console has dropped only from $400 in 2005 to $300 today.
And that fact alone may be the most surprising about the five years of the next-generation consoles.
"If you'd told me in 2005 that [for the holiday season in] 2010, the three consoles would be $300 [for the core Xbox 360 Slim], $300 [for the core PlayStation 3] and $200 [for the Wii]," said Michael Pachter, a video game analyst at Wedbush Morgan Securities, "I would have told you [that] you were on drugs. There's no way."
But that is indeed the way things have worked out. And despite having dropped the price of the core system just $100 over five years--albeit with far more built in than there was five years ago--Microsoft is still selling hundreds of thousands of Xbox 360s each month; according to the analyst firm NPD Group, Microsoft moved 325,000 Xbox 360s in October. That's testament to what consumers feel they're getting out of the system.
And that's translated into sales. Pachter said that Microsoft has sold 40 million Xbox 360s, and currently has 17 million Xbox Live Gold customers, each of whom are paying $60 a month.
Microsoft was not able to respond to a request for comment.
"They've done it by creating more value for the consumer," said Pachter. "There's a built-in hard drive, built-in Wi-Fi....and Xbox Live is three to four times bigger than I thought it would be. The mindset of gamers back in 2005 was, we like to play by ourselves. In 2010 it's, we like to play with other people."
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