Microsoft Canada is set to throw a spanner into the highly competitive games console market.

Strategically timed to meet the Christmas rush, the company’s first games console, Xbox, will be launched in Canada and the U.S. Nov. 8, almost exactly a year after Sony launched its top-selling PlayStation 2. Industry experts believe that Xbox could pose a substantial threat to frontrunner Sony and the second largest game-maker, Nintendo, which is also preparing to launch a new system, GameCube.

‘This is going to be the beer and the cola wars combined,’ says Ryan Mugford, marketing lead for Xbox, Microsoft Canada. Microsoft hopes to take a big chunk of the US$20-billion global video game market when Xbox hits retail at $459.99.

‘To go out against Sony and Nintendo we had to be absolutely certain we were offering something significantly better,’ says Mugford. He says that a hard drive and broadband multiplayer ensure that the graphics and sound are superior. Xbox promises to provide 256 channels of audio, 64 of which will be in 3D.

Microsoft detailed its North American launch at a press conference in advance of this year’s E3, one of the world’s largest annual games industry trade shows. The software giant has committed US$500 million to global marketing for the first 18 months, but the program is only just coming to life in Canada, two months before the launch date.

Males aged 16 to 26 have been identified as the core target group for Xbox.

‘These people are very bright, electronics and Internet-savvy consumers, so we have to make sure that all our marketing efforts are communicating to them, and not at them,’ says Mugford. ‘We want to provide them with information, rather than focus on selling to them, as this group can smell being sold to a mile away.’

To get the ball rolling, Microsoft started its Canadian campaign as the title presenting sponsor of Toronto’s electronics music festival, iDANCE, held in Nathan Phillips Square Sept. 2. ‘People who attend the festival are generally those who listen to electronic music, so it ties in beautifully with our market,’ explains Mugford.

MacLaren McCann in Toronto has created original TV spots to be aired on national TV during the fall. The first executions were aired on Much Music during the 2001 MTV Video Music Awards Sept. 6. ‘Our research has shown that gamers generally listen to a lot of music so this makes perfect sense to get the TV campaign started,’ Mugford says. Edelman Public Relations, also in Toronto, is handling all the PR for Xbox.

The Internet is also a key tool for communicating with the target consumers. The Website, www.xbox.com provides info about the console and invites consumers to register for an Xbox magazine and newsletter.

A number of potential cross-promotional partners are also in discussions with Microsoft. To date, Xbox has been named the title sponsor of Vans Triple Crown Series, which showcases extreme sports.

Before developing the product, Microsoft held 1,600 focus groups with gaming experts across the globe, to find out what would attract them to a new console. ‘We held vast numbers of groups in Canada because I believe that Canada understands gaming better than anyone else on the planet,’ says Mugford. ‘If we can win with those consumers then ultimately we will win with everyone.’

According to Max Valiquette, president of Toronto-based youth marketing consultancy Youthography, Xbox’s main weakness is a lack of familiar characters. ‘PlayStation 2 and Nintendo both have really character-driven games. There is nothing in Microsoft’s history to suggest that they can develop such strong characters,’ he says.

However, Valiquette believes that Xbox is superior in terms of ‘playability,’ as it promises gamers the chance to compete against numerous other players from around the world, instead of simply facing opponents in the same room. ‘If they deliver on these promises, it’s going to be the most involving of all the consoles,’ he says.

Greg Skinner, president of Toronto-based youth marketing consultancy Mina, predicts that Sony will initially lose some of the new gamers, but the die-hard gamers will stick with what they know and love. ‘If you’ve spent $300 – $400 on a games console and built up a collection of games, you’re not going to throw it out and buy a new one,’ he says.

Some experts believe that Sony could have its work cut out to compete with the novelty factor of the new system. Valiquette says: ‘We haven’t seen a lot of marketing around Xbox, but there’s been a lot of hype and activity in cyberspace, so everyone is waiting with baited breath. It will definitely be tough on PlayStation 2.’

Sega stopped production of its Dreamcast game console this year after selling a meager 2.3 million units worldwide since its September 1999 launch – compared to the 6.4 million PS2 consoles sold worldwide in 2000 alone – so industry spectators are waiting to see what effect Xbox will have on the market.

Never one to settle for the back seat, Sony has been preparing for the newcomer to the battleground for some time. Toronto-based Segal Communications has formulated a series of new promotional activities to keep PS2 at the front of the consumer’s mind. A new mall tour starts this week to allow game sampling. A movie advertising program will also be taking place across Canada between October and December, and Sony is strengthening promotional partnerships with the Raptors, the WWF and video dance parties, to name but a few.

Rob Segal, president, says: ‘We’re excited about the launch of Xbox because it will add more exposure to the category. We are confident that the consumer will continue to choose Sony because of the diversity and value for your gaming dollar.’ Segal points out that Sony also has the advantage of a year’s head start in selling consoles (the PS2), and building up relationships with game designers.

‘We’re going to let Xbox and Nintendo fight to be number two,’ he continues.

Butch Freedhoff, GM of Toronto-based Sony Computer Entertainment Canada, adds that PlayStation 2 has far superior software to that of its rivals. ‘We certainly don’t think we are in jeopardy,’ he says. ‘The fact that Microsoft wants to be in a business that we dominate only accentuates that we have the right business plan.’

Stores including Future Shop, Electronics Boutique and Toys R Us will be stocking Xbox.

‘We are overwhelmed by the interest from our consumers who have been eagerly awaiting this launch,’ says Jim Tyo, VP of Canadian operations at Electronics Boutique. President and COO of Future Shop, Kevin Layden, agrees. ‘We expect Xbox to be one of the must-have items for the holiday season,’ he says.

To date, Xbox has secured more than 200 international game artists and publishers to develop content, including powerhouse game studios Capcom, Sega Entertainment, Konami and Electronic ArtsActivision. Its launch library of 15 to 20 games is expected to help drive sales of 1 million to 1.5 million units across the continent by the end of the holiday season. In North America, Microsoft will ship up to 800,000 units of Xbox on the launch day.

Nintendo has delayed the launch of GameCube until Nov. 18, which gives Xbox a two-week leg-up on the highly coveted holiday buying season. Nintendo says the move was to meet consumer demand and to avoid glitches like the one Sony had with PS2 last year, when a major chip shortage meant that only half of the anticipated units hit retail by the scheduled launch date. Nintendo has upped the number of units for its North American debut from 500,000 to 700,000, and will be rivaling Xbox and Sony with a lower shelf price. Xbox will be launched in Japan and Europe in February 2002.