Microsoft Signs Six More Studios for Xbox

Microsoft Corp. Thursday revealed six design studios have added their names to the roster of companies that will exclusively design games under the Microsoft label for its forthcoming Xbox game console.

The Redmond, Wash.-based software juggernaut already had 18 studios in the bag, including Oddworld Inhabitants Inc., Peter Molyneux's Lionhead Satellites and Microsoft's in-house Xbox development teams such as Bungie Studios. The new additions are Blitz Games Ltd., Curly Monsters Ltd., Double Fine Productions Inc., Radical Entertainment Inc., Vision Scape Interactive Inc., and Yeti Interactive.

The six companies come to the table with strong credentials in the video game design business:

• Blitz Games has developed PC, PlayStation, Dreamcast and N64 games including "Chicken Run," "Frogger 2," "Glover," "Action Man: Mission Xtreme," Action Man 2: Destruction X," and Disney's "The Little Mermaid II"
• Curly Monsters, formed in 1998, is composed of team members that have worked on titles for companies like Psygnosis Inc.; its latest title was "NGEN Racing"
• Double Fine Productions was formed by LucasArts game designer Tim Schafer, whose background includes "Grim Fandango," "Full Throttle" and "Day of the Tentacle"

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  Radical Entertainment has developed for publishers including Electronic Arts Inc., Fox Interactive Inc., Sony Computer Entertainment Inc., Sega Entertainment Inc., and THQ Inc.; its most recent titles include "MTV Snowboarding," "Jackie Chan Stuntmaster," "NBA Basketball 2000," and "Independence Day"
• Vision Scape Interactive has designed for Microsoft, Sony, Sega, and online interactive games; past accomplishments include "Jet Moto 3," "Twisted Metal 3" "Twisted Metal 4," "EverQuest," "Game Day '99," and "Land Before Time"
• Yeti Interactive was formed by members of the development team for "Rayman," and "Rayman 2."

It is a strong sign that Microsoft has been able to attract such vigorous developer support for the Xbox, one of its first forays into the hardware field. The company will need those design studios to attract and win the support of console gamers if it is to carve out a place for itself in the competitive industry, which often depends upon vigorous software sales to offset losses incurred by selling the hardware.

Some analysts foresee an uphill battle for Microsoft on that score. Merrill Lynch analyst Henry Blodget released a report Tuesday which predicted the Xbox console could sell at a loss for three years or more, possibly losing as much as $2 billion, before breaking even in 2005.

Why? The answer comes down to simple mathematics. Blodget estimated that production costs for the Xbox could be as much as $375 due to its advanced hardware specifications and out-of-the-box broadband Internet and network connectivity. But competitors are selling boxes far below that price. Sony's PlayStation 2 retails at about $300, and Nintendo is expected to price its forthcoming GameCube console at about $199. To stay in the game, Microsoft will be forced to stay competitive with Sony. Blodget concluded that Microsoft may lose as much as $125 for every Xbox sold, before marketing costs are taken into account.

The reality of the dangers of the game were driven home earlier this year when Sega was forced to discontinue production of its highly successful Dreamcast console because it could no longer cover production costs.

Still, Microsoft has a few aces up its sleeve. The Xbox's specs include a 733 MHz Intel processor, an 8 GB hard drive and high-end video and audio processors. And Microsoft, which has already carved out a healthy niche for itself as a PC game publisher, created a development environment for its new console which is very similar to that used for PC games and is often described as "developer friendly." Many developers consider Sony's PlayStation 2 to be a more difficult environment to use.


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