Microsoft is going to launch Xbox and Xbox live in China.
A year ago, during a visit to Microsoft’s headquarters in Redmond, Washington, President Hu Jintao said, ‘Because you, Bill Gates, are a friend of China, I am a friend of Microsoft.’
Which is pretty amazing stuff. Microsoft’s handling of its relations with China would have made a cow working a machine gun look adept. To call it a shambles would be polite.
At one stage Beijing was so annoyed at Microsoft that there was thought all government bodies would go with Linux which would have given Microsoft palpitations.
Hats off then to Tim Chen, who took over Microsoft’s Greater China business in 2003 and started salvaging from the wreckage. It was not a good time to do it. Vista was a mess and going to be very, very late.
All of which makes the Xbox decision look a bit odd. The machine itself is sold at a loss and the money made with the software. How you make money with software when at least 86% of the software in China is pirated is an interesting point to debate.
But an Xbox launch in China might make some sense.
Microsoft seriously wants to get into the game of controlling some, at least, of the online services. Xbox allows Microsoft to do that. No Xbox and Microsoft is not in the game. So it will be marketed as a game console although the games are but bait to get people to use it as a set-top box. Packed with media and connectivity features, Xbox is a seriously well thought out living-room media server.
Add to that Xbox Live, which is a slick online service that provides a growing assortment of games, entertainment and other paid services.
The 130 million internet users in China live for online communication, and pay for piracy-resistant online games and probably will be happy to rattle the swill pail for some of the services provided by Xbox Live.
So the online services make some money; the Xbox hardware loses a lot of money; the Chinese user at home gets to associate Microsoft with online services.
Last problem. We may think Xbox is inexpensive. If you are live in China and get paid Chinese wages then US$299 for a starter version is serious money.
There is an awful lot going against the Xbox working for Microsoft. Companies like Baidu are not going to sit by idly and watch Microsoft storm into the market. But Microsoft has to do something or miss out on the biggest potential market in the world.