Alan Bowman, General Manager, Microsoft Entertainment and Devices Division, Asia & Greater China

MARCH 20, 2008 • Last February the DFC Dossier took a closer look at how the Xbox 360 was doing in Latin America. Another part of Microsoft’s aggressive worldwide platform strategy is launching in major Asian markets outside of Japan, so we were just as curious about how the platform was progressing in Asia. Although Microsoft’s challenges in establishing itself in the Japanese market have been well reported, there has been far less coverage of the launches in South Korea, Hong Kong, Taiwan and Singapore.

To help us better understand what it takes to market the Xbox 360 is Asia, DFC went to Alan Bowman, the general manager of Microsoft’s Entertainment Devices Division in Asia and greater China. Bowman is no stranger to the region, or the business, having previously served as director of the Home and Entertainment Division, Xbox for Australia and New Zealand.

From Bowman we learned that Microsoft has already localized more than 120 of the270 high-definition titles it has released in Asia. That’s a significant commitment to the region. The rest of what he had to say on the Asian market follows below.

DFC: It’s been close to two years since the Xbox 360 has been available in Hong Kong, India, Singapore, South Korea, and Taiwan. Please give us an overview of how the platform is doing in Asia, and how well consumers have taken to the 360?

Alan: Xbox 360 has been the first high definition video gaming system available across Asia. Since its debut we have built a truly exciting business. Let me put this into two main areas: content and online services. For content we released 270high-definition game titles by the end of2007; 40 of these are exclusive to Xbox360. Over 120 titles have been localized in Taiwan and Korea, demonstrating commitment to those markets and enabling gamers there to fully enjoy the games we bring to market. The excitement in Asia was well demonstrated by the Halo 3 launch last year. Console sales increased 400% with the launch of Halo 3 in Hong Kong, and pre-sales were sold out within five minutes in Korea.

An Xbox 360 promotion in Singapore.

Xbox 360 games have won five Best Games Awards in Hong Kong in 2007, of which Gears of War scooped three awards while Blue Dragon and Dead Rising were also recognized. Halo 3 was also named the Best Video Console Game in 2007 by the Korea Association of Game Industry. Xbox LIVE, our online service, recently hit the 10-million member mark – six months ahead of schedule! In December, following the fall update of Xbox LIVE, we addedon a new feature called Xbox Originals to enable gamers to download classic Xboxgames like Halo, Fable and Burnout 3.

DFC: How big is the video game market in Asia and how does it compare to other emerging markets in Eastern Europe and Latin America? Any similarities?

Alan: In Asia, online gaming is very popular. This has opened up huge opportunities for the online video gaming services, like the one Xbox LIVE is delivering. Xbox LIVE has an attach rate of about 50% in Asia, indicating a deep penetration of the service among Asian gamers. With the current Xbox LIVE attach rate and comparing this to the popularity of online gaming in the market, we see that there is still a huge growth potential in this space.

DFC: How many units does a Top 10 title sell in Asia in general, and in Hong Kong, India, Singapore, South Korea, and Taiwan specifically? How has that figure changed over time?

Alan: Unfortunately, we cannot release games sales information. However we have seen an incredible interest and spike in game sales following the release of Xbox 360 nearly two years ago. With over 270 high definition titles now available on our platform, and with the extension of gaming on Xbox LIVE, we’re seeing numbers grow consistently and have further expectations that these will continue to grow.

DFC: What has to be done differently to market and sell consoles and video games in Asian markets, as compared to Europe or the U.S.?

Alan: The Asia market is very fragmented, and the wide variety of cultures here requires bespoke marketing activity. What works in Korea will not necessary work in another part of Asia, like Taiwan for instance. We approach the marketing of our games and the Xbox console in a very unique and individualized way. We concentrate on providing culturally relevant content for gamers, responding to their individual markets. The way we market and communicate Xbox also is localized, ensuring we are making a cultural connection to consumers.

DFC: What content appeals to the Asian consumer, and how does that differ from Japan, Europe or the U.S.? Who’s buying next-generation consoles and video games, how much are they willing to pay, and how many of them are out there?

Alan: What we’ve realized over the years is that a good game sells all over the world. That said, there are some cultural differences in the various regions. Gamers in Asia generally like Japanese style games and we take particular care in making sure we bring a good range of Japanese style games to our markets. With this in mind we are working closely with legendary Japanese developers like Hironobu Sakaguchi of Mistwalker, Yoshiki Okamoto of Game Republic and Tetsuya Mizuguchi of Q Entertainment, as well as top Japanese games companies such as Square Enix, Capcom, Tecmo, Namco-Bandai and Sega to create epic Xbox 360 games. One landmark title being released on Jan. 24 is Lost Odyssey, a massive RPG created by Final Fantasy creator Hironobu Sakaguchi. This title is a Japanese style RPG – just what Asia gamers like. It has had fantastic reviews and we expect it to do tremendously well in Asia.

A retail Xbox 360 package from South Korea.

We also make sure key titles are localized into Chinese and Korean. We have teams in Taiwan and Korea dedicated to this effort and to date, we’re proud to say that more than 125 titles have been localized and that number is growing. Safe and responsible gaming is also important in Asia. To help parents monitor and limit the amount of time family members spend on the console we released Family Timer which can be downloaded via Xbox LIVE.

DFC: How much of what Microsoft has learned launching Xbox in Japan translated to other Asian nations, and why?

Alan: North Asia in particular looks to Japan for inspiration in fashion, culture and the arts and this extends to gaming as well. Knowing this, we work with the top publishers and developers in Japan to bring their titles to the Xbox 360 platform. Some mega blockbuster Japanese titles we’re bringing to market not just in Asia but also to the rest of the world over the next couple of months include Lost Odyssey and Ninja Gaiden 2.

DFC: What type of advertising works best in different Asian markets, and why? In addition to this, what messages best reach Asian consumers compared to their Japanese, European or U.S. counterparts, and why?

Alan: This is a really broad question. The advertising we use differs depending on our target audience and our messages, so let me speak in broad terms. Korea tends to be a more TV-centric market so we use this medium for our more wide-reaching messages like having 270 high-definition titles on our platform. Hong Kong and Singapore tend to be more print focused so our messages have to be in those mediums, particularly newspapers – these tend to be more about new product launches and events. Taiwan is a large market and we use print and online in the main to reach our audiences. Online is also important to us as our general target audience tends to spend more time on the web.

In North Asia, promotion style often emulates what works in Japan, such as this Ninety-Nine Nights event.

DFC: What 360 packages are you currently marketing in Asia, and at what prices?

Alan: The prices of the three systems we carry in different markets in Asia vary. But these prices are a rough indicator per region: Xbox 360 Elite System with 120GB hard drive, a black wireless controller, black Xbox LIVE Headset, Xbox 360 HDMI Cable and Ethernet cable. Estimated retail price starts from $460 and varies in different Asian markets.

Xbox 360 System with wireless controller, a 20GB hard disc, Xbox LIVE Headset, Component HD AV cable and Ethernet cable. Estimated retail price starts from $360 and varies in different Asian markets.

Xbox 360 Arcade System with wireless controller standard, and a 256MB memory unit for game saves. Five full Xbox LIVE Arcade games are also included. Estimated retail price starts from $280 and varies in different Asian markets.

DFC: What has been the most successful 360 game in Asia, and why?

Alan: Halo 3 is a world buster and Asia is no exception. Taiwan: Over 1,000 participants joined the press conference/ consumer hands-on event. Over 70,000 people attended the three-day Halo 3 event before launch. People lined up to wait for the launch of Halo 3 on Sept. 25 from 6am! Record high sell-out of 10,000 units of Halo 3 on the first day, followed by well-received pre-order campaign where 2,000 units were sold in three hours. Hong Kong: A Midnight Madness event was held in a local retailer, Toys R Us, in Causeway Bay on Sept. 25 at midnight. Over 400 consumers lined up outside to be part of the Halo 3 phenomenon. The first gamer lined up for over 30 hours before the event! Within two hours, 135 Halo 3 consoles, 314 copies of Halo 3 and 109 Halo 3 accessories and Live items were sold!

Singapore: Halo 3 was launched on Sept. 25 in Singapore. The launch sales event was held in Suntec City. Over 500 consumers lined up to wait for their copy of Halo 3. The first consumers came and waited for the sales as early as 7:30am. Over 10,000 shoppers visited the Halo 3 show floor on launch day and all the Halo 3 Limited Edition available were sold out on September 25.

Korea: Pre-order campaign started on September 10 and all Halo 3 available copies were sold out in five minutes! Another game that we must mention is Gears of War. Selling over a million units worldwide just two weeks after its release, the first-person shooting game Gears of War was the fastest-selling Xbox 360 game at the time of its launch in Nov. 2006 worldwide and in Asia. The game has also beaten Halo to become the most popular online game on the platform. Sales of Xbox Live Gold membership have increased by 50 per cent since the game was released.

The Xbox 360 launch party in Taipei.

DFC: How important is a service like Xbox Live for the market in Asia? Is the downloadable content available for purchase via a service like Xbox Live Arcade a market driver or is it more about competing with other users online?

Alan: Online gaming is extremely popular in Asia. Xbox LIVE is the key differentiator of Xbox 360 and we are glad to be a market leader in console online gaming. Multiplayer capabilities, such as those offered by Halo 3, allow up to 16 people to play online – directly appealing to the popular gaming culture in Asia. We’re not competing with other online users but the Xbox LIVE service itself provides more choices for different people, with different games in the portfolio, online services and three different versions of Xbox 360 in the market.

DFC: What’s up next for the Xbox 360 in Asia for 2008? New launches, new SKUs, new advertising, etc?

Alan: We’ll focus on strengthening the game portfolio in Asia to meet the needs of different audiences. In the next six months we will be launching more games ranging from sports and RPG to casual and movie tie-ins including Lost Odyssey, Ninja Gaiden 2, Devil May Cry and GTA4. This just a sampling of what is to come. There is so much more we’re working on but are not able to speak about now.