Rings of Red

With all the accolades presently being paid to Nintendo for the astonishing success of the DS and the Wii, it's understandable that Microsoft occasionally seems a bit put out by the whole situation. After all, the Xbox 360 sailed through the seemingly ambitious 10 million unit goal which was set for its first year or so on the market, and is outdoing Sony's PS3 in most markets - a situation which few would have dared to predict only a few years ago.

Given the circumstances, it's not hard to see why some more ill-advised comments from Microsoft executives regarding the Wii have seemed... Well, a touch bitter. Right now, Microsoft must feel like the kid who stayed up all night learning all the best combos in Street Fighter, only to arrive in school the next day and discover that everyone else in the class has decided to play marbles instead.

Nintendo's resurgence, however, doesn't really detract from Microsoft's success in real terms. Right now, the Xbox 360 is winning the battle which it set out to win - namely, the battle with Sony's PS3 - and is showing no sign of relinquishing its dominance of the "real" next-gen market.

I have always argued that this fight was Sony's to lose, and that remains the case; what's happened here is that Sony has slipped up badly enough, and fallen hard enough, to give Microsoft a clear shot at goal. The problematic PR, delayed launch and presently weak software line-up for PS3 are all fairly major concerns; the enormous price point, however, is the most serious issue.

Prior to launch, plenty of people questioned whether the market would support that pricing level - Blu-ray drive or not. The answer has returned, loud and clear; no, the market will not support this price point. Every day that Sony leaves the PS3 on the shelves with this unattractive price tag attached gives its rivals more of a head start.

With flawless execution, Microsoft could sail into the space which is being left by Sony's failures and build an Xbox 360 market share which would be practically unassailable. In some regards, that's exactly what it has done. Nobody can downplay the company's astonishing achievements with regard to software; the Xbox 360 has a compelling line-up of software on shelves, and an even more compelling line-up of exclusive titles in the pipeline.

Games like Halo 3, Bioshock and Mass Effect make Xbox 360 owners feel good about their purchase, and provide compelling reasons for Xbox and PlayStation 2 owners to upgrade. Indeed, in the top ten Most Wanted games chart compiled from user data on GamesIndustry.biz's sister site, Eurogamer.net, seven of the top ten titles are Xbox 360 games. Two Wii titles (Super Mario Galaxy and Super Paper Mario) make it into the ranking; only one PS3 title, Metal Gear Solid 4, appears.

It's obvious, then, that Microsoft is doing more than just making headway with the hardcore audience. Frankly, that battle is all but won, and the onus is now on Sony to demonstrate that it is capable of creating an offering for hardcore gamers that is as attractive as the one Microsoft has crafted.

The obvious criticism - which is no less true for being so obvious - is that there's precious little evidence of Microsoft's software line-up managing to break out of that hardcore market. The company still lacks not only the kind of Singstar, Eye Toy and Buzz titles which drive casual market adoption, but also the Final Fantasies and Tekkens which appeal to the vast mass of "average" gamers who lie outside the hardcore market Xbox 360 has so far exploited.

This is, at least, a well-understood problem, and one which is widely commented upon. It has, of course, done nothing to slow down Microsoft's race to ten million; but it may make the next ten million a lot harder to sell, and the following ten million almost impossible, if the issue is not addressed.

However, there is another problem which Microsoft faces at the moment - one which the company has shown even less sign of understanding, or addressing. It is the problem of hardware reliability and customer service, an area in which the Xbox 360 has a track record that is nothing short of utterly appalling - and an area which Microsoft absolutely must address, or risk handing the goodwill of the market back to its rivals.

Of course, this too is not a new problem. Microsoft has been slammed over the failure rate of Xbox 360 consoles, and its own poor customer service in dealing with that matter, many times before - British readers will undoubtedly recall that the firm was hauled over the coals on the Watchdog programme here only a few months ago.

This problem hasn't gone away; in fact, from a consumer point of view, Microsoft appears to have done precisely nothing to address it. While the attention of the media may have turned to scrutiny of Sony's failings, the vast numbers of Xbox 360 owners who have been let down first by Microsoft's shoddy manufacturing, and subsequently by the company's arrogant and unfair policies with regard to customer service, have increased. Their voices are contributing to a groundswell of unrest and negative buzz which will hurt Microsoft very badly indeed if it is not addressed.

The problem is clear. A large number of Xbox 360 consoles from launch onwards have shipped with manufacturing problems which have manifested themselves in the dreaded "three red lights" - an error code displayed on the front panel which means that the console has died, and needs to be returned to Microsoft for service.

The number of systems which shipped with these problems is a matter of some debate, but it's clear that it is a far, far higher proportion than the company originally admitted. Early claims suggested that Xbox 360 consoles were only failing as often as you would expect from any piece of consumer hardware - a figure generally agreed to be around 3 per cent. However, entire batches of consoles at launch were failing en masse - and the reliability, although it improved, continued to be poor for months afterwards.

Has this been fixed? Who can say - Microsoft has certainly made no promises regarding enhanced reliability for the Xbox 360 Elite console, so it's simply impossible to judge whether new machines rolling off the production line will be any better than their predecessors. Even giving the benefit of the doubt, that still means that millions of machines from the "unreliable" period of the console's manufacturing are sitting under televisions around the world.

This, however, is only half of the problem. For a new piece of consumer hardware to display a high failure rate is damaging, but not seriously so, as long as the company has a good system in place to ensure that customers' systems are being repaired, and goodwill is being maintained.

Unfortunately, Microsoft has made two massive blunders in this regard. Firstly, it has taken to shipping refurbished systems to customers whose consoles have died - not a huge problem in itself, but the reliability of these refurbished machines is also vastly suspect, which results in anecdotal cases where gamers have returned their consoles to Microsoft three or even four times, with each subsequent console suffering the same fault after a few months. These cases make compelling "horror stories" for consumers, and have been widely disseminated.

Secondly, despite its shameful appearance on Watchdog, and being lambasted by the press over its behaviour, Microsoft continues to insist that British consumers whose consoles have failed after its 12 month warranty period must pay GBP 85 (around 125 Euro) to have the system repaired. Its customer service representatives are adamant on this point, refusing to budge even when it is pointed out that these manufacturing flaws are clearly Microsoft's responsibility under consumer law, regardless of the terms of the firm's own warranty.

For Microsoft to rectify these problems will, of course, be painful and expensive for the firm. It is also absolutely essential if its head start over Sony, and the market goodwill it has built around its brand, are to be even remotely meaningful over the coming years.

To hardcore gamers, consoles are "special case" items; they are early adopters, generally have a large disposable income, and are willing to accept all manner of problems and flaws in order to enjoy the games they want to play. However, they are a small - if vocal - market. To everyone else, to the vast ocean of consumers to whom Microsoft must now appeal, if the PlayStation brand is to be unseated, a console is just another piece of consumer electronics, and it is subject to the same standards you would expect from your DVD player, your digital camera or your toaster.

You wouldn't buy a specific DVD player, no matter how nice the feature-set, if a friend had told you that he bought one last year and had to return it to the manufacturer three times. You wouldn't buy a certain digital camera if you heard that they routinely break down after 13 months, and you have to pay around a third of the original purchase cost to have them repaired. You wouldn't buy a toaster if your friend had that model of toaster, said it made lovely toast, but every couple of months it burns the bread and has to be replaced.

Silly examples? Not in the slightest; this is exactly the thought process with which the average consumer, considering a next-gen purchase, is presented. The Xbox 360 may be a magical box of wonders to the hardcore gamers enjoying the likes of Gears of War and Crackdown, but to the rest of the world, it's just another piece of consumer electronics. If they hear horror stories about reliability and customer service, they won't buy it - end of story.

Right now, those horror stories are proliferating; the word of mouth about Xbox 360 is that the games are great, but the hardware is a nightmare. If Microsoft is serious about reaching an audience with Xbox 360 which is bigger than the 20 million units achieved by Xbox, then that simply isn't good enough. It's time for Redmond to stop burying its head in the sand over this problem, and start coming up with solutions - before its unhappy customers become one of Sony's best assets.