The Wall Street Journal Online analyzes the prospects of the Xbox's online-gaming component. Analysts say Microsoft has spent hundreds of millions on Xbox Live, with little guarantees of returns. 'It is not clear that companies like Microsoft and Sony will be able to lure large numbers of players -- each has attracted a small fraction of users to online play with their previous consoles,' WSJ Online writes. 'The companies also must be careful about new business models for distributing games -- such as games-on-demand -- so as not to alienate game publishers, who still rely heavily on in-store sales. And games designed for multiple players have a mixed record of attracting customers.' Says analyst Michael Pachter, 'At the end of the day, we don't play games for social interaction ... We play games to escape.' Microsoft's strategy is 'absolutely flawed,' he added.
There are a couple things going on here, first I think that it is safe to assume that Microsoft knows something that Mr. Pachter doesn’t; such as what the future holds for XBox Live. Microsoft has shown ample evidence that it is very good at understanding customer preferences; I don’t think it is unreasonable to give them at least some benefit of the doubt.
Online gaming is likely to become more and more popular as more and more people get access to broadband data networks. Online gaming just isn’t any fun when you have to wait for the data to catchup with the joystick (or whatever they call it these days)
Mr. Pachter needs to replace We with I. Companies such as Sony with Everquest and Wizards of the Coast with Magic Online have proven beyond a reasonable doubt that there is a market out there for gamers that like playing against real life gamers. There are a number of very good reasons for this as well, in complex games like Role Playing and Magic require a human intellect in order to pose any challenge.
Also, there is a very active subset of gamers that enjoy the companionship of gaming but just don’t have the time to do it in person. Thirty-somethings like myself and others that have careers and families simply can’t afford to spend hours on end socializing with friends while gaming. You have to game when the time allows, whether that is in 15 minute chunks between conference calls taken from home or midnight binging while normal people are sleeping.
Oddly enough, this last group of professionals – while ample disposable incomes – is probably the largest segment of gamers, it is no coincidence that Microsoft is going to develop a complex Live environment in order to capture some of that disposal income as this sophisticated gamer picks up online only incidentals.
So in short, I think that it is fair to say that Mr. Pachter doesn’t understand gaming.