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Below you will find a letter written by Robbie Bach, Senior Vice President, Chief Xbox Officer at Microsoft Corporation. The letter reflects upon a successful year for the Xbox business with particular attention paid to the performance of key franchises, hardware and software services.
With a great holiday season and year now officially in the books, I’d like to address the current state of the Xbox business and highlight a few key accomplishments as we move into the new year.
2004 was a solid year for the industry and was great for Xbox overall. It was a year of strong market momentum for our platform - as well as for our partners – as we entered the sweet spot of the current console lifecycle.
Significantly, for each of the last thirteen months, Xbox unit sales of consoles, software and peripherals grew year-over-year. We are the only company that can make that claim.
In July we announced that we had hit our annual goal and had sold 15.5 million consoles world wide through the end of fiscal year ‘04. We continue to be on track to sell in excess of 20 million consoles world wide by July 2005. The important point here is momentum. Based on NPD data for November and internal sales data for December, Xbox won the critical Christmas season in the United States, garnering a projected 40 percent market share. In the same timeframe, Xbox console sales propelled forward with an 11 percent increase compared to this time last year. At the same time, our competitors experienced year-over-year declines – PlayStation 2 dropped an estimated 40 percent, and GameCube sales fell an estimated 47 percent.
On the software side, the 2004 Christmas season was one of the strongest holidays on record, with the latest NPD data showing Xbox software sales up 77 percent year-over-year. Xbox now offers a rich portfolio for gamers of all ages and interests, with more than 600 titles available worldwide. Our attach rate – the number of games sold divided by the number of consoles – is 7.6 (8.3 with pre-packaged games), which continues to be the highest ever of any console at this point in its life cycle.
We announced last May that Electronic Arts was the latest addition to our list of publishing partners supporting Xbox Live, and this past year 13 new EA titles joined a portfolio of online-capable titles that now exceed 150. In fact, EA’s first Xbox Live enabled game 'NCAA Football 2005', saw its month one, year-over-year sales more than double on Xbox in the US, while remaining relatively flat on competitive platforms - a clear sign that gamers have embraced the Xbox Live community model of online gaming.
You may have seen the October Game Developers Magazine, which announced its top 20 Publishers of the Year. Microsoft Game Studios was named the number two publisher, just behind EA, based on revenue as well as use of third-party developers, average critical response to titles, percentage of original intellectual properties (IPs), and developer opinion. I’m extremely proud of MGS work and there are a couple of Xbox titles I feel represent two of the greatest entertainment experiences available for gamers today. A very strong performer for the company has been 'Fable,' developed by Peter Molyneux's Lionhead Studios, which sold more than 1.3 million copies since its launch in September. 'Fable' was awarded 'Best Role-Playing Game' at last month’s Spike TV’s second annual Video Game Awards in the US.
And of course, 'Halo 2' mania continues, with the title outperforming all other titles on store shelves this season. 'Halo 2' drove astounding retail performance, with worldwide sales of 6.3 million copies since its launch, and we expect strong sales momentum to continue throughout the year. The 'Halo' franchise, which includes predecessor 'Halo: Combat Evolved' for the PC and Xbox, has now sold a collective 12.7 million copies in just three years' time. 'Halo 2' was also awarded two awards at Spike TV’s ceremony last month - 'Best First Person Action' game and 'Designer of the Year.'
Certainly, at least part of the success of 'Halo 2' can be attributed to its experience on Xbox Live, and early Christmas data indicated that new customers flocked to the service in unprecedented numbers. By the end of December, more than one million unique Xbox Live users were playing online matches of 'Halo 2' world wide, with gamers logging a collective 69 million hours of gameplay.
The year ahead promises continued excitement for Xbox gamers, with highly-anticipated upcoming releases that include Microsoft Game Studios’ 'Forza Motorsport,' Bioware’s 'Jade Empire' and Rare Studios’ 'Conker: Live & Reloaded' A few weeks ago, Game Informer Online included these three titles in their 'Ten Games to Watch 2005 List,' while also acknowledging that 'Microsoft was a force to be reckoned with' in 2004. Our third-party partners will launch other long-awaited titles including LucasArts' 'Star Wars: Republic Commando' and id Software's 'Doom 3.' Delighting legions of Xbox gamers, Rockstar Games announced just before Christmas that the hit 'Grand Theft Auto: San Andreas' will be available this coming June. For younger gamers, Xbox Live Arcade, due to launch in Europe this Spring, will offer a variety of casual and classic arcade games for download, including 'Bejeweled' and 'Ms. Pac Man.'
With an incredible Christmas season behind us, we continue to prove that the diverse games portfolio on Xbox and our thriving Xbox Live community are driving strong sales momentum into the New Year. We will exceed growing consumer expectations in the thriving video game sector for 2005 and beyond.
I hope you have a happy and prosperous new year.
Sincerely,
Robbie Bach
Senior Vice President, Chief Xbox Officer, Microsoft Corporation
So 2004 was a really great year for Xbox owners, and we can only hope that this new year is just as successful, and with some great titles to look forward to - we think that it will be the Xbox gamers who will be the real winners in 2005 -
John Grothier
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