Switched On: Aping Donkey Kong: The bizarre 180 of XBox 360

Every Wednesday Ross Rubin contributes Switched On, a weekly column about the future of technology, multimedia, and digital entertainment:

As the last Switched On discussed, paid subscription services and the kind of reputation-tracking that Microsoft is planning for Xbox Live Gold are not the kinds of features that will expand the console gaming market far beyond its current audience. Nonetheless, Microsoft remains determined to pursue this nebulous target market. Judging by a recent interview, the new console was apparently named after the total number of things that the company sees as not being key to expanding the market.

Microsoft's positioning has changed as completely and dramatically as one of its new console's removable faceplates. According to its Xbox executives, it's (now) not about better graphics. It's not about better sound (this time). It's (suddenly) not about more capacity. It's not about having a custom CPU (or presumably a new graphics processor). It's not even about the potential Microsoft advantage of launching earlier than your competition. And it's not about serving as a more affordable Windows Media Center or more powerful Media Center Extender.

Surprise, it�s about the games. But at least since the late George Plimpton pitched in vain to sway would-be Atari 2600 owners toward the coil-corded, keypad-sported, Keyboard Component-aborted graphical superiority of Intellivision, it has always been about the games. How will this forthcoming generation, then, be different? Microsoft will have a few exclusives and strong first-party titles. But Sony�s equivalent lineup looks at least as strong, and as the market share leader, the PlayStation purveyors have more leverage to negotiate exclusives. Finally, Nintendo plays its deck of character franchises like a master of Texas Hold �Em.

So, if one simply extrapolates where the industry has been to where it�s going, it doesn�t appear as if Microsoft has any advantage in the next round from which to gain market share, much less expand the market. Microsoft would counter, though, that its ace in the hole is XBox Live. Live is a powerful idea in console gaming, a strong proof of concept that is dragging Nintendo kicking and screaming into the online age and forcing Sony to think about providing at least more infrastructure around online play in its next console. Unfortunately, it cannot be captured in screen shots. Yet, Microsoft�s grand game unveiling at its E3 press conference was Final Fantasy XI; it�s questionable whether that will even expand the market for the incredibly insular massively multiplayer online role-playing gaming community.

Is Microsoft simply talking Nintendo�s walk? Nintendo is the only console developer that has any historical ties to the arcade experience that was the true birthplace of casual videogaming. In stewarding the Game Boy for more than 15 years, Nintendo has attracted simpler games because they were written for a simpler device with a younger demographic. (Indeed, PSP titles, while more sophisticated, are also relatively friendly to a casual gamer.). Finally, Nintendo was downplaying having the hottest specs in favor of focusing on gameplay years before it became fashionable to do so in Redmond.

Games like Mario Tennis, Donkey Konga, and Mario Kart are easy to jump into and enjoy, and Wario Ware has pioneered a new genre of thumb candy (although its occasional focus on nostril lubricating agents provides a strong case against photorealism). While Nintendo the console developer struggles to support a wide variety of titles for its hardware, Nintendo the software publisher probably understands the casual gamer best. As long as you buy into its Disneyesque milieu, you�re welcome to join the Mario Party.

Indeed, while there are things console manufacturers can do to facilitate casual gaming, software publishers are the companies responsible for expanding the base of gamers. This is a challenge to which they�ve repeatedly if inconsistently risen to through a history that includes Ms. Pac-Man, Tetris, Myst, The Sims, Snake and Bejeweled. Many of these games flourished on multiple platforms. And by the time the tallies are totaled on the next generation, more consumers will likely be playing games on mobile phones than on all three major consoles combined.

The Xbox 360 may be able to recreate the laws of physics, but it can�t change the laws of logic: dedicated gaming machines aren�t likely to be purchased by consumers who don�t have a serious interest in games. There�s even an argument that the next generation of consoles may provide slower growth than in the past. After all, at least the XBox 360 and PlayStation 3 need scarce high-definition TVs to demonstrate their full superiority over their predecessors, and rumored higher console and game price titles may delay mass market adoption. If Nintendo and now Microsoft are right, and we are reaching diminishing returns in terms of graphics improvements, will consumers � who have been driven to upgrade by improved graphics � pass on new consoles the same way they are likely to stop upgrading to higher-resolution digital cameras?

Microsoft should capitalize on its differentiation with Live and continue to pursue that social � but still relatively dedicated � gamer. The company sees the great potential for extending the service in terms of cooperative play, matchmaking, tournaments, digital merchandising, sponsorship and even �spectator mode� (although, if all you want to do is watch people play videogames, there�s already a cable network for that). Microsoft can greatly increase its revenue per customer and expand the scope of console gaming, but it will be the formidable task of software publishers to expand its audience.

Ross Rubin is director of industry analysis at NPD Techworld, a division of market research and analysis provider The NPD Group. Views expressed in Switched On, however, are his own. Feedback is welcome at fliptheswitch@gmail.com.