Microsoft, Sega unite for Xbox games

In this story: $500 million marketing blitz Sony president 'not worried' RELATED STORIES, SITES

TOKYO, Japan -- Trying to lure customers and software developers in the lucrative video game market, Microsoft Corp. announced Friday that its Xbox game console when it launches this autumn would boast 11 games designed by software developer Sega Corp.

The deal would give the upstart Xbox a much-needed arsenal of game titles when it takes on entrenched competitors in Japan and the United States, such as Sony Corp.'s reigning console PlayStation 2.

The agreement also boosts Sega's new focus on game development. Sega abandoned its Dreamcast console last month due to poor sales and shifted its focus to its healthier software business.

"This is a business where there's no way to get in small. You have to be totally committed," Microsoft chairman Bill Gates told Reuters on Friday.

That's important in Japan, where close coordination between hardware and software makers is credited with putting its video game makers at the forefront of the $20 billion industry.

Software titles are crucial to the success of game consoles because they generate sales and also offer higher margins for both the hardware manufacturer and game developer.

$500 million marketing blitz

The cubic Xbox with its bright green "X" logo, built-in online capability and hard drive, is shouldering Microsoft's hope of breaking into interactive home entertainment.

Microsoft said it will spend more than $500 million in the first 18 months after the Xbox's launch on marketing.

"Even for us that's a huge, huge investment," Gates said.

Microsoft Corp. also opened an avenue for online gaming with the Xbox console by allying with Japanese Internet services company NTT Communications Corp. a day earlier.

Net access for the Xbox is a key feature that the world's top software company hopes will give its new game machine an edge against Sony Corp.'s popular PlayStation 2 machine, which has yet to announce a strategy for connecting to the Internet.

Sony has a firm grip on the market with its PlayStation series, with the first version becoming the most successful video game machine ever and the second version gaining a wide head start with its launch nearly a year ago.

Together, they represent a combined user base that is approaching the 100 million mark.

The new Sega titles for Xbox would include racing games such as "Sega GT 2" and adventure titles such as "Panzer Dragoon."

A team of Japanese software developers, led by a top game designer lured away from Sony, will remake U.S.-developed games and create its own software for worldwide release.

Sega has said it plans to supply games to Sony as well as to Nintendo Co. Ltd., which will launch a next-generation console this year to go head-to-head with the Xbox and PlayStation 2.

Sony president 'not worried'

But in an arena marked by fierce competition -- witness Sega's vanished hardware platform -- others reminded Microsoft that taking the trophy was not going to be easy.

"I'm not worried. Good luck," said Ken Kutaragi, president of Sony Computer Entertainment. Speaking a day earlier, he had stressed the difficulty of breaking into Japan, which he called "the center of gravity."

"It's good for Microsoft in that they've got a strong developer locked in for some titles," said Lisa Spicer, senior analyst at ING Barings. "It would have been more interesting to see Microsoft take a stake or Sega make some titles exclusive."

But Gates was optimistic at the Tokyo Game Show, where Microsoft made an aggressive pitch with banners and displays for the Xbox.

"People didn't know how committed we were for the Japanese market. We've got the Japanese market full-speed ahead on the Xbox," he said.

Industry experts were skeptical about the Xbox's chances in the country.

"I was underwhelmed," said independent software developer Jake Kazdal, adding that the console's bulk could prevent it from becoming popular. "It's too big for Japanese homes. That's a tea-table not a video machine."

Reuters contributed to this report.

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Microsoft Xbox
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