NEWS - Monday, October 21, 2002

Microsoft chief defends Xbox

Microsoft would be forced to reconsider selling the Xbox video game system in Australia, or seek changes to the law, following the acquittal in July of a Sydney man alleged to have sold chips that modify a Sony PlayStation 2 to play imported games, Microsoft chief executive Steve Ballmer said yesterday. After the launch of a Telstra mobile computing device, Mr Ballmer said the decision affected Xbox’s business model, which relies on subsidising the hardware console in return for a royalty on every game sold. Microsoft has slashed the retail price of an Xbox from $649 to $399, which resulted in increased hardware sales and more game software sold. Although it is still the underdog against the entrenched might of Sony’s PlayStation 2, the price cut is having the desired effect, with a 12 per cent increase in Xbox software sales from August to September, according to market researcher Inform. But Sony, which saw sales of PlayStation 2 titles decline 19 per cent in the same period, still dominates, selling 28 per cent of all titles, against Xbox’s 7 per cent. "Given the way the economic model works, and that is a subsidy followed, essentially, by fees for every piece of software sold, our licence framework has to do that," Mr Ballmer said. "If there are aspects that are not allowed, it would encourage us to require a change in the legal framework. Otherwise, it wouldn’t make economic sense."


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