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Wednesday, May 22, 2013

New Xbox Faces Wider Range of Competition

Next Xbox Will Face New Array of Rivals

REDMOND, Wash. - Microsoft is betting it has a new way to win the wallets of consumers.

Don Mattrick, head of Microsoft's interactive entertainment business, said the console would interact with mobile devices.

Microsoft Unveils New Xbox One Close Video See More Videos '

Microsoft's new game console, shown to the press Tuesday.

The company on Tuesday introduced the new version of its Xbox video game console. The Xbox has been one of Microsoft's few undeniable consumer hits of the last decade, a product that was not just a credible entry into the games business but also a sign of the innovation possible at a company that is rarely seen as an inventive thinker.

“I think of Xbox as the accidental success out of Microsoft,” said James McQuivey, an analyst at Forrester Research, who added that the connection Microsoft has formed with the players of its current Xbox is “much deeper than any relationship Microsoft has ever achieved before.”

The new console, the Xbox One, will enter a market very different from the one its predecessor, the Xbox 360, entered nearly eight years ago, when there was no iPad, smartphones had keyboards and mobile gaming devices were primitive at best.

Today, video games can be played almost anywhere, on any device, with the biggest possible audience of online friends and without the aid of a costly gaming console.

The last year or two has been bumpy for Microsoft's consumer efforts. The Windows 8 operating system software and the Surface tablet-computing devices got a tepid reception from the public when they went on sale last fall.

The company's mobile phone efforts have been largely ignored. And even Bing, Microsoft's Internet search engine, has failed to close a wide gap with Google, the market leader.

Microsoft, though, could see better results with the Xbox. With it, it hopes it can reassert the living room as the place where people can still get the best gaming experience, complete with eye-popping graphics and innovative methods for controlling games. It is also a place where Microsoft's technology can be at the center of a home entertainment system and the funnel through which people gain access to online video.

Microsoft has sold more than 76 million of the device's current incarnation, the Xbox 360 worldwide, compared with almost 100 million Wii consoles from Nintendo and more than 70 million PlayStation 3s from Sony.

The company also controls what may be the most valuable asset in console gaming, Xbox Live, a subscription-based online service with 48 million members who use it to play games against one another and watch movies.

“You can do a lot of things on the phone and a lot of things on tablets,” said John Taylor, an analyst at Arcadia Investment. But, he said, “you can't do the same kinds of things on those devices” that you can on a television screen.

Microsoft plans to develop its own original, live-action television series, which will be accessible through the Xbox. The series will be made in partnership with the director Steven Spielberg and will be based on the popular Halo video game franchise.

The company is also working with the National Football League to develop an app for Xbox that lets players interact with their fantasy football teams while watching a live game.

In an interview, Don A. Mattrick, the president of Microsoft's interactive entertainment business, said that he recognized the growing appeal of mobile devices for gaming and that Microsoft would aggressively tie smartphones and tablets into the experience of using its console. He became most animated when talking about the possibilities of the new Xbox for providers of video programming.

“We're going to the take the form from a one-way experience pushed through a straw to where you can communicate back and make it interactive,” Mr. Mattrick said.

Even if it is a wild success, the new Xbox is likely to have a bigger impact on consumer perception than it will on Microsoft's overall sales. The Xbox remains a small slice of the company's business, which is still dominated by sales of Windows, Office and other software. The company's games division represented only 4 percent of its operating profit.

At an event in a carnival tent on its corporate campus, Microsoft did not say how much the new system would cost or how publishing partners would charge for games, which typically start at around $60 for high-end game consoles.

A major feature of the new Xbox, which is expected to hit store shelves in time for the holiday season, will be a new generation of Kinect, the camera-based motion-control sensor introduced several years ago as an Xbox 360 accessory. The new Kinect will come with every Xbox One.

Traditional retail sales of games have come under pressure in recent years as mobile devices like the iPhone and iPad have invaded their turf with free and low-cost games. While many gamers dismiss those offerings as inferior to console games, the games have nevertheless tapped into a huge audience of players who may never have played on an Xbox or Sony's PlayStation.

The games business could use a jolt. Total United States retail sales of game hardware and software fell 25 percent to $495.2 million in April from $657.5 million a year earlier, according to estimates by NPD Group, a research firm. That figure does not include the sale of downloadable content over the Internet.

Alex St. John, an entrepreneur who worked on Microsoft's pre-Xbox game efforts, says he is pessimistic about prospects for gaming consoles.

“They're coming out with the latest and greatest stone tool,” Mr. St. John said. “The new console that trumps the old console is called the Apple iPad. This generation of kids loves mobile games.”

A version of this article appeared in print on May 22, 2013, on page B1 of the New York edition with the headline: Next Xbox Will Face New Array Of Rivals.