1. It' s unreliable. As Microsoft finally acknowledged this month, Xbox 360s fail more often than the company " is comfortable with." Some reports pin the " Red Ring of Death" failure rates as high as 33%. As a result, Microsoft increased the system' s warranty from one to three years at a sizable and appreciated expense, but the company' s unwillingness to fully disclose what' s causing the problem undermines the solution. Gamers don' t want to risk $300-400 at the chance to play games on 360, they want to make sure it can and will play games for years to come. Pile on the recent class-action lawsuits claiming that the machine scratches discs at random, and it becomes clear that the Xbox 360 isn' t nearly as dependable as it could be.
2. It only sells marginally better than Xbox. 
Launch-to-date sales of Xbox 360 in the US are only 200K units more than the original Xbox for the same period. That' s a bad thing. Granted, calling the first Xbox a failure would be unfair. But the machine was hardly a success as it lost billions of dollars throughout its life and only managed to sell 24 million units worldwide (14% market share) in comparison to PS2' s 115 million (67%) and GameCube' s meager 22 million (13%). Microsoft needs to sell more 360s than it did Xboxs -- many more -- if it wishes to secure a long-term place in the video game industry. The company' s unprecedented and steadfast reluctance to drop the 360' s $399 price despite Sony' s exorbitantly priced PS3 could come back to haunt them.
3. A recent string of bad publicity. Microsoft' s long-running denial of Xbox 360 failure rates mentioned above isn' t the only public relations gaffe experienced this year. Robbie Bach, parent president over the XBox division, dumped $6.2 million in Microsoft stock just weeks before the company announced the costly $1.15 billion warranty extension. It marked the first time Bach had traded stock in eight months at a non-scheduled time, according to filings. Microsoft called the incident " unrelated," but the appearance of an insider selling stock right before a huge loss just looks bad. In addition, having Xbox president Peter Moore leave right before its biggest and most important holiday season doesn' t look good either, whether voluntary or not.
4. It has limited appeal. You' d be hard pressed to find a better " hardcore gaming" console than the Xbox 360 at the moment. But how does Microsoft intend to infiltrate the living room (assuming that' s their ultimate desire) without first offering software for the entire family? You know, that whole casual-games thingy that seems to be doing so well right now (" Hi Wii!" ). While Xbox 360 delivers traditional games in spades, it needs to start doing something different in lieu of superfluous first-person shooters if it wishes to sell more. By all means, keep the good core games coming, but Microsoft needs to surprise gamers with something fresh while broadening the console' s appeal. The Viva Pinata series and Scene It! DVD games just aren' t enough.
5. It bleeds money. Microsoft has lost unthinkable amounts of money on its Xbox business. In the six short years it' s been in the industry, the company hasn' t made a dime. When adding the recently announced $1.9 billion losses incurred in fiscal 2007, total life-to-date Xbox losses are conservatively estimated at somewhere around $6 billion dollars. Despite Microsoft' s luxury in funding said losses with its monstrous war chest, the fears of investors are easily justified. But why should gamers care how much money is being spent so long as Microsoft keeps footing the bill? Because gamers should want team Xbox to stick around for the sake of competition and quality of play, not to mention long-term support. Every man has a breaking point, and anyone can pull a Sega and quit the hardware business -- even a rich kid with deep pockets.
6. It still doesn' t sell in Japan. Can a console achieve ubiquitous success without the support of the second largest video game market in the world, i.e. Japan? That' s the billion dollar question Microsoft is trying to answer while striving for moderate success in the country. Since first launching in December of 2005, however, Microsoft has sold a paltry 420,000 units in Japan -- hardly a dent, though not unexpected. And the allegation by some that the Japanese public don' t buy American products quickly loses merit when realizing that even the native PS3 struggles in sales. Microsoft doesn' t need to dominate Japan. It never did. But a larger variety of software, and smarter marketing efforts, targeted squarely at Japanese gamers would reinforce the company' s global efforts in the video game industry.
Looking ahead to fall of 2007, the Xbox 360 has the biggest games lineup in recent memory, a lineup that includes BioShock, Mass Effect, Madden 08, Assassin' s Creed, and more in addition to the hugely anticipated Halo 3. Master Chief' s last adventure could easily be the best-selling game of the year and shift hundreds of thousands of 360s in the process. If there' s one thing that sells consoles, it' s great games, and Xbox 360 has them. Sadly, Microsoft' s ongoing string of mishaps may keep them from truly ending the year (or the season for that matter) on a high note.
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