Here Comes Halo 3

It is, perhaps, the only truly popular thing Microsoft has ever done in the entertainment space: It's Halo video game series is a blockbuster success, generating over 11 million units in sales and billions in revenues. And this week's release of Halo 3, the third and final installment of the Halo trilogy, and a game that is designed exclusively for Microsoft's beleaguered Xbox 360 game console, has a lot riding on its release: The game is expected to kick-start sales of the 360 and beat the $125 million single day sales record set by its predecessor, Halo 2.

That Halo 3 will accomplish these goals seems to be a given. Though video games are still largely the province of a niche market--young males who can purchase these products only at retail--it is a lucrative market, and video game profits, on a yearly basis, rank up there with the best Hollywood or any other entertainment has to offer. There have been several high profile video game success stories, from the never-ending "Mario" saga on Nintendo's various machines to more modern and gritty games such as the "Grand Theft Auto" from the past several years. The Halo series is right up there with them, and thanks to their near-exclusivity to Microsoft's game platforms, they've been a vital economic shot in the arm for the software giant's struggling entertainment division. (Which also makes the Zune, go figure.)

How big is Halo 3? Within days of being able to pre-order the game back in July, gamers had preordered a staggering 1 million copies of the title, a record. Analysts expect the game to generate $150 million in sales in its first 24 hours of availability, a figure that matches the opening three-day total for "Spider Man 3," this year's most popular movie. Consumers are expected to purchase about 2 million new Xbox 360 consoles solely to play this one game. It is, in short, the only game that truly matters to the 360, and the title that will most obviously drive sales of the console going forward.

It couldn't come soon enough. After out-selling its Nintendo Wii and Sony PlayStation 3 (PS3) competition in dramatic fashion during the 2006 holiday season, the 360 has stumbled badly. Sales plummeted in 2007, while sales of the Wii, in particular, soared, and as I write this, the Wii has actually outsold the 360 worldwide, despite being on the market for a year less. Even the moribund PS3 is showing signs of catching up the 360.

Part of the problem for Microsoft is a growing realization that the 360 is simply not reliable. The company took a record-setting $1 billion charge this year to address widespread system failures, and while the company has never owned up to the magnitude of the problems, it's now clear that between one-third and one-half of all 360s ever made have failed. (Two of the three Xbox 360s I've personally owned have failed.) Microsoft hopes that by covering any failed 360s without question, it will regain the faith of consumers, but it's unclear whether even the success of Halo 3 will make that possible. By mid-2007, the company had sold just 11 million Xbox 360 consoles worldwide, far fewer than the 15 million it had previously projected.

This week, Microsoft will finally ship Halo 3 into this uncertain world. Reviews, thus far, have been overwhelmingly positive, though I will withhold my own review until I've completed the single player mission at least once. But Microsoft clearly has a hit on its hands. How big of a hit, and how much it will mean to the Xbox 360 remains to be seen.

TAGS: Windows 8
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