Earlier this month, the gaming goliath became embroiled in a public relations crisis, when its machines began experiencing catastrophic hardware failures across the globe. Although exact numbers of affected machines have not been disclosed, some estimates put the number at around 30 per cent — almost one in every three.
On the face of it, Microsoft responded quickly by announcing a US$1.15 billion bail-out package and an extended warranty deal for those affected by the crash, in conjunction with an open letter from the division’s global president, Robbie Bach.
But dig deeper, and it seems many believe the tech giant was lacking in both transparency and speed in responding to what should have been an open-and-shut PR case. Bloggers, once key allies of Xbox, had been making noise for some time, but Microsoft initially labelled them a vocal minority.
The second faux pas emerged as a general reluctance to reveal exactly how many consoles were affected, and exactly what the problems were in the first place.
Microsoft has since claimed it has patched the problem, but is anyone still listening?
The PR problems probably couldn’t have come at a worse time. The Nintendo Wii is rubbing its hands with glee as the latest figures show its new console is surging up the sales ladder. Sony meanwhile, has announced a round of price cuts for its PlayStation units.
Microsoft initially remained resolute that it would not cut costs, but it may have reconsidered its position, with recent reports suggesting price cuts are on the way. It’s been a difficult month for Microsoft and its Xbox, and it’s now incumbent on the company to restore consumers’ faith in the brand. However, experts wonder whether it might have alienated its online support group for good.
Fact Box...
May 2005: Microsoft unveils its much-hyped Xbox 360 on MTV.
January 2007: Microsoft chiefs downgrade Xbox 360 sales expectations to 12 million from previous forecasts of 13 million to 15 million units sold for the year to June.
July 2007: Microsoft reveals its US$1.15 billion rescue package to fix widespread hardware failures.
James Acheson-Gray, managing director, Grayling Asia-Pacific
Microsoft misunderstood the extent of the problem from the outset. It wrongly assumed that problems with the Xbox 360 could be confined to the video-game intelligentsia. Its second mistake was to aggravate the blogging community, by allegedly saying that the complaints were ‘the result of a few people on the internet making noise’.
One might have expected Microsoft to take this group more seriously. Having been dominant for so long in other sectors, did it neglect to cultivate relationships with potential ambassadors and supporters? As it stands, it still hasn’t explained where the problem lies — ‘general hardware failure’ and ‘environmental factors’ have been offered as reasons. Consumers may conclude that Microsoft doesn’t know what is going on and lose confidence in the brand, at least as a supplier of gaming devices. The door is open for further speculation as to the cause of the problem; clarity may have put a lid on it.
Finally, a talented team successfully brought the Xbox 360 to market a full year ahead of its competition. The Xbox team is bound to feel dejected, but it needs to still feel part of a division that knows what it is doing. Internal communication is important.
Jeff Ooi, business strategist and blogger, jeffooi.com
Déjà vu. It isn’t yet ‘game over’ for the gaming console unit at Microsoft, but the marketing department is losing sleep.
How can Microsoft announce its willingness to spend up to US$1.15 billion for repair bills just to fix the problem-laden Xbox 360 game consoles without telling the world exactly how many batches of shipped products were implicated, or the actual technical glitches behind them?
Microsoft came into the market one year earlier than its rivals. The positive side is it may lead the pack in ensuring the current generation of Xbox gains mainstream appeal with a nice headstart. But then, was it a rushed job in time-to-market that caused the marketing jinx?
The stakes are high. Microsoft has invested heavily to break into the $37.5 billion video-game industry. In May, Xbox 360 ranked second in the US with 155,000 units sold, trailing the 338,000 units of Nintendo’s Wii, a rival perceived to have less computing horsepower. The gap is formidable. Has it been a case of complacency left over from previous successes with older console models? While the marketing folks take time to figure a way out, the video-gaming crowd will flock to a rival brand in no time.
Even before Christmas.
