Critical Intel

Critical Intel
Will The Xbox One Fail in Asia?

Robert Rath | 24 Apr 2014 16:01
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Though I live in Hong Kong, I could buy an Xbox One in about 30 minutes if I wanted to. There's a guy in the market who always has one in stock, imported from the United States in someone's suitcase. They go for $900 a pop, because the system doesn't release here until September. We'll see then if anyone wants to buy it.

Microsoft has their work cut out for them if they want to break into Asia. The company was slow to catch on, partially because they mostly run games that are more western than Sony, but also because the 360's hardware wasn't well designed for Asia. The region lock played a part - you're just as likely to buy the Korean or Singaporean version of a game as the Hong Kong version here - but there was eventually an upswing in select markets. The console has gone on to do gangbusters business in India and done well selling on the grey market in China - but the problem is that it's still selling well there, and may cannibalize Xbox One sales in cost-conscious markets.

As if Microsoft didn't have enough of an uphill battle, they're releasing a full year after the PS4, apparently because they have to retool their entire console for the Asian market. That sounds promising, right? Like they're making a machine that can compete here. But there are three main obstacles Microsoft has to overcome to break into Asia, and I'm not yet convinced they have the will to do it.

Because at first glance, the Xbox One looks like a machine designed by Americans for Americans - the perfect console to make entering the Asian market a complete nightmare.

Wrangling Content Partners Overseas

Making the Xbox One a media hub was a risky idea in the United States and Europe, but it's a disastrous choice for the Asian market. Implementing this idea in the west, while not easy to execute, is at least fairly straightforward in vision - sign Netflix, Hulu, ESPN, HBO Go and Amazon Instant to content deals as a base, and work outward to add mid-level players like WWE and MLB.com. Simple, right?

Now translate that to Asia, where trying to play a video on any these sites gives you the message: THIS CONTENT CANNOT BE VIEWED OUTSIDE THE US.

Even if you have a Netflix, Hulu or Amazon Instant account, there's no way to use those services with an IP address outside the United States. The problem is content licensing deals - basically, none of the content on these sites has been legally cleared for distribution in Asia, and doing so would mean inking a different deal for each country. Netflix has yet to expand in the region, and Hulu bailed out of Japan back in March, scuttling its global ambitions. Except for HBO Go Asia, none of these streaming video services exist here - and HBO Go Asia is currently only in Hong Kong and the Philippines. That means that if Microsoft wants to bring its media hub concept to Asia's doorstep, they'll have to wade into the continent's pool of scrappy, small-time video streaming services. One smart bet would be the Chinese site Viki, which has 22 million active monthly users and specializes in Asian TV shows, but past that there aren't many clear brand leaders. That's bound to make the leadership back in Redmond nervous, since no one wants to pick a losing horse.

The fact is, Microsoft is starting these media deals from scratch, and that's not easy, cheap or quick. This snarl of negotiations and international copyright law, more than anything, has been why the Xbox One's release is coming a full year later for Asia, giving Sony a head start it didn't need in the first place.

Microsoft could certainly turn this into an asset in the right circumstance - exclusively bringing Netflix to Asia, for example, would be a huge coup, as would forming partnerships with multiple local sites - but whether that will happen remains to be seen.

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