A report published by market analyst DFC Intelligence is questioning Microsoft's strategy with the Xbox 360 Elite, suggesting the company is following the same path that led to the decline of both Atari and Nintendo as console manufacturers.
The author argues that the presence of another Xbox 360 variant on the market, not clearly differentiated from the others but named in a way that implies their inferiority, only serves to confuse and alienate the mass market. While the Xbox 360 Elite is aimed at the high-end console market, historical precedent indicates that companies who focus on hardcore gamers eventually end up with nothing but hardcore gamers, a demographic inadequate to sustain a successful console system over the long run.
Citing the case of Atari, who attempted to transition from the console market to personal computers and ultimately collapsed in both, the author suggests that Microsoft's attempts to move into the high-end video playback field are also ill-conceived. "The Xbox 360 Elite seems like Microsoft's attempt to chase Sony for the high-end video-centric consumer," he writes. "However, this is a power race that Microsoft simply can't win. The Elite targets a very niche, possibly imaginary, consumer that wants a bleeding edge high-definition system but wants to cut corners when it comes to video playback by using a comparatively low-tech video game hardware system. Of course, the Elite doesn't include an HD-DVD player or even built-in Internet Wi-Fi, so, for high-definition video, the PlayStation 3 is both more powerful and more cost effective. The Elite kind of migrates the Xbox 360 towards a high-definition video recorder/player much the same way Atari tried to migrate its video game system into a PC over twenty years ago."
What the system lacks, however, is of less concern than the possibility it may alienate Microsoft's entire console audience. Nintendo dominates the low-priced console market, where small fluctuations in price point can make a difference to the potential purchaser; Sony is climbing back at the other end of the market, actually eliminating the low-end PlayStation 3 model, while continuing to support the PlayStation 2. Microsoft's inability to challenge them at either end of the market spectrum, according to the author, puts it at a very real risk of becoming the distant-third manufacturer.
The full text of the report can be found here.