"With its new Xbox 360 game console, Microsoft is hoping to change the face of digital entertainment.

Introduced November 22 in the United States, the new unit is the first of a series of next-generation gaming consoles to hit retail shelves, and quickly sold out before the Thanksgiving holiday sales rush even started. In some places, overzealous fans lining up outside retailers the night before prompted a police presence to maintain order.

The much-anticipated Xbox 360 strives to take gaming to a new level with a unique mix of style, connectivity and services. With it, Microsoft hopes to revolutionize the home entertainment environment in much the same way that Apple Computer revolutionized portable music with the iPod.

The Xbox 360 is at its core a videogame system and initially is being marketed as such to the hardcore gamer to drive early sales. Exact Thanksgiving-weekend sales figures were not available at press time, but analysts say all of the estimated 400,000 consoles that made it to U.S. stores by the launch date have been sold. A total of 1 million units are expected to ship in the United States by the end of the year. The console bows December 2 in Europe and December 10 in Japan.

MUSIC-BIZ OPPORTUNITIES

But focusing on gamers is just a beachhead strategy. Already Microsoft is positioning the system as a hub for digital entertainment discovery and acquisition, opening new doors to a music industry hungry for additional channels of promotion and sales.

With this new platform, games could evolve from a one-way medium for previewing and promoting music to a multimedia bazaar where music and other content can be bought and sold -- even updated -- interactively. But just like the Internet before it, these new doors open to a maze of questions about business models and digital rights management.

That videogames are an important marketing channel for music is nothing new. According to the NPD Group, 20 percent of consumers who buy videogames also buy the music featured in the game.

"If you want to reach this consumer, consider videogames as one way to do it," says Anita Frazier, an NPD Group analyst. "It's a terrific vehicle."

The new Xbox aims to make this vehicle even more effective.

"We're trying to build the right entertainment platform for the digital generation," says David Hufford, group director of Xbox 360 platform and games for Microsoft. "The iPod has shown the way that when you bring together the hardware, the software and the service, you can really capture the imagination of people in new, profound ways."

Xbox 360 owners can use the console to stream music from any Windows XP-powered PC, play or rip CDs directly into its hard drive and connect with an iPod or other digital music device -- essentially unifying the home theater experience." [more]