Microsoft to introduce Xbox One to China

Here's an Xbox One achievement: Microsoft plans to sell the video game system in China.

The Xbox One will be the first video game system to be introduced into China in more than a decade. A ban has kept Western console systems from being sold in the country. Microsoft plans to begin offering the system in China in September.

"Launching Xbox One in China is a significant milestone for us and for the industry, and it's a step forward in our vision to deliver the best games and entertainment experiences to more fans around the world," said Yusuf Mehdi, the corporate vice president of marketing and strategy for Microsoft's devices and studios, in a post on news.xbox.com.

Microsoft formed E-Home Entertainment, a strategic joint venture with Internet TV company BesTV, last year after China created the Shanghai Free Trade Zone. Among the products that can be sold in China through the zone are, for the first time, video game and entertainment devices.

The Xbox One will be the first game console to provide streaming Net TV services in China, said E-Home Entertainment Development Co. Ltd. chairman Dazhong Zhang in a statement released by Microsoft. "The launch of Xbox is a milestone for our company in the family entertainment market and will create profit growth opportunities,' he said in a statement. "Furthermore, we will continue our investment and support into research and development for gaming content together with Microsoft."

Microsoft has sold more than five million Xbox One consoles to retailers in 13 countries so far — priced at $500 in the U.S. It expects to have the console available in 42 markets globally by launch in China.

Microsoft's move into China is not only monumental, but good business, says Wedbush Securities analyst Michael Pachter. "There are 100 million 'middle class' households in China (and) 700 million play games on Tencent's QQ network, so there are likely a lot of people who like games and can afford a console," he says.

Since so many gamers play on PCs, it's likely that "about 10% or so of the middle class households will buy one," Pachter says. "However, also keep in mind that Apple is marketing very expensive iPhones and iPads there, and they sell well, so likely the Xbox One will as well."

Chinese gamers spent $12.3 billion on games in 2013 and the overwhelming majority (89%) on PCs, according to Piers Harding-Rolls of research firm IHS Technology. The remaining 11% in spending is on mobile and tablet devices.

"Aside from pricing, the main challenge remains educating a gaming audience that has no entrenched understanding of consoles, especially now that smartphone and tablet gaming is growing so rapidly and driving a local industry shift away from PC games to apps," he says.

Following Apple's decision to begin selling devices in China, Microsoft is "the second big flag planted from a consumer electronics standpoint," says Digital World Research's P.J. McNealy.

With China's emergence as the largest market for TV sales, "the timing is perfect (for Microsoft) because you can ride the coattails of that by selling them a console," he says.

He expects Sony to make the move, too, eventually. "The bottom line is, if you are selling a console on a global basis, you have to have China on your roadmap," McNealy says.

What's not known at this point is how much current Xbox One content will be — or need to be — localized to meet Chinese censors. A new model might be needed to appeal to Chinese consumers and to avoid rampant piracy of intellectual property that occurs in China, Pachter says.

"I think that Microsoft will come up with a business model, perhaps a game like Call of Duty, that permits it to exploit the market," he says. "We'll see. My guess is that this is a multi-year effort, and we won't see meaningful profit contribution initially."