Xbox 360
Development
Known during development as Xenon, Xbox 2, Xbox Next or NextBox, the Xbox 360 was conceived in early 2003. In February of 2003, planning for the Xenon software platform began, and was headed by Microsoft VP J Allard. That month, Microsoft held an event for 400 developers in Bellevue, Washington, to recruit support for the system. Also that month, Peter Moore, former president of Sega of America, joined Microsoft. On August 12, 2003, ATI signed on to produce the graphic processing unit for the new console, a deal which was publicly announced two days later. The following month, IBM signed on to develop the triple-core CPU for the console. Before the launch of the Xbox 360, several alpha development kits were spotted using Apple's PowerMac G5 hardware. Games running on these were reported to be using 25-30% of the actual system's power. Microsoft chose to use these systems for their PowerPC architecture, which is similar to that of the Xenon CPU used in the system. On October 24, 2005, Microsoft shut down Xbox Live for a day to upgrade it for the Xbox 360.
Launch
The promotional campaign for Xbox 360 began on March 14, 2005, with the opening of an alternate reality game called OurColony. Throughout March and April it offered challenges to its community, rewarding solutions with cropped pictures of the console and game screenshots. The end of OurColony came on May 12, 2005, with the release of a video where J Allard of Microsoft showed off the Xbox 360 console. The official unveiling of the Xbox 360 occurred the same day on MTV in a program called MTV Presents: The Next Generation Xbox Revealed. In October of 2005, a similar alternate reality game was created, Hex168, to promote the system before launch.
The Xbox 360 was released on November 22, 2005, in the United States and Canada; December 2, 2005, in Europe and December 10, 2005, in Japan. It was later launched in Mexico, Colombia, South Korea, Hong Kong, Singapore, Taiwan, Australia, New Zealand, South Africa, Chile, India, Brazil, Poland, and Czech Republic. Microsoft has additionally announced official launches in: Hungary, Slovakia, and the Philippines. In its first year on the market, the system launched in 36 countries, more countries than any console has launched in a single year. Due to its early launch, the Xbox 360 has a one-year lead on both of its competitors, Sony's PlayStation 3 and Nintendo's Wii.
Retail configurations
Microsoft's retail strategy involves three different configurations of the Xbox 360: the Xbox 360 SKU, frequently referred to as the Xbox 360 Premium Package, the Xbox 360 Elite, and an Xbox 360 Core System SKU. At launch, the Xbox 360 was priced at $399 and the Core System was priced at US$299.
| Xbox 360 | Elite | Premium System | Core System |
|---|---|---|---|
| Exterior finish | Matte black + Chrome | Matte white + Chrome | Matte white |
| Detachable hard drive | 120 GB | 20 GB | None |
| Gamepad | Wireless, 2.4 GHz | Wireless, 2.4 GHz | Wired, 3 m breakaway cord |
| Ethernet cable | Yes | Yes | No |
| Xbox Live headset | Yes | Yes, excluding Oceania, Mexico | No |
| Xbox Media Remote | No | Launch, Oceania, Mexico | No |
| HDMI Out/Cable | Yes | No | No |
| Component cables | Yes | Yes | No |
| Composite cables | Yes | Yes | Yes |
| Xbox Live Silver | Yes | Yes | Yes |
| Month of Xbox Live Gold | Yes | Yes | No |
The Core System was not originally available in Japan, but was released on November 2, 2006. In Australia and New Zealand and Mexico a Media Remote was included as a substitution for the Xbox Live headset in the Xbox 360 Package. The same remote was included for a limited time at launch in the premium bundle. The three configurations contain different video cables; the core system comes with composite cables, the premium includes a hybrid composite and component cable with optional optical out, while the elite includes the aforementioned cables with the addition of an HDMI cable. All three configurations include one year warranties, although consoles purchased in Canada and the United States before December 21, 2006 originally had 90 day warranties; later extended to one year.
BusinessWeek magazine compiled a report that estimates the total cost of components in the premium bundle at US$525 at launch, excluding manufacturing costs, meaning that Microsoft initially lost money on every Xbox 360 system sold. The strategy of selling a console at a loss or near-loss is common in the console games industry, as console makers expect to make up the loss through game licensing. Since Microsoft owns the intellectual property rights to the hardware used in the Xbox 360, they can easily switch to new fabrication processes or change suppliers in the future to reduce costs. Thanks to streamlined processes and ample component supplies, a report from iSuppli released on November 16, 2006, estimates the total cost of components in the premium bundle is US$323.30. This flexibility stands in contrast to the situation Microsoft faced with the original Xbox, where manufacturing costs were never reduced below the break-even point. Microsoft is predicting that with the Xbox 360, a greater market share, yearly revenue through their Xbox Live service, and falling hardware costs will eventually make system sales profitable.