Microsoft optimistic on XBox sales

NEW YORK (Reuters) - Microsoft Corp (MSFT.O) is cautiously optimistic about holiday sales of its XBox 360 game console, but even flat sales in 2009 could be remarkable for the video game industry, a senior executive said on Wednesday.

The gaming industry is on track to grow 20 percent in 2008, said Shane Kim, vice president of strategy and business development for Microsoft's video game business. But, he added, "people are not projecting that kind of growth" for 2009.

"We're still cautiously optimistic as we enter full bore into the holiday season," Kim told the Reuters Media Summit.

Microsoft reported a record-breaking 25 percent jump in sales of the XBox 360 on Black Friday weekend after the U.S. Thanksgiving day, which marks the start of the holiday shopping season.

"Hopefully that momentum will continue," he said, adding that the XBox 360 also outsold Sony Corp's (6758.T) Playstation 3 by three units to one.

But Kim noted that while the gaming industry has traditionally fared well in economic downturns as people turn to stay-at-home entertainment, it was difficult to predict what would happen this recession.

"Who knows, maybe flat performance will be considered a remarkable achievement," Kim said, declining to give a projection for 2009 growth.

Kim said his unit is planning for "tough times" and assessing where costs could be saved: "A big objective for us is to deliver most entertainment value for the dollar."

"While (consumers) may cut back on large purchases like automobiles or appliances, they're still looking for entertainment," said the executive, who focuses on strategic planning and partnerships for Microsoft's interactive entertainment business unit.

He said Microsoft's interactive business unit will pursue more partnerships, such as the recent tie-up with Netflix Inc (NFLX.O), and that it remains open to acquiring competitors to expand its business.

Kim also expects consolidation to continue among video game publishers, especially smaller companies that are looking to develop hit games even as they cut costs.

"There are a number of mid-tier publishers behind the Electronic Arts (ERTS.O) and Ubisofts (UBIP.PA) and Activisions (ATVI.O) of the world who are struggling," he said.

Kim is seeing somewhat of a return to compelling video games developed by smaller publishers, which could reduce the industry's dependence on sequels of blockbuster hits.

Naysayers believe expensive gaming consoles like XBox will be rendered obsolete as gamers move to the Web.

But Kim said, "This console generation will have a long life cycle. I think it's way premature to say there will never be another XBox." He added, however, that it takes a company significant investment to make a new box.

"It's a very risky proposition to do something like that, let alone an expensive one," he said.

(For summit blog: summitnotebook.reuters.com/)

(Editing by Tiffany Wu and Derek Caney)