Microsoft's Xbox 360: Has Its Time Finally Arrived?

Momentum is now a friend to Microsoft, when it comes to the game console business. Finally.

Halo 3 has been like a magic elixir for Xbox 360, by some measures tripling console sales in the wake of the title's release, and for the first time, Microsoft beat sales of Nintendo's Wii during the month of September, selling an average of 105,600 units a week last month.

Combine that with ongoing concerns that the Wii will be in short supply once again this holiday shopping season and it would appear that Microsoft's beleaguered gaming unit (it's lost about $4 billion since the Xbox was first released six years ago) may finally be turning the corner.

Microsoft is turbo-charging its competition with Nintendo today by releasing a new version of Xbox, dubbed "Arcade," a direct swipe at the family friendly Wii, priced at $279, including five titles from Pac-Man to Uno.

At the same time, the company will make more than 100 family friendly TV episodes available on Xbox Live, including "Looney Tunes" and "Backyardigans" (a favorite in my household) thanks to new deals with Warner Bros. and Nickelodeon. (Still, since there's no hard drive in the new version, consumers will need to shell out extra bucks for additional storage if they want to load anything longer than a single, half-hour TV show. That's a bummer.)

In fact, in press materials released today, Microsoft takes the extra step in highlighting the number of game titles it has available, "including more than 200 rated E for Everyone or T for Teen."

Don't be fooled: this is a major swipe against Nintendo. Kind of like a boxer who's got an opponent on the ropes, staggering, and then winds up for the stiff right hook that hopefully ends the fight. Microsoft will need a big wind up. Nintendo has been doing remarkably well, but the ongoing supply issues could be the company's Achilles heal. Especially if impatient shoppers get tired of waiting and decide that Xbox gives them more capabilities and more options.

There's also been a lot of talk about Microsoft taking the Xbox into the brave new world of "onboard" HD, by including an HD-DVD player inside new versions of the Xbox. Sources inside the company were telling me just yesterday that an announcement could come as soon as the Consumer Electronics Show in January. Ken Birge, a spokesman for Microsoft, emailed me late yesterday with the company's official response: "Microsoft has no plans to integrate an HD DVD player into Xbox 360.

Offering the HD DVD player externally is the best way to give consumers the ultimate choice to create their own high definition experiences." I bounced that comment off the folks I originally spoke to and they're not buying it. Fine for now, one said, but watch what happens in the next few months. And so I will.

For now, the HD drama will take a back seat to the showdown between Microsoft and Nintendo. Xbox 360's time may have finally arrived.

Questions? Comments?