Halo’s ‘Reach’ Expands, Microsoft Preps for A Big Holiday

If there’s one truth in the videogame world, it’s this: Never bet against the sales success of a new “Halo” or “Grand Theft Auto”. But as Microsoft prepares to launch “Halo: Reach” this fall, early evidence indicates people may not be betting heavily enough.

Halo Reach
Source: Microsoft
Halo Reach

For the past three weeks, Microsoft has given fans of the game a taste of what the series’ next installment will be like. It turns out that player appetites were even more voracious than expected.

2.7 million people logged in to play the public beta test of the multiplayer component of “Halo: Reach.” That’s more than three times as many people who did so with the beta for “Halo 3”.

Even taking in the larger installed base of Xbox 360 owners, it’s a number that surprised industry observers — and indicates Microsoft could have a potential monster hit on its hands.

“It’s certainly, at this point, feeling like it’s slightly stronger than we thought at the beginning of the year,” says Arvind Bhati, managing director Sterne Agee. “Halo has got a big audience – and as long as the quality is there, it’s going to get that kind of response. It’s a game that sells systems.”

“Halo 3,” when it was released in 2007, broke sales records — taking in more than $300 million in the first week. Ultimately, it sold nearly 6 million copies. (Analysts say sales of 7-8 million copies for “Halo: Reach” — a prequel to the series, which does not feature the game’s primary Master Chief hero — would be notable.)

The potential for higher than anticipated “Halo” sales combined with growing curiosity surrounding the motion controller currently codenamed Project Natal could boost expectations for Microsoft this holiday season. Given that Robbie Bach, president of Microsoft’s entertainment devices division, in January said he expects 2010 to be the Xbox’s “biggest year ever,” that’s notable. (Related: Shake-up among Microsoft's consumer executives).

Analysts say the timing of “Halo: Reach,” which hits stores Sept. 14 and will be the franchise’s last game developed by creator Bungie Studios, couldn’t be much better.

“Halo is going to catch people exactly when they’re getting bored with ‘Call of Duty: [Modern Warfare 2],” says Michael Pachter, managing director of equity research at Wedbush Securities.

That could impact Activision, which is betting big on the “CoD” franchise again this year. Beyond a new title (whose sales will be meticulously examined, given the developer strifesurrounding the franchise), the company is also releasing downloadable content for “Modern Warfare 2”.

Similarly, Electronic Arts could be caught in the blast zone, with “Crysis 2” due this winter and “Dead Space 2” slated to release during the first calendar quarter of 2011. Expectations on both titles are significantly lower than a “Halo” or “Call of Duty” game, but EA, over the past few years, has been stung by a series of titles that have posted disappointing sales. It can scarcely afford more.

If “Halo: Reach” is meant to court the hardcore audience, Natal is squarely targeted on the casual gamer — and is the company’s best hope of dramatically expanding its installed base this year. (The majority of “Halo” players are assumed to already own an Xbox 360, since the system has already hosted two installments.)

Analysts are mixed on whether Microsoft will offer a price cut this year, but Pachter believes the company will bundle Project Natal with a slimmed down Xbox 360 and maintain the current $300 price tag.

Sony, he predicts, will rely on standalone sales of its own motion control device, dubbed “Move,” which could give Microsoft a lead in the battle between the two. Globally, Sony’s hardware sales have been creeping higher since holiday 2009, although the Xbox 360 still holds a notable lead over the PlayStation 3 in the U.S.

Ultimately, though, he thinks Nintendo will continue to dominate the industry, despite the new controllers and big releases.

“Nintendo’s going to keep outselling the other two,” he says. “If I’m right, Nintendo’s going to have a $100 price advantage, and that’s just huge.”