Microsoft Braces for a Blockbuster With Halo Reach

When “Halo: Reach” goes on sale at 12:01 am Tuesday morning, it won’t just be the biggest gaming event of the year to date. It will likely be the entertainment industry’s biggest moment of the year.

Halo Reach
Courtesy of Microsoft
Halo Reach

Microsoft is betting big on the latest installment of its flagship franchise, and it has every reason to do so. Life to date, the company has sold more than 34 million ‘Halo’ games – and each major new release has shattered any Day One sales records set by the film, music or gaming industries.

The installed base of Xbox 360s is now three times what it was when “Halo 3” hit shelves three years ago and anticipation is running high. More than 2.7 million people joined the “Halo: Reach” beta test in May.

“Reach” will go on sale in 25 countries at midnight with thousands of retailers—including GameStop and Best Buy —hosting midnight launch parties to let eager gamers get their hands on a copy. Microsoft also plans to take over Times Square with a party and concert celebrating the game.

The release is more than just an earnings boom for Microsoft, though. It’s also the best barometer so far this year for investors to gauge the overall health of the video game industry.

“Franchise games like ‘Halo’ and ‘Call of Duty’ are important to judge the health of the market,” says Colin Sebastian, an analyst with Lazard Capital Markets. “If ‘Halo’ comes in lower than expectations, there’s an assumption that there’s something wrong with the business.”

Strong sales, conversely, might buoy investor’s spirits but they could also have a negative impact on other publishers.

The phenomenal success of “Call of Duty: Modern Warfare 2” last year set industry records – but the game’s rich multiplayer components dampened spending on other titles. This year, “Halo: Reach” could have the same impact.

“Titles that compete directly with ‘Reach’ are going to be affected,” says Billy Pidgeon senior analyst with M2 Research. “From what I’ve seen of the game, it’s going to keep people playing online for quite some time. It will create a sizable vacuum in the multiplayer space.”

That could make it interesting when “Call of Duty: Black Ops” hits stores in November – and several analysts worry that Electronic Arts' “Medal of Honor”— which is already the source of some controversy— could be a victim of the blast effect of both “Reach” and “Black Ops”.

Tuesday’s release of “Halo: Reach” is more than just the biggest game of the year for the Xbox 360, though, it’s a junction point for Microsoft. “Reach” is the last “Halo” game that will be developed by Bungie Studios, the company that created the franchise and has been responsible for virtually every installment to date.

Bungie, once a Microsoft subsidiary, separated from Microsoft two years ago in an amicable parting. “Reach” is the second “Halo” game the company has made since then, but it’s now ready to explore other franchises. In April, the company announced a 10-year publishing deal with Activision ( for its next game series. The title, which has not been announced, is not expected to hit shelves until 2012 at least.

Microsoft owns “Halo,” though, and will continue to make games built around it. But having a new developer oversee the games represents a risk. Bungie is widely considered one of the best studios in industry and has set a high bar with “Halo”. Living up to those expectations will be difficult, no matter how talented the next team might be.

“It could be a great opportunity for a new group or existing group to step up, but it’s going to be pretty scary,” says Pidgeon. “To me, [‘Reach’ is] the pinnacle of what Bungie wanted to have. I feel like they’re going out on a high note and they’ve written the last chapter here. … There’s not going to be room for a hiccup in the next game. It’s got to deliver. People have really high expectations for ‘Halo’.”