Microsoft targets gamers with HD DVD promos

By Susanne Ault -- Video Business, 11/2/2007

NOV. 2 | Despite selling 210,000 of its Xbox 360 HD DVD add-ons through September—more than any individual Blu-ray standalone player—Microsoft’s strategy is to market the unit as a niche accessory.

This stands in contrast to Sony’s PlayStation 3 strategy, in which Blu-ray movie playback is an integral component in the company’s play for the mass market.

In fact, the attach rate of the HD DVD drive to the 6.8 million Xbox 360s in the U.S. is just 3%.

Microsoft is expressly targeting the drive to gamers through a variety of narrowly focused promotional bundling programs at Best Buy, Wal-Mart, Amazon.com and others. “You need to get the Xbox system, and software, and then the drive, and titles. It’s not a mass-market proposition,” said director of marketing Albert Penello. “It’s a multi-hundred dollar proposition.”

Penello notes that because the 360 HD DVD drive is meant as an accessory for the gamer, and not a primary film-viewing unit, Microsoft has developed selective campaigns to promote the add-on.

In mid-October, Microsoft and promotional partner Universal Studios Home Entertainment were bundling a free first-season Heroes HD DVD within boxes of the 360 HD DVD drive at Best Buy. Universal and Microsoft also teamed up in October on an Amazon.com Xbox sweepstakes, in which people could win a Heroes-themed Xbox 360 console, Heroes HD DVD and HD DVD drive.

Also, as a subtle suggestion, Microsoft bundled the 300 HD DVD and DVD combo disc with Xbox 360 systems. Xbox users would need to own or purchase the add-on in order to playback the HD DVD side of the disc.

The Heroes bundles were offered the same week that Paramount Home Entertainment launched Transformers exclusively on HD DVD, considered the best-selling title in this format to date. Heroes also is one of the stronger HD DVD titles.

“We wanted to have a killer promotion at the time of the movie coming out,” said Penello. “We are trying to take advantage of the content that is coming out for HD DVD. You know that the [Transformers] movie hits to the core of your consumer that is interested in games and high-def movies.”

He promised upcoming 360 HD DVD drive promotional bundling around upcoming A-list HD DVD releases Shrek the Third and The Bourne Ultimatum.

“Every time we do one of these things, we do see a bump,” Penello said. “The Heroes [bundle] exceeded expectations. People are responding to these types of things.”