Microsoft expects Xbox 360 to officially surpass the original Xbox at the end of November, with a projected 25 million unit global installed base.

One reason that Microsoft has been able to reach that milestone was a sharper focus on the European market. While North America and the U.K. were particularly receptive of the original Xbox, Microsoft has had its work cut out in Japan and the rest of Europe, where stiff competition from the more established PlayStation and Nintendo brands pose a challenge.

But improved marketing, a price cut and a solid software lineup in Europe (dubbed by Microsoft as this generation's "battleground") has helped the company attract a broader audience who wasn't necessarily receptive to the Xbox brand even a year-and-a-half ago.

We spoke with Chris Lewis, VP of the Interactive Entertainment Business for Microsoft EMEA about watching the competition, maintaining momentum and how Microsoft has adjusted its strategy from the original Xbox.

We saw that the 360 had broken 7 million in sales in Europe recently, but can you give a broad overview of Xbox 360's position, particularly against Sony and Nintendo?

We are very proud of the fact that we've reached and surpassed 7 million units. That actually happened ahead of when we expected it to happen. I think probably one of the biggest catalysts for that in the last three months is the price drop that we took back in mid-September. Since that time, we’ve seen up to a five-fold increase in sales velocity, which is fantastic. But overall, it’s not just about price. Clearly, we need a stronger alignment of great content and services. We unveiled the New Xbox Experience … plus a host of great games.

For us in EMEA [Europe, the Middle East and Africa], there's a been a considerable uptick in what we're spending in terms of media, almost effectively to launch levels again. We’ve seen this huge uptick in our velocity, which has taken us considerably ahead, certainly of PlayStation 3, right across the region. In some geographies, the U.K. specifically, we were almost three times Sony’s volume last week, for instance.

So it’s generally very good. We’re really happy with our performance. There's a lot more still to come, of course, so there's no complacency, but it's great to be at this course and speed.

It’s interesting to see the Xbox doing so well in Europe, considering the PlayStation brand has been such a tough competitor in that region. What’s the difference between this generation and last generation that has helped Xbox break through some of these tougher markets?

I would agree that we would have historically more sporadic success than we would have liked. Certainly we weren't satisfied with that performance. We've always done very well in markets like the U.K. and the Nordic countries. Northern Europe has always done particularly well for us. We started there with the first version.

I think the [bigger] gaming appetite, the stronger focus on more mature content at launch, higher levels of disposable income, etc., all of those factors played very well to our early successes in the U.K. and Northern Europe.

To your point, where we have been weaker up until the last 18 months or so has been Mediterranean Continental Europe. We have different tastes in those markets. There’s a much more casual gaming taste, far higher levels of price sensitivity, and if I’m being honest, we’ve had to work harder at locally relevant and impactful marketing to really break through in those markets by using local iconic characters and recognizing the textured tastes around the region. It’s something we’ve gotten consistently better at in recent years.

Price isn’t everything, but certainly when you get to the equivalent of €179 or £129 here in the U.K., you then open yourself up to a much broader set of consumers. At the same time we have a wide spectrum of more family- and casually-orientated content, like Lips.

As for Nintendo and the Wii, from the start, they aimed at the mass market. Typically, in previous generations, we’ve seen console makers target the hardcore initially, then slowly move into the mass market phase of the strategy, as Microsoft is doing now. But do you think in Microsoft’s next generation, would it make more sense to tackle that mass market right off the bat instead of adopting the typical hardcore to casual trickle-down strategy?

You’re right that the approach and strategy right from the outset was to appeal to the more mature, harder-core component first-off. Certainly that’s a strategy that’s unfolded very well for us. We’ll remain committed to that community. We’ll continue to bring content like Halo and Gears of War. Those kinds of products play superbly well and they’re incredibly successful.
   
I think Nintendo and Microsoft have probably done most to open up a broader spectrum of people to gaming. From our point of view, it’s about Xbox Live, about having online right at the center of the architecture. Xbox all along has been about connected-ness. … That to me is really key in terms of the future.

Nintendo occupies a different space to us in that regard as well, in that [the Wii] isn’t an online connected platform [perhaps by Microsoft's definition?--ed.], it isn’t high definition, it doesn’t offer the scalability we offer in the SKU lineup and the storage ability. … I certainly think we do have an appetite for getting into those broad family genres, and that part of the strategy will continue to be so, but I think we clearly want to appeal to all tastes. Our aspiration is to win overall, and to do that we need to continue to bring content to all the different genres in the market, with Xbox Live at the heart of that.

As for the competition with PlayStation, Microsoft has dropped the price, and in a sense, the ball is in Sony’s court to respond, or counter-attack. Maybe it’ll be with a price cut. Their big first-party games are picking up and, eventually, there’s PlayStation Home. What does happen when Sony starts truly leveraging their brand in Europe with more features, more games, and a lower price? It's still a year-younger system. What’s Microsoft doing to stay ahead of the curve?

Well, there are a couple of things I’d say. One is that I’d certainly not want to trade places. I think we are in a very strong position, not only as we remain ahead of them overall in EMEA, but at and through Christmas we’ll have extended that lead for a number of reasons. [Aside from a price drop and high-profile software], there’s a whole lot more to come, as you’d expect.

And as much as I’d like to say, “Oh hey, we don’t look at the competition, we’re fixated on what we’re doing,” that would not be true. I’m not complacent about competition. I think in many ways, the quality of the competition is what keeps pushing the quality bar up, generally. We’re mindful of what’s happening, but we march to our own rhythm. We’ve always had the strategy to bring our price point down the way that we have, and we’ll continue to operate that way. They’ll have different things coming during the Christmas, as indeed will we. I’m very confident, however, that we have a much broader spectrum of games and experiences.

Fundamentally, I’m not concerned, because I know we have got a lot more still to come.

Just how long will Microsoft stay committed to this generation? We’ve heard the next generation may arrive in 2010 or 2012, we’ve got one guy that says the next generation of consoles won’t even come. What’s Microsoft’s strategy; making this generation as long as humanly possible?

Well no. If you saw what we did last time around with the original Xbox, we just kept very tuned in to what the customer wanted, and I think there was clearly an appetite for high definition. And the next generation was very much due. We felt that would be the opportunity to launch when [Xbox 360] did.

I think this generation will be longer, because there is so much scalability. When you look at NXE, that is a complete revision of the interface and the look and feel and every aspect of the system. That’s not predicated by new hardware. We have fundamentally done that through software and services. So if you think of that scalability and the opportunity to enhance and develop what we do with this platform, then I think it’s very, very possible--and indeed appropriate--that this generation will be longer. But we’re not specific about when that will happen, and we don’t have a particular timeline that we share right now. But as I said, there’s a lot more still to come.