The Xbox was released in the United States in November 2001, followed by Japan (February 2002), Australia and Europe (both March 2002). This put it in direct competition with Sony’s PlayStation 2 and Nintendo’s Gamecube. The launch of the Xbox was the result of a longstanding plan to enter the highly lucrative video games market and challenge the dominance of Sony and its PlayStation platform.
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Microsoft decided to enter the market as it is highly lucrative and growing. The ever-evolving nature of the machines means that there are growth opportunities beyond games including the use of apps, payments related to online content and partnerships with television broadcasters.
The decision to become a games console manufacturer has paid dividends. The Xbox 360 has outsold Sony’s PlayStation 3 and Microsoft’s Entertainment & Devices division has become a major growth driver and a real profit center for the company. In 2011, this division generated revenues of $8,913 million and net income of $1,324 million.
Microsoft does face challenges. Nintendo is launching its new console, the Wii U, in 2012 and while the development of the console into an all-encompassing entertainment system increases its appeal, Microsoft must be careful that it strikes a balance between its primary function as a games console and multimedia applications.
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What is Microsoft's position in the games console market?
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