The big game

Master Chief has already saved the universe a couple of times. Maybe now he can bail out Microsoft Corp's flailing videogame business.

The futuristic super-soldier is the star of Halo 3, Microsoft's new game for its Xbox 360 console. The game arrives on retail shelves tomorrow, and industry-watchers expect that the third in this series of videogames will be a monster hit.

"I think it's probably going to sell more than the first two did," said Matt Rosoff, analyst at Directions on Microsoft, a company in Kirkland, Wash., that tracks Microsoft's various businesses.

The Halo trilogy tells the tale of a savage war between the human race and two alien species, the Covenant and the Flood.

The first game, released in 2001, has sold 4.5 million copies in the United States, according to NPD Group, a market research firm in Port Washington, N.Y.

Halo 2, released three years ago, has sold 5.9 million units and did $125 million in sales in its first 24 hours, the best one-day sales ever for a videogame.

Specialists say Halo 3 will certainly match those numbers and will probably beat them.

"It is more than likely that Halo 3 will eventually break into the top 10 best-selling video games of all time," said Nick Williams, an analyst at the game industry research firm GamerMetrics, a division of IGN Entertainment Inc. of Brisbane, Calif.

That's good news for Microsoft, but maybe not good enough for a company with an entertainment division still trying to overcome its billion-dollar blunder in selling defective Xbox 360 consoles.

The new game features improved multiplayer features, like the ability to play out the main storyline of the game with three friends while linked over the Internet. Players can also make videos of their in-game exploits and share them with friends.

The game's dramatic storyline, featuring a final showdown between humanity and the Covenant empire, could appeal to anyone who has ever stood in line to see a sci-fi movie.

The company hopes that Halo 3 will help its entertainment division to turn a profit during fiscal year 2008, which ends next June 30.

That would mark a major turnaround for a business in which Microsoft lost $1.8 billion last fiscal year and a total of $7.3 billion over the past five years.

The Xbox 360 had a very good Christmas in 2006. Microsoft sold 2 million of them in the United States during the holidays.

That's far more than Sony Computer Entertainment's star-crossed PlayStation 3, which moved just 750,000 units.

Xbox 360 even beat out the hugely popular Nintendo Wii, despite the Wii's lower price, $250 for the Wii versus $300 to $400 for the 360.

But things came unglued during the first six months of 2007. Post-Christmas Xbox sales plummeted. Microsoft had predicted total worldwide sales of 15 million Xboxes by June 30; instead, the company sold fewer than 12 million.

Meanwhile, Microsoft faced a torrent of angry complaints from customers about malfunctioning Xboxes.

In July, Microsoft admitted that design defects in the consoles were causing "an unacceptable number of repairs."

How unacceptable? Enough to force Microsoft to set aside up to $1.15 billion from its 2007 earnings to cover extended warranty repairs for Xbox 360 owners.

Long before Microsoft took action, stories about broken Xbox 360s were common on the Internet. Rosoff thinks these stories were a big reason for the 360 sales slump.

"Word traveled," he said. "People knew about this."

Can Microsoft repair the damage to the Xbox brand?

The new warranty and a redesign of the Xbox hardware will probably mollify hardcore gamers, Rosoff said.

"Where I think it hurts Microsoft," he said, "is the company's effort to expand console gaming beyond the hardcore audience."

Newcomers to console gaming won't be eager to buy a machine with a reputation for breaking down, Rosoff said.

Microsoft and its rivals are desperate to attract new gamers.

Two-thirds of US households still don't have a videogame console, according to the Entertainment Software Association, an industry trade group in Washington, D.C.

Nintendo's Wii, with its low price and motion-based controller technology, has been most successful in attracting buyers who had never before played videogames.

Sony took a different tack, cramming its PlayStation 3 with costly, state-of-the-art technology and billing it as a full-fledged home entertainment center.

But so far, Sony has been rewarded with mediocre sales.

Microsoft figures that a hot launch for Halo 3, combined with a recent price cut for the Xbox 360 console, can reignite the Xbox brand and recruit legions of new players.

Already there are some promising signs. The $50 price cut announced in August drove the price of a basic Xbox 360 down to $280, only a little higher than the Nintendo Wii.

In response, consumers bought a lot more Xboxes, with sales up 63 percent, compared to July, according to NPD Group.

Now comes Halo 3, a title that Microsoft hopes will transcend the videogaming universe to become a full-fledged entertainment empire.

"The big push that you're seeing for Halo 3 right now has obviously moved beyond gamers and has moved into the pop culture space," said Jerret West, Microsoft's global product manager for Halo.

Marvel Comics has already created comic books and a graphic novel based on the game. Another Halo novel made the New York Times bestseller list.

Soft drink maker Pepsico Inc. has even introduced Game Fuel, a Halo-themed flavor of its highly caffeinated Mountain Dew soda pop.

Despite all the hype, West said that the game itself is what matters.

"It's the best of the three," he said. "There's no question about that."

None of it will be enough to make the Xbox 360 the number-one or number-two gaming console, said gaming analyst David Cole of DFC Intelligence in San Diego.

"Right now, they're probably the ones most likely to be in third place," Cole said. "Depending on how things pan out in the next year or so, it could be a rather distant third."

The Nintendo Wii, introduced less than a year ago, has already sold more units worldwide than the Xbox 360, Cole said.

He is convinced that Sony will break out of its funk with a 2008 price cut for the PlayStation 3 and with a host of new games to beef up its current lackluster offerings.

So in Cole's view, Microsoft is destined for also-ran status in the gaming business, no matter how well Master Chief does tomorrow.

Hiawatha Bray can be reached at bray@globe.com.