Microsoft (MSFT) has had its Xbox 360 in the market for over two years. The product is hardly mature. The current round of video game consoles which includes the Sony (SNE) PS3 and Nintendo Wii are just getting a number of the big new games designed to play on them.

But, progress is ever hungry and Microsoft wants to add features to its console which will give it a broadening appeal. The cornerstone of the new add-ons are avatars, odd little people and characters that users can create to personalize the game experience. According to the FT, "Both Microsoft and Sony will use avatars to make online gameplay and socialising more appealing on their consoles."

In addition, Xbox users will be able to share photos and watch movies at the same time even though they are at different locations.

All of this is probably pretty exciting. It may increase the attractiveness of game consoles beyond 18-year-olds who sit in light-less rooms for days at a time playing games in lieu of bathing or interacting with real people in the outside world.

For Microsoft, the real challenge is not the hope that new features will make its Xbox more attractive than the PS3. The big hurdle is how to get a household which does not have enough money for gas, food, and mortgage payments to shell out the money for any game console and its new features. An Xbox can cost over $300. Many of the games which run on it go for $60 or better. An Xbox Live subscription is another $60.

If gas moves much above $5 and a box of Cheerios moves toward $10, many families will not be looking at the Xbox or any other discretionary items.

The video game business has continued to do well so far in a tough economy, but the recession is getting much deeper. Microsoft’s best move might be to sell the Xbox as a product with a monthly payment plan or offer an low-feature, low-price version of the machine.

None of the avatars has a credit card.

Douglas A. McIntyre

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