Xbox Celebrates Successful Holiday Season

Jan. 22, 2003

Xbox Celebrates Successful
Holiday Season, Gaining Share and Solidifying Number Two Position Across North
America and Europe

December Marks Record-Breaking
Month for Xbox Console and Game Sales

REDMOND, Wash. – One year ago, the
Xbox™ video game system was the new kid on the block. Today Microsoft Corp.
confirmed that Xbox was a top holiday seller and is now firmly entrenched in the
number two market position in the U.S. and Europe. According to the NPD Funworld
TRSTS December 2002, Xbox significantly widened the gap between the competition,
established itself as the clear number two video game platform and brought the
overall next-generation market share for Xbox to 24 percent. Xbox console sales
in December had year-over-year growth of 48%, which was the highest among all
next-generation platforms for the month according to the NPD data. On the other
side of the Atlantic Ocean, Xbox also won additional market share, bringing the
European share of Xbox to 19 percent (ChartTrack and GfK, November).

“We are very pleased by the holiday
results. Xbox is the next-generation video game system of choice and the clear
number two across the United States, Canada and throughout the Europe,” said
Robbie Bach, senior vice president of Microsoft and chief Xbox officer. “With
the popularity of Xbox Live, more than 300 games in development and more than
200 titles on the market, we expect to continue to gain market share from
long-time console makers.”

December was the largest selling
month for Xbox consoles ever, beating the previous record month; November 2001,
by 43% (NPD TRSTS, December 2002). Also according to the data, December was the
largest month ever for Xbox software sales beating the previous record month,
December 2001, by 80%. Xbox also enjoyed a nearly 4.8 attach rate, the highest
for any next-generation console after 14 months in the market. Moreover, Xbox
sold the most software of any next-generation system after 14 months in the
market. Finally, the Xbox Live™ service continued to be a major hit at retail in
December, selling 70% more Xbox Live Starter Kits in the first two months than
the PS2 network adaptor sold in its first two months.

Clearly popular with consumers, the
Xbox game portfolio has been a huge success both for Microsoft-published games
as well as third-party publishing partners. Game titles are selling best on
Xbox. Of the top 20 multiplatform titles, the Xbox versions are attaching on an
average of 70 percent more than those for PS2.In addition, third-party
publishers continue to fare much better on Xbox. Life-to-date, these partners
have sold 56% more units on Xbox than they have for GameCube. "Tom Clancy’s
Splinter Cell," from Ubisoft, is not only the number one Xbox title and number
four title overall in the US market, it is now the second-highest selling Xbox
title ever in the US. "Splinter Cell" outsold GameCube’s "Metroid" by 19% in the
first two months of sales.

“’Splinter Cell’ for Xbox continues
to fly off retailers’ shelves across North America and Europe,” said Tony Kee,
Vice President of Marketing, Ubi Soft Entertainment. “It’s been a phenomenal
holiday for us on Xbox, and we are eager to replicate the great success of
‘Splinter Cell’ with more Ubi Soft games on Xbox.”

“It was admittedly a challenging
retail environment for the entire game industry this holiday, but Xbox
overdelivered in every way. It was all we could do to keep our shelves stocked
with the Xbox Live Starter Kit and copies of games like ‘Splinter Cell’, ‘MechAssault™’
and ‘Ghost Recon,’" said Dan Dematteo, President of GameStop, Inc. “What’s even
more exciting is that the demand for Xbox has remained strong even after the
decorations have all been packed away.”

Additional highlights from around
the world include:

Europe

● During the key retail month in
December, Xbox outsold GameCube by 100% in the United Kingdom. (Source:
ChartTrack, December 2002)

● Xbox has passed the million
console mark in the UK, France and Germany alone. (Source: ChartTrack, GfK;
December 2002)

● European gamers showed their
support for Xbox in huge numbers, with near-sellout sales during its first
European Christmas season. The "Sega Christmas Pack from Xbox," a limited
edition Xbox Christmas offer that included 120 euros’ (80 pounds sterling) worth
of free triple-A games from Sega, also proved a winner with gamers across
Europe. Many stores sold out of stock before Christmas.

● The Xbox Live Consumer Beta and
Test Drive program have been a great success, and momentum continues to build
for the European retail launch of Xbox Live, which is on track for March 14,
2003.

Japan

● After a very successful beta test,
Xbox Live launched on Jan. 16 in Japan. Beta users, partners and several famous
game creators comprised the guests at the Xbox Live party in Tokyo. Early
response to Xbox Live in Japan has been enthusiastic, and many gamers are
excited to play "Phantasy Star Online" on the Xbox Live service.

Canada

● Xbox achieved significant momentum
over the critical holiday period in Canada, selling faster than ever before.
According to ACNielsen market data for November 2002, Xbox captured more than 32
percent of the Canadian next-generation console market — its best month since
launching in Canada in November 2001.

Australia

● Xbox market share grew
dramatically in Australia in the key months of November and December to nearly
40 percent and 35 percent respectively. Xbox market share growth was mostly at
the expense of PlayStation2, which dropped from just over 70 percent to 60
percent. (Source: Inform, November and December 2002)

● During those same two months,
GameCube’s market share plunged to just over 5 percent, and that trend is
continuing in 2003. (Source: Inform, November and December 2002)

Asia

● Xbox can now be found in more than
500 selected retail outlets throughout Hong Kong, Singapore, Taiwan and Korea.
The excitement of the recent Xbox launches in Asia has been fueled by the launch
of the "Dead or Alive 3" (DOA3) offer to usher in the Chinese New Year beginning
next month as well as the online preorder campaign for the localized version of
"Halo™" for Korean gamers that started last week.

About Xbox

Xbox (
http://www.xbox.com/ ) is Microsoft’s
future-generation video game system that delivers the most powerful games
experiences ever. Xbox empowers game artists by giving them the technology to
fulfill their creative visions as never before, creating both Xbox console
games, and now with the advent of Xbox Live!, online games, that blur the lines
between fantasy and reality. Xbox is now available in the continents of North
America, Europe, Asia and Australia.

About Microsoft Game Studios

Microsoft Game Studios is a leading
worldwide game company with two core businesses: game development and publishing
(http://www.microsoft.com/games/) and Zone.com. Zone.com (
http://www.zone.com ) is the Internet’s
largest game site.

About Microsoft

Founded in 1975, Microsoft (Nasdaq
“MSFT”) is the worldwide leader in software, services and Internet technologies
for personal and business computing. The company offers a wide range of products
and services designed to empower people through great software — any time, any
place and on any device.

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Microsoft, Xbox Live, Xbox,
MechAssault, and Halo are either registered trademarks or trademarks of
Microsoft Corp. in the United States and/or other countries.

The names of actual companies and
products mentioned herein may be the trademarks of their respective owners.

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