'Halo' no longer just a game for Microsoft

Microsoft wants video gamers to "finish the fight" when the last chapter of its Halo trilogy comes out next week, but a carefully crafted merchandising strategy will make sure the space-marine protagonist Master Chief lives on for years to come.
Halo is crucial to the success of Microsoft's Xbox video game business, which has lost billions of dollars since it was started in 2001 as a way to counter Sony's growing dominance.
Hailed by some as the Star Wars for Generation Xbox, the Halo franchise has spawned a mini-empire of licensed toys, clothing and tie-ins. The game features a space marine called Master Chief trying to save humanity from an alien army known as the Covenant.
For a company expected to post $57 billion in revenue this year, such licensing deals are little more than a rounding error. Yet Microsoft is driving to make the games division profitable this fiscal year, so every penny counts.
"Halo merchandise is a logical way to earn some extra revenue, and they are trying to collect on as many fronts as they can to turn Xbox into a profitable business," said Matt Rosoff, an analyst with Directions on Microsoft.
The most important effect of new Halo-branded products, however, is to make people more aware of the game.
"We make money and making money is great because this is a business. But we want long-term money that satisfies the fan base, not money today," said Steve Schrek, director of franchise development at Microsoft.
Microsoft also hopes Halo will help it "finish the fight" against Sony, whose PlayStation 3 console has struggled in the United States since it made its debut nearly a year ago.
The PS3's high price--still $500 after a July cut--is the biggest factor behind its woes, but Sony has also failed to deliver a true "system seller"--a game so good that people will buy a particular console just to play it.
Halo 3 is just such a title, and Microsoft has kicked off an advertising blitz that includes evocative TV spots featuring live actors recalling events that happen in the game.
Transmuting Halo from geek spectacle to the mainstream is a challenge for a company more used to pitching operating systems and word-processing software than building consumer entertainment products.
Microsoft is wary of watering down Halo, meaning it would rather walk away from deals for Master Chief pajamas or Covenant sippy cups.
"It's a balancing effort to be very, very careful that we don't oversaturate and piss off our 15 million fans," said Brian Jarrard, franchise lead at Bungie, the game studio within Microsoft that created Halo.
"We are obviously looking to broaden Halo and make it accessible...while at the same time, we want to keep feeding our core audience."
Microsoft had little experience in talking to toymakers and others about how to transfer an onscreen experience to real objects. But such experts exist in the licensing arms of movie studios, so Microsoft partnered with 20th Century Fox to act as the main licensing agent for the Halo brand.
Items that did not make the cut were a Halo-themed lottery ticket, lingerie modeled after a female hologram character, and toy guns based on the game's weapons. Instead, fans can expect high-quality action figures from McFarlane Toys, a tabletop game from WizKids, and replica weapons for mature buyers.
"We're very clear with them that this is not about running out and carpet-bombing everything. This is figuring out how in five years we're hitting new customers as opposed to in five years nobody cares," Schrek added.