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Xbox 360 slowly rides into the sunset as shipments drop 35 pct. from 2011

The gears of the current video game console generation are grinding to a slow halt now in the middle of 2012. Game makers are calling out Microsoft, Sony, and Nintendo for stalling the entire console market by not releasing new machines. Market analysts are predicting that the era when consoles drove investment and design trends in the gaming industry is drawing to a close. There are more signs that the end is extremely night for the first round of high-definition consoles. Even as Nintendo gears up to match the Xbox 360 and PlayStation 3 with its Wii U console, those competitors are winding down their console business. Microsoft has shipped 35 percent fewer Xbox 360s over the past three months than it did the year previous.

Microsoft revealed in its second quarter earnings report on Friday that it shipped 1.1 million Xbox 360s—that’s sold to retailers, not sold to customers—between the beginning of April and the end of June. That’s a drop of 35 percent from the 1.7 million Xbox 360s shipped over the same period in 2011.

The Xbox 360 has seen impressively strong sales over the past two years for such an old device. This is in part to the remodeled console Microsoft released in June 2010. The Xbox Slim helped Microsoft ship 1.5 million consoles over the April to June quarter in 2010, and the Kinect release later that year helped fuel the consoles growth through 2011, including that June quarter rise to 1.7 million. The severe drop off to 1.1 million consoles over that period this year was caused by a number of factors—consumer spending is down and game releases have been scant since the beginning of the year—but all of them are the result of Microsoft slowly phasing out the Xbox 360 as the center of its video game and entertainment ambitions.

It should be noted though that there is a fiscal method to Microsoft’s apparent madness of relying on a 7-year-old machine in decline to carry its entertinament business. Even as shipments of the Xbox 360 drop, the Microsoft Entertainment & Devices division of which it’s a part continues to grow. Revenue from the division for the quarter was actually up 20 percent. Other services like Skype are what is bolstering the division, but Microsoft is keeping Xbox 360 costs low, so these last months of sales are gravy for the business.

That said, Microsoft can’t wait past 2013 to release the Xbox 720. The Xbox business can take it easy now, but Microsoft needs an affordable, technologically-advanced winner soon or all its effort in the video game market over the past 13 years will have been for naught.