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Microsoft Needs a Big E3. Here's How It Could Happen.

Heading into the year's biggest gaming conference, where's the momentum?

Going into last year’s E3, the momentum in the console race was Microsoft’s to lose. The Xbox 360 had consistently outsold Sony’s PlayStation 3 at U.S. retail for years, and its more robust support of online gaming made Xbox one of Redmond’s best brands.

Now, the tables have turned. The PlayStation 4 is outselling the Xbox One on the same retail battlefield, and Microsoft has had to reverse a key piece of strategy to make its new console more competitive. Last month, it dropped the Kinect sensor as a mandatory pack-in with the Xbox One, cutting the console’s price to $399 in the process.

The momentum is on Sony’s side, and one of the big exclusive games that will likely juice interest in the Xbox, Halo 5, has already been confirmed for release … in fall 2015.

Still, it’s not all bad news. A $100 cheaper console makes the Xbox a more compelling option for people who will want to play upcoming cross-platform titles like the Bungie-Activision shooter Destiny or Warner Bros.’ latest Batman game, Arkham Knight.

What Microsoft needs, though, is proof that it will still have big software exclusives in the vein of EA’s Titanfall, which was exclusive to Windows, Xbox 360 and Xbox One. Also potentially interesting: A “timed exclusive” launch of a big new game with a pre-existing fanbase that will rush out to buy the thing they like as soon as possible.

In a note to investors earlier today, Cowen and Company’s Doug Creutz and Stephen Glagola suggest a perfect candidate for a timed exclusive on either Xbox or PlayStation:

Although Rockstar will almost certainly not be at E3, if a next-gen GTA V is in the works for 2014 or early 2015, we wouldn’t be surprised at all to see it highlighted at one or both of the hardware presentations on Monday (particularly if it comes as a timed exclusive on the PS4 or Xbox One, which is always a possibility). We know Rockstar is working on new product and the suspiciously slow pace of GTA V DLC releases leads us to believe that a lot of resources may be currently allocated to a next-gen port.

This is just speculation for now. And Sony’s marketing partnership with Grand Theft Auto V publisher Take-Two broke the Xbox 360’s 32-month sales streak last year, so it’s very possible that the game’s high-def version could be PlayStation-bound, instead. But it’s this type of exclusive — timed or outright — that the Xbox needs, ideally in multiples.

New Xbox boss Phil Spencer has already promised that Microsoft really does care about its core gamer audience’s interest, and not just owning the living room. Now’s the chance to prove it.

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