The console market is more complex than ever before - with machines becoming full multimedia delivery devices, and emerging markets and demographics bringing new types of games and gamers.
Microsoft hasn't been shy about its ambitions to capitalize on all of those areas. Aaron Greenberg, Microsoft's director of product management for Xbox 360 and Xbox Live, recently sat down with Gamasutra to discuss Microsoft's progress and plans.
He discussed the Asian markets, digital distribution and the upcoming game creation avenues offered by XNA Game Studio, the idea of an all-in-one entertainment console, and why Microsoft still isn't competing with Wii.
The State Of The Market
Do you think the first-to-10-million benchmark is still ironclad? Sony is doing better in Japan, getting up there in Europe.
AG: We're not seeing any actual market data that's indicating that there's any actual momentum right now around the PS3. I mean, if we look at US sell-through data, since the Blu-ray format war ended, the PS3 sales have actually been down month per month, and our expectation is that if we look at the whole year of 2008, we'll continue to extend our lead relative to the PS3.
Sony has announced, as part of their financial reporting for their fiscal year, that they're basically expecting to be flat year over year. They did nine-point-some million units of PS3, and they expect to do ten million this next year, and they've been pretty clear that they're not going to be aggressive on price to gain share; that they're very much focused on profitability.
So we're not really sensing that they're going to be as aggressive this year as people had hoped. Then you have titles like Killzone slipping, Home moving now... So it'll eventually see how it works out, but in the US I think things are great.
In Europe we've had a lot of success following our price drop - we did that in advance of GTA - and we saw sustained run rates where we're basically doubling our sales. In Europe you can get an Xbox 360 for almost half the price of a PS3, so we believe we're going to continue to see sustained momentum there.
The Hard Drive Divide
How long is this hard drive thing going to keep going on, having a hard drive in most SKUs versus not having a hard drive in the Arcade model?
AG: Well, I think there are different types of consumers on the market, right? For you and me, of course, we want to have a hard drive, and we want to download all that stuff, but you've got to realize that there's a type of consumer out there that is going to be buying a console this holiday and be shopping on price; and for them, they may never connect to Xbox Live, they may just want to play games in their bed room, or who knows.
The other thing is that we know that for a lot of people, price point is important for gift giving. If somebody gives you a gift, you can always add a harddrive on later. It's the same core experience, and we don't want those people to have a handicapped game experience.
We do include the memory unit with every Arcade model, so you can connect to Live, you can even download a couple Arcade games. You can have the online experience, but if you're going to want to really download stuff, like movies and Arcade games and stuff, you're going to want to definitely have a hard drive.
It's also useful from the development side to rely on the fact that that space is there. I don't know if the "different markets" thing still works, because I think consumers are getting much more savvy.
AG: I don't notice any difference. I mean, I've played the multiplatform titles like GTA on both consoles, and, you know, I don't think your average consumer is going to notice any difference as a result of that.
Our core philosophy is that we're not going to force consumers to pay for something they're not going to use, and so, you know, we know that there's a set of customers out there that will never ever use the harddrive, so why should we force them to pay for them.
To me that's always been silly logic, because developers would be using it, and so consumers would be using it if they had it.
AG: Trade-offs and everything, but sure.
Do the Arcade models sell? You probably can't say percentages.
AG: You know, you can look at NPD data. I don't know it off the top of my head, but I can tell you that the majority of sales are for the Pro or Premium SKU, and then the split beyond that is the Elite and the Arcade.
I think it's something like 60/20/20, more or less, but it can vary from month to month, and from market to market. I mean, we find in other markets, outside the US, the high price point is an issue, so the lower price makes the Arcade a little bit higher.
The Asian Market
How are you feeling about Asia right now? Do you think it's really important?
AG: I think that we've made a lot of progress in Asia. I mean, if you look at Japan in particular, we've worked with a lot of the third party partners that we have there to bring a lot of their content to market. There are the investments that we've made, and our own studio development, working with [Mistwalker head Hironobu] Sakaguchi, and actually developing our own exclusive Japanese role-playing games.
I think one of the things that maybe would surprise a bunch of people is, who would've expected that today the console with the most Japanese-style RPG titles is the Xbox 360? No one would've ever thought that, right? So I think we've done a good job getting the content.
Now, you know, the established brand that Sony and Nintendo have there - you know, they've been there for years. In fact, what we're seeing in Japan is that, really, the Wii is - people in Japan, unlike in other markets, tend to just buy one system.
The market doesn't get fragmented that much, whereas in Europe and North America, you tend to have a "second place" console that does really well and a lot of people will buy two systems.
I think it's just a different market - the types of games, purchase behavior, all of that. And so, I think for us, we feel like we want to make sure we have the best game creators out of Asia bringing out games on our platform, and we do, and we'll continue that.
I think The Idolmaster was brilliant for that market. I don't think a lot of people realize that that game didn't sell millions of copies, but did reach two million downloads, or something like that, in Japan. It's making Namco a lot of money. I'm surprised it hasn't come out here yet, because it seems like the anime crowd would totally pick it up.
AG: I'm surprised more that a lot of the Japanese style games haven't been brought to the US, because I do think there's an appetite for that. We've done it with [Xbox Live] Arcade, with a lot of the Arcade titles, but no, you're right, there are still a lot of games that we don't see at retail.
I think it's the challenge of the lower volumes of those games, and getting your bigger accounts to buy in a title like that. That's why I think the digital distribution route is a better alternative for a lot of those products.
With that one in particular I'm surprised that they don't think they could do a similar kind of low 200,000 units, get some sales, and get song sales out the wazoo.
AG: Or give it as an exclusive to maybe somebody or something, right? There's a lot of ways to do that, but I don't know. It's a good question; you should ask Namco about that.
Xbox 360 And The Wii
Microsoft is going after the Wii in a more serious way.
AG: We are?
Well, the casual initiative seems to be growing. Do you think it's possible to do that in the same box, to tackle that market as well?
AG: Yeah, absolutely. I think that there's a difference in the type of customer that is buying the Wii. When you think about it, there's a difference between trying to be the number one console with nine year old gamers, and being the console that offers the most experiences from 13 to 33.
I think for us, we don't really see the Wii as a direct competitor, we actually very much complement the Wii experience. It's obviously clear that we're going head-to-head with the PS3 in this generation. I think what Xbox will be able to do as well as the Wii is grow the market.
In this generation we're seeing record revenues for the US and globally for the business, and we're seeing more people buying and playing games than ever before, and the Wii is definitely part of that. And as they grow that pie, that benefits us too, because those customers are eventually going to want to graduate to an Xbox 360 experience.
So I think that obviously it's good for the Wii, but it's also good for us.
Can you comment on the rumor that the Xbox 360 Wiimote thing that's been rumored?
Hardware is tackling different problems now. Do you have any thoughts on how that's going to ultimately converge, or how it's going to lead to in the next hardware generation?
AG: I don't know. I think what's happened in this generation is that the video game consoles that we all think of, that play Madden, and GTA, and shooters - and where do we play those immersive game experiences? Xbox has become the default for that, right?
Publishers are doing lead development where there's the largest online community, the most games. Yeah, sure, some of those titles are also available on the PS3, but the Wii is doing something completely different. I can't speak to what Nintendo would do, but I think Xbox feels pretty good about the opportunities to grow the market.
Look at where we're at, we've got a 19 million installed base, globally. Last generation, PS2 sold, what, 120 million units, or something like that? So we feel like there's a lot of room for us to grow our sales as what we would think of as the default market leader for next gen consoles.
I'm very interested to see what's going to happen next.
AG: You already have high definition, right? You've already got storage. You already have internet connectivity.
AG: Our Elite console has a 120GB hard drive. Nobody's saying, "I need more space," you know?
Nintendo, for their part, if they keep going down this path, they don't really need to make a Wii 2. You don't really need to level the graphics out too much. Are they going to extend the life of that platform for a super long time, then come out with a completely different product?
AG: Everyone says that eventually the novelty will wear off, right? I think that a lot of the people that are buying that console today are not people that have generally bought consoles in the past, right?
You see they're not buying games on it, right? They're buying it, it's like something they break out when people come over, and it's maybe a fun thing, but it's almost like the same people that buy a karaoke machine, you know? They're not really buying it for games, they're just buying it as a novelty.
In a way it's going back to the toy model for games.
AG: Yeah, and I think if we get a little deeper outside of just gaming and think about another thing that really makes us unique, it's that we offer a complete entertainment experience. Because, not only do we have the online, but we have a video store.
We have the largest high definition library of movies on demand, we've got all the major cable and TV networks available. With what we're doing with Xbox Live Arcade, and digitally distributing games, I think that there are a lot of great, fun entertainment experiences that you just won't get on any other console.
The all-in-one machine is starting to work now. It's been tried a lot of times in the past, but it has not really worked. It's interesting to see it happen, because personally, I don't want to buy a movie that way. I want to own the disc.
AG: You can still do that.
I know, of course. But for a lot of people, it's really working.
AG: Do you buy music CDs, still, or do you use--
AG: So you're an exception to the rule. I think consumers have moved to digitally instant entertainment. iTunes is the largest music store in the country, right? I think that it wasn't a big leap for consumers to think about downloading games or downloading TV shows or movies on their Xbox.
When we launched our entertainment offering, we didn't know what would happen, because at that time it was primarily more of a core gaming audience - early adopters. Today we've got a third of our paid downloads on Marketplace for non-gaming content.
If you think about us as like a retail store, and maybe you say we're a games retail store, thirty-three percent of the people are coming in and they're buying stuff that is not games.
I think, at the end of the day, people are sitting in front of their couch and they're like, "I turn on my TV and I want to be entertained." And sometimes that entertainment is going to be playing a game, sometimes it's going to be watching a movie, or a TV show, or watching live TV, or whatever it may be. It's just another choice and option of entertainment.
Some people feel it's being run too much like a retail store. Microsoft is essentially, with Live Arcade, being like a Gamestop, and deciding, "This is OK," or "This is not OK." If you look at Live Arcade, there's a lot less indie stuff now than there was. Capcom's kind of dominating the space.
AG: Well, when we first launched Arcade, we went out to everybody and said, "Hey, we think there's a market for small bite-sized style games that are pay-for-play, that can be digitally downloaded, that are a uniquely different style of games than what you can get at retail."
Folks that really jumped at that initially were almost all indie guys, right? Now there were some publishers that were bringing some of the classic, coin-op classics, and things like that, but what's happened now is that it worked, right? People have seen how these games are selling in the hundreds of thousands of units; they're doing really well, digitally.
So now the third party publishers have come on. And I think that that's been good, because we're getting more games. The one thing that we are cognizant of is making sure that we continue to maintain a quality bar, because we've heard a lot of feedback about that, and we're taking it seriously, because we don't want this to be a dumping ground like what you find with games on cell phones, where there are twenty-five poker games.
You know, there is a team that adds to the portfolio, and people do submit their games. Same as when people submit their retail game, right? We don't want just to put up crap games. And so we will from time to time say, "You know what, this game does not meet the normal quality bar, and we don't want it in our store."
It's strange to me that I'm seeing fewer indie games, and a lot of the games that are lower quality are coming from the big publishers.
AG: Well we are, as a company, invested in the indie development side. I think you will see that change, because we are working with more of the indie developers, and I think you'll see that shift come back, because we realize that it is really important, and it is what a lot of people want to see. I think we're going to continue to invest even more there than we have in the past.
The other thing is that, you know, we offer a good alternative in what we're doing with community games - the XNA community games on Xbox Live, where anybody can make their own game - anyone, it doesn't matter - whether you're a small indie studio, or a guy doing it in your free time. There's no certification process, there's no portfolio management, and it's the open door, so anyone can put their game out there.
Have you figured out the pricing and compensation structure for that yet?
AG: We haven't announced anything on the business model for that yet. I think we're getting close, but you'll have to stay tuned for that one.
I'm hopeful that that will get more interest in Japan as well, because they have a huge independent game making community there, and they release all their stuff for PC.
AG: Yeah, I think people will be really surprised, just all the kinds of creativity that will come as a result of that, because the fact that you're opening that up to the world. Hundreds of colleges are using it to teach; they're going to put games out there.
It's just another level, like you saw with Arcade, where it brought all different types of games, all different types of game creators into the market, and I think that this will do the same thing.
Korea And China
I'm also interested in the Korean market. I went and talked to some Xbox people over there, actually, some time ago. At that point, they'd only sold 15,000.
AG: It's a pretty hardcore PC market.
AG: I know that we're the leading console in Korea; I know we've done well there.
Well, the Wii is that now, so...
AG: Yeah. Sorry! Forgot about the Wii.
The Wii just came out.
AG: Well, let's say the high definition console. I don't always say we're beating Sony. You don't want to kick 'em in the nuts too many times.
In Korea, there's an Xbox 360 verison of this big game, Mabinogi, coming out from Nexon. I've been trying to figure out if you're going to have to buy the disc, or if it's going to be "free to play, buy the items," like they always have done. Is that structure, is that possible to do?
AG: Yeah. That's the whole idea behind points and microtransactions and all that, it's to absolutely enable the opportunity to do that. You could launch a game for free, absolutely.
I'd heard, in the past, that it was not possible to release a game for free, but then I know that there was the Yaris game, so that must have changed.
AG: Right. Yeah, we have some free games. I would say that a lot of what you are talking about is to be able to launch a game for free and then sell add-ons.
AG: Yeah, we really don't have an issue with that.
It'll be interesting to see if they do it, because that would be the first one.
AG: I would say Xbox would be the only platform. We have 12 million members on Live, and if you could scale in a way, that model would make sense.
It actually fits their model a lot, because they sell Nexon Cash cards, where you can go into Target and buy a card that has points on it. It's basically the same thing.
AG: Oh really.
The reason they did that is for people who don't have credit cards and stuff.
AG: That's what we did; that's one of the advantages of why we use points.
There are several games being made specifically in Korea for the Korean market; I don't know if any of those are going to come out here, but when I talked to them there were maybe six that were happening. It's an intriguing market. People don't pay enough attention to Korea.
AG: No. And it's a big market, and they're all connected online, right? And they all love gaming - I mean everybody. They've got all the gaming TV shows. It's a huge opportunity. And then China, right next to them, is maybe right there with them.
Yeah. China is huge. Their content is even less Western-focused; their content is even more specified. It doesn't matter, though, because if you can get a game to be big in China, it's the only market you need.
AG: It's the Wal-Mart of the world.
Microsoft Post-Peter Moore
How are things post-Peter Moore?
AG: I think great. I mean, we're very fortunate to have a really seasoned senior leadership team at Microsoft. You know, [Microsoft senior VP] Don Mattrick was a top executive at EA for a number of years, and oversaw games studios, and actually started his own game development company, years ago.
Both him and [Microsoft corporate VP] John Schappert - who founded [EA] Tiburon, and has been heading up all of Live's software services - are, obviously, the new top execs running Xbox business, and it's been great. I think it's always good to have new, fresh perspective.
I know John has a lot of passion around Live, and has been very ambitious about really continuing to innovate in that space, and Don across the whole business, every piece of the business from Live, to games, to the console platform.
So while everyone loved Peter, and we still have a solid relationship with him at EA, I think we're lucky that it feels like we haven't skipped a beat since he's left. I think the biggest thing we feel is that there's no Peter to talk to, right? Don and John are more business guys, and they're running the business.
People will hear more from them. I know we heard from John at GDC. He talked to a lot of people there. Don's been pretty hands-down focused on the business, which I think is the right thing. So I think people here miss Peter and his personality.
Yeah, there's not as much of a face now.
AG: Right. I think you're stuck with me for the time being. I don't ever claim to be a Peter Moore. That guy is awesome.
Bring back wacky [J] Allard! XNA Game Studio is coming out soon also, right?
AG: Yeah. They already put out the tools to a lot of people to start doing it, and we want for them to start creating games.
Will you actually be able to buy a game on the 360 Marketplace and get it on your Zune?
AG: I don't know what the business model is for the games on Xbox, but I know that the idea is that you can write once and you can play on mobile devices, so... Your PC, your console, and on your Zune.
We showed that in a game running real code at GDC - kind of a classic shooter-style game that someone on the team developed - and using the same code, was running on all three platforms. So I think that is exciting and totally unique about XNA (Game Studio), and, you know, for the folks that do own Zunes, why not be able to take the games on the go?
I think it'll be a differentiator for them, because other, uh... I mean, you could say "other portable music players..."
You pretty much just have to say, "iPod."
AG: The iPod has a very, very limited game selection. And so if you actually open this up for the community to create their own games, and the fact that the new Zunes have a great screen, and the touchpad works well - I think it could be interesting.
Do you think it'll make the Zune a gaming platform in any way?
AG: No. I mean, I guess I shouldn't speak for Zune, but I think at the end of the day, people buy an Xbox or a PS3 or whatever for games first and foremost. And then they go and they buy movies and TV shows and all this other stuff, but people are buying it for the games, and the quality of the games.
I think the same is going to be for Zune - people are going to buy it as a music player, they're not going to buy it as a portable gaming system. The fact that you get all that stuff in addition is a great value add, but we've got to be realistic about that.
Personally, I would buy like a small Zune, as long as it could still play the stuff, just to play the games on.
AG: Yeah, well we had it running on the small ones. I have one, and it worked great.
It's almost a little mobile-game-ish, in terms of the interface.
AG: Yeah. Yeah. It's a certain style of game. You're not going to play Halo.
Well, you never know.
AG: We'll see what they come up with. The fact that, overnight, you could have hundreds of games available, that will be pretty cool.