In part one of the GamesIndustry.biz with Microsoft Interactive Entertainment Business EMEA VP, Chris Lewis, he cast his eye over a strong 2008 for the Xbox 360 platform.
Here, in the second of the three part interview, he talks about currency fluctuations and their impact on price points, the importance of marketing, and just who does hold the console lead in Europe... after Nintendo.
Q: We've been hearing that with the changing currency levels, and the much weaker pound Sterling, gamers in mainland Europe are trying to buy online from the UK more - is that prompting you to look at your relative price points at all?
Chris Lewis: We're mindful of that, but it's very hard to plan too far ahead as regards foreign exchange rate fluctuations. Sterling right now is in a different place right now versus the Euro and the Dollar, and the Yen - so that which you allude to, you'd start to expect to see some the Sterling-based business hemorrhage out of the UK.
Actually we're not seeing that much of it - we have a look at it a couple of weeks ago along those lines, trying to match our sell-in with our sell-through to see if there's a disparity there that might imply that stock is going elsewhere. We're not really seeing a lot of it at the moment - but that's not to say it won't start to happen.
Do we then get into a flurry of price changes? No, I think we remain structured about it and we don't try and predict too far ahead what we think currencies will do. I think we're in a fine place as regards our price points anyway now, and I think the consumers are testament to that - they are flooding to the platform in a way that is even beyond our own expectation levels to be honest - which is great.
Fortunately we've built sufficient inventory to give us the flexibility to accommodate those levels of demand versus our original plan, so we haven't had any stock shortages. We have sufficient stock to continue to cope with increased demand.
Q: On the issue of marketing - late last year it was difficult to get away from TV ads for the Xbox 360, in the UK at least. How do you evaluate the impact that's had on consumer decision-making?
Chris Lewis: Well it's great to hear you say that. I think when we met at E3 I probably talked to you then about one of the things that we intended to rectify, which was that we'd been perhaps a little patchy in terms of our marketing consistency.
Not to say that I thought we'd done a bad job, I just thought we needed to be even more consistent and visible in our messaging to consumers - and we did that. We spent a launch level of marketing money in-line with our ambition to attain the success that we've achieved over this last Holiday period, and still want to achieve.
How much of our success would I attribute to that? It's one of three very strong levers - undoubtedly content, marketing and price are the three levers that we pull on the hardest, but they have to be in concert. Our marketing has been much more visible - people are saying that about the UK media, but it's also true of Spain, France and Italy.
But it's got to be in line with what you want your brand to stand for, and another thing we're really pleased about is that people's feedback on the campaigns themselves has been very positive. They've tested very well, the data we've had back from consumer groups is very positive, it's helped our brand equity and purchase intent ratings, as you'd hope, and people like the ads.
The key, though, is that we've got to keep doing it - one swallow don't make a summer. You've got to continue to invest in that way, and we have to steel ourselves to remain very visible in the market, because it's a good recipe in combination with content and price point to give us the success that we need.
It's not necessarily just above the line media, sometimes we get a bit hooked up thinking that if it's not on TV it doesn't count - some of our outdoor campaigns, our print work that we've done... the stuff that we're most proud of actually is what we've done with third party publishers. Some of the marketing deals with Activision, EA and Ubisoft, and people like that - in many ways we're most proud of that work, because it's strong partnership work, as are the ads that we run with retail partners.
There's good leverage there, it's good for both parties - and the other thing you'll have seen that we want to make very clear is what the game's about, how much the console is and where you can get it.
Q: A lot of the time those third party titles were cross-platform, but that partnership marketing almost creates the impression they're just for the Xbox 360, and a decent proportion of consumers probably wouldn't know that they're not - how important is that to you?
Chris Lewis: Well, I couldn't have answered it any better than you've just described in the question. It's good to hear you say it, because I think you're right, and we've been very proud of that work. We should also never assume that consumers know what's exclusive and what's cross-platform, but the key is that people know it plays best on Xbox 360, and the price point that we're talking about at the tail end of those ads makes it great, affordable value - and they know where to go and get it.
I think the combination of those brand ads, whether they be product-specific ads or not, we've always tried to hang those ads with a clear message of price and availability. It works very well, and we'll continue to do that.
Q: What about the word-of-mouth aspect, especially where Xbox Live comes in? Do you think consumers tell their friends to get a certain version of the game because that's what they've got?
Chris Lewis: Without a doubt - the community aspect of Live is extremely powerful. When my son, for whatever reason (and it's usually a broadband issue, because we've just moved house), can't get on Live... there's a huge problem, and I get a lot more pressure there relatively than anything else around his gaming.
Clearly, he always wants to play games that are older than his years, and I don't allow that to happen, but certainly his desire to be on the Live service, with the richness that he gets and the fact that all his friends are compelled to do the same thing... it's a community, and people are coming to Xbox Live in large swathes now to communicate, chat, play games together, all sorts of things. We're seeing real exponential growth in that, particularly since we changed the user interface - that's undoubtedly made a difference. It's made it more open, brighter.
Q: The NXE - clearly an improvement, but do you really think that it's actually responsible for bringing new people to the platform? Surely it's just encouraging people to spend more time in that environment, so your Live minutes are going up, and it's really the games or video content that's persuading people to buy the console?
Chris Lewis: I think the content is key, of course, but I think with those sort of situations you can put people off relatively easily if they go in and it's either hard to install, or intimidating, or you're not sure where you are, what game you last played, how quickly to get to your own profile...
If those things are hard I think people drop out of the system quite quickly. What we've done with the NXE and the brighter, fresher, avatar-based interface is stop all of those risks occurring, and I think people have also started to appreciate the richness and compelling nature of the content, whether it's games, video, chat, or whatever it may be.
Xbox generally is very sticky - once you get it into somebody's hands they're incredibly enthusiastic about it, which is great for us. We get that with the in-store staff in the specialist stores, for instance - they all love Xbox 360 and talk about it.
But now what we're finding is a growing community of advocates via the Live service that weren't perhaps there before - but you have to keep that service level high, and you can't think that the job is finished. We have to continue to positively surprise people with what we bring to that service and how we keep it fresh. We're good at that stuff - it's central to our expertise.
Q: There's been a bit of confusion around numbers with respect to yourselves and Sony, and who's leading in the European marketplace. Can you just clarify the picture as you see from an Xbox in Europe point of view?
Chris Lewis: You're right, there has been some confusion, but I'm not confused. Let me say we're confident that we talk about numbers that are meaningful customer numbers, whether they be GfK or Chart-Track generated, or otherwise, but they are numbers about shipments into the market, numbers that represent our performance in Europe, the Middle East and Africa - they're not PAL territories in totality, so the numbers I talk about don't include Australia and New Zealand for instance.
But certainly across the territories that I'm responsible for, all of the data points that I've referenced I'm very confident about. It's really based on legitimate external data sources as much as anything - because it's always easy to talk about your own internal numbers, and we try to encourage people to use some of the analyst data, but also the likes of GfK and Chart-Track - very clearly customer and consumer data points, not necessarily manufacturing data points.
Q: And so you're very clear on your numbers, both within the UK and across mainland Europe?
Chris Lewis: Yes.
Q: And in those two territories, are you ahead of PlayStation?
Chris Lewis: Yes. If you look right across my area of responsibility, every data point that I've got, which I trust - and data points we've always used - put us approximately 1 million units ahead in the aggregate.
But actually, surprising as it may seem, we're highly respectful of Sony and Nintendo - I think you'll find all of the platform holders feel mutually respectful towards one another. It's not about us necessarily fixating on Sony - we like a target to run at, and a barometer of success, and we see Sony most closely aligned to our own platform. Therefore we intend to measure our success in some way versus what they've doing.
But it's not the only way we measure our success. Attach rates, the ecosystem, is frankly in many ways more important to us - what a vibrant ecosystem we represent for third parties and retailers, that's hugely successful to our business. One of the numbers we're most proud of in many ways is just how games we continue to attach to Xbox 360, and that will remain more of a fixation for us.
Of course we're conscious of competition, and our focus on that is manifest in price points and our ongoing attention to them, and you're not going to see us change in that regard.
Chris Lewis is VP for Microsoft's Interactive Entertainment Business in the EMEA region. Interview by Phil Elliott.