At E3 last week Microsoft put a lot of solid details on its new motion control tech, Kinect, as well as unveiling a slimmer Xbox 360 and the usual commitment to hardcore games.
In an interview with GamesIndustry.biz, executive VP of Interactive Entertainment in Europe, Chris Lewis talks through the reasons for the lack of pricing on Kinect, why the company is still serving the hardcore gamer, expectations for sales of new hardware and a line-up of titles yet to come.
Q: The one thing missing from your E3 showing of Kinect was the price – why was that and when can we expect a solid commitment on that?
Chris Lewis: Well, we will obviously announce the price nearer availability which will be in November for Europe. Europe's central and we've had success there, we'll talk more about price later in this calendar year. We've just wanted to use each key milestone during the calendar year to build the story and price is a separate discussion later in the year.
Q: I think the concern is that it's going to be expensive considering its technology aimed at a more casual audience, and it might not be priced for the mass market as an impulse buy...
Chris Lewis: Here's what I will say – we are very clear that we offer great value now, we always have. We're focused on continuing to offer great value and we're price competitive, we've always been price competitive. We have an appetite and realisation to stay price competitive in our offerings whilst continuing to offer the best value in terms of the experience.
Kinect for 360 really takes us into that broader, more casual audience. We will ensure that we will offer great value for money and the price point will reflect that. I think it's also true that people will be very happy and willing to pay for a great experience. I think that's true certainly for other parts of the industry as well. We've seen that with other experiences for Xbox 360 and the excitement for Kinect has just been overwhelming. As soon as people have the opportunity to try it out, especially without the intimidation of a controller, it's a very compelling experience.
Q: There's the newer Xbox model – smaller quieter, with built-in wi-fi and retailing at the same price. What happens to the current SKUs in Europe now – can we expect a price cut on those models and are they being phased out?
Chris Lewis: We're excited about the new sleek design and it's whisper quiet. The on-board wi-fi has gone down very well with everybody, and that now is the new Xbox 360. We're not being explicit yet about what other SKUs or products will come later on. We'll be more articulate about that later in the year.
Q: Can we expect a price drop for the Elite and Arcade units?
Chris Lewis: We're not announcing any price changes to those existing products.
Q: So the Elite is going to sit on store shelves at the same price as the news SKU. You're leaving it to retailers to adjust pricing?
Chris Lewis: What you'll see is that particularly on the UK High Street retailer's work very hard to distinguish themselves with bundles and packages and that level of trading will continue. We're happy with the way we're working the inventory through and we're closely partnering with retail to make that happen. We have a good rythmn of supply and replenishment, we're not concerned with any challenges there.
Q: It feels like your reinventing the Xbox – new look, new SKU, new technology in Kinect and a different style of games to go with it. How are you expecting that to influence sales in the coming months and up to Christmas, particularly in the European regions?
Chris Lewis: Europe's very central to our global success and ambition, it always has. Particularly in the last 18 months we've really turned a corner in terms of having the right price, the right marketing, the product and understanding what our consumers want in Europe, when that may sometimes differ to what we see in other parts of the globe.
Kinect for 360 is big for France, Italy, Germany and Spain, where there is a market for the casual gaming appetite that we can now address without the physical barrier of the controller. I think 2010 will be a very big year for us, it is in many ways for us mid-lifecycle. What you've seen is with this new sleek design and Kinect for Xbox 360 we've got at least another five years of this generation where we continue to offer great experiences for people. We continue to attach more games than competitive platforms and we have the healthiest ecosystem with 25 million people connected through Xbox Live. So we are uniquely placed to continue to do really, really well in this business and enjoy ongoing momentum.
Q: Can you put a number on the increase you'd expect in terms of hardware sales?
Chris Lewis: I could but I won't. I can't be explicit about the numbers but I can say our market share has grown. Our business ambition for this financial year, which begins on July 1, is certainly bigger than last year and we constantly set ourselves ambitious targets. Don Mattrick is not shy about aggressive targets for Europe because he now knows we've got the right assets, now more than ever, to really appeal to our audience.
Q: When you first announced Project Natal there was a fear in the core crowd that you would abandon the hardcore market, the consumer that has made Xbox 360 what it is today. Do you think you're addressing that with Kinect for Forza, and titles like Metal Gear Solid: Rising?
Chris Lewis: We remain committed to that hardcore audience, and that's also about bigger landscapes, more intricate gaming. We make no apology for the fact that audience defined us and you saw that we started our E3 press conference with a huge plethora of hardcore games from first and third party partners. That audience remains very buoyant. But we've said it before – we have an ambition to get into the casual space and we will target our communication, our marketing, our price point – everything in terms of appeal to that audience without alienating our core audience. And our publishing partners are committed to that in the same way, they love the fact that we're opening up more opportunities and going into new experiences that we weren't able to do before.
Q: Can we expect games for Kinect to retail at a lower price than the regular games, something closer to software pricing on the Wii?
Chris Lewis: We haven't talked about specific software prices for Kinect experiences. Again, we'll make sure we offer great value for money, we keep seeing that, but we have to make sure we're committed to it. Our audience won't tolerate anything else. The experiences we bring through the games and entertainment will be top quality and the people who will benefit from that will be the consumers.
Q: Aside from motion control, a lot of buzz around E3 this year has been on 3D, from both Sony and Nintendo. But Microsoft doesn't seem to be interested in that market – why is that?
Chris Lewis: Xbox 360 is 3D ready now, it works and we have games out there already. There are two things I'll say about 3D. You need an installed base of 3D technology in the home, the screens and the preparedness to wear the glasses. You can't have the revolution without the army in terms of the installed base. Certainly for this Christmas the timing isn't yet right. Over time there will be a lot more interest as the price points get more realistic, we'll see family's feeling better about having that kind of infrastructure in the home. I think we'll see in 12-18 months from now that will become more important. From our point of view we're very well placed and we'll listen to what our consumers want and we can enhance the experience accordingly.
Q: Do you expect that the time next year we'll be sitting here having a deeper conversation about Xbox 360 3D?
Chris Lewis: It will become a deeper part of the conversations we'll have, yes, but for this Christmas in particular it's too early to be having that conversation. We're really happy with the assets we've got, we've got the new SKU, Kinect, and when we went through the assets we've got for the E3 press conference we've got an embarrassment of riches in terms of new experiences, partnerships and services. With Xbox Live, the mere fact that we can completely change the user interface and enhance the experience without the need to force people down a new hardware purchase route I think is incredible for the consumer.
Q: You're also making the Xbox Live connection more accessible now with built in wi-fi – there's no extra costs for the peripheral and it's a plug in and go experience.
Chris Lewis: That's the fastest wi-fi available out there in this platform space, completely. There's a lot of excitement out there and it's something we take very seriously. We centralise what we're trying to do there around what the consumer tells us we want and what we see in testing, and that's true for Kinect as well.
Q: Aside from the Kinect software, can you assure people that there is other new first-party software in the pipeline? Because at E3 on stage you were showing Gears of War, Forza, Halo, Fable titles, and apart from the Project: Kingdoms from Crytek there was no new announcements or surprises in that area.
Chris Lewis: One of the reasons we're really excited by the number of games we attach – and we attach more games than anyone else out there – is it makes us a great partner for third parties. Those guys have a huge ongoing catalogue of games that we know about to give the consumer hit after hit after hit. From our point of view in Microsoft Game Studios there's a lot more stuff coming. It goes back to my embarrassment of riches point. We had to select the one's that we thought would resonate best in the time available without extending the conference too long. And that's quite a tricky balance. The job I've got in Europe is as much about third-party content as it is our own content, I like the fact that we really share the stage with those guys and there's a lot coming from them.
Q: The Crytek announcement was a surprise – how long have you been working with them on that?
Chris Lewis: We're not specific about timing but it's not happened in a short time frame. They are typical of the wholesale enthusiasm out there that there is to work with us. That's not some floppy gesture, but they love the platform and I think we're good partners. They are healthy and mutually beneficial relationships.
Chris Lewis is executive VP of Interactive Entertainment in Europe for Microsoft. Interview by Matt Martin.