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Xbox boss admits internal goal was to sell 200m consoles

Phil Spencer says the rough start for Xbox One was partly due to the company's misguided approach to the business at the time

For much of this console cycle, Microsoft has watched as its Xbox One has been handily outsold by Sony's PlayStation 4. While the PS4 has already been bought well over 40 million times, Microsoft has long since stopped even issuing hardware sales figures. After botched messaging at the outset around DRM and always-on policies (which Sony PR quickly capitalized on), it became clear that Microsoft would need to alter its strategy and mindset. In an interview with Australian outlet Stevivor, Xbox head Phil Spencer candidly acknowledged that the team led by Don Mattrick at the time was shooting for 200 million units sold. The problem, Spencer admitted, is that Microsoft for the longest time viewed Xbox as a trojan horse to get into and dominate people's living rooms instead of treating games as the focal point.

"The goal that the team had was to figure out how could we sell 200 million game consoles," he said. "We've never seen a console sell that many units. The biggest individual console, the PS2, did 120 million or something like that. The approach the team took was people are moving to OTT Video Services [over-the-top, like Netflix and Stan] and television's getting disrupted - and if we could build a console that could be at the center of this transition and really embrace not only people playing video games, but also people with the changing habits in television, you really take the console market and the gaming market and you expand it potentially."

He continued, "... I've been on the Xbox since we launched the original Xbox. I've played video games my whole life. I still play video games all the time. That's what I do. When we came in after two-and-a-half years ago and started running the Xbox program, I centred us back on not trying to become something other than a game console. You don't earn the right to be relevant in other categories of usage for the console until you've earned the gaming right, so let's go make sure that's what we deliver."

"The idea that video games are a category that Microsoft should go be in a whole number level, full support, it only happened a number of years ago"

One of the first things Spencer did was to unbundle the Kinect from Xbox One. A number of people simply didn't use it, so why force it on consumers? More recently, Spencer has pushed initiatives like the indie movement with ID@Xbox, the Xbox Game Preview program and the Xbox Play Anywhere label that gives consumers dual ownership of titles across Xbox and Windows 10. He noted that these are all signs of an internal shift at Microsoft and how it perceives video games as a business unto its own that's worth investing in.

"I think that this has been a transformation in the company as well," Spencer said. "The idea that video games are a category that Microsoft should go be in a whole number level, full support, it only happened a number of years ago. We started Xbox because we were worried about the living room; Xbox became 'how do you shore up computing in the living room?' The people who were building it were clearly building for a video game console, but I'd say the company's focus was a little more broad than that.

"Today, if you sit down with Satya Nadella, the CEO, Amy Hood, the CFO of the company, they will talk about gaming as a core capability of Microsoft, not gaming as a bridge to somethings else, but gaming into itself. It's not just Microsoft, you see Google investing time in gaming, you see Facebook buying Oculus, you see Amazon buying Twitch, you see multi-billion dollar transactions going on at the gaming space, not so you can go be something else, but because gaming is a very high engagement, high monetization use on any electronic device that you see."

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Latest comments (10)

Jordan Lund Columnist 2 years ago
Setting a goal that no console has ever met was a tremendously bad idea. The only way to hit 200 million would be to partner with cable companies and replace all cable boxes with Xbox Ones. Then you might have a chance.
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Klaus Preisinger Freelance Writing 2 years ago
Cable companies will never package their product with a box that can runs apps by the competition (i.e. Netflix)
Cable companies will never package their product with a box that generates money for somebody else (i.e Xbox Store)
Cable companies have their own supply of boxes to sell, tailor made for their company's interest.
The need for a cable box is true in the U.S., not true in other parts in the world. I just plug a credit card sized thing into my TV and voila, all my subscriptions right there; no second remote for the TV program.

I cannot imagine Microsoft was oblivious to all these facts upon conceiving the Xone. If you shift the argument away from cable boxes to dominance of the living room, the picture does not change at all. The Xone can hardly compete with the featureset of other modern devices aimed to feed content into the living room, i.e. video players, devices linking you to as many streaming services as possible, Synology devices, etc. Do not get me wrong, a Windows PC can compete with all of these at the same time, but for whatever reason a Windows console was pruned hard until it cannot.

That whole "focus on games" sounds reassuring to people interested in games, but when it comes to the Xone as the device with the best living room features, it seems MIcrosoft has given up. For every app, such as Netflix, you can name, there is at least one app that is blatantly absent, e.g. SkyGo.
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Adam Campbell Game Manager, Azoomee2 years ago
Cable companies will never package their product with a box that can runs apps by the competition (i.e. Netflix)
To be fair, Netflix has found its way onto cable TV boxes in the UK (i.e Virgin), though I'm sure for every service that does support them, there's a more dominant one that doesn't (i.e. Sky).

I think Microsoft made a big mistake when they backed away from media and TV focus. Their messaging could have been a lot better and I'm not sure what they expected to get out of Kinect, but I could definitely see a market for what they were trying to do, one bigger than just gaming alone.
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Jeff Kleist Writer, Marketing, Licensing 2 years ago
@Klaus

I cN tell you for a fact that Comcast and others were very much in board, as long as Jinect was locked to every one. The biggest growth area for cable companies is additional services like home security and automation, and the Xbox One was going to be the center of it (Amazon poached many key members of the Kinect team, and you're seeing the original vision in the Echo). Microsoft has had a very long relationship with Comcast and Universal, and a bunch of the tech is in Comcast's X1 system, which again was supposed to have Xbox in it. No I don't believe for a second, that Comcast still would not of required a renting of the X one hub, or some other piece of hardware to make it work.

We have CableCARD here as well, but few devices support it, and the cable companies are currently fighting an app based evolution of it to keep from being forced into providing VOD and DVR through it. Netflix is currently on Comcast and several other major services on their boxes, and the guide integration you see on the X1 is a long term piece of their goals. Microsoft wanted to catch cord cutters like Plex, hence the TV tuner and DVR feature (which the idiots have killed in the US because of their whining and screaming about anything to do with Tv). There is no reason the X1 could not support a USB cacleCARD tuner, and many are available on PC.

Apps like SkyGo are up to the provider to develop and supply, and Cerizon in the US recently killed their Xbox app, thigh I expect it to re-emerge was a UWP compliant with the FCC.

Microsoft had yet to sign many of the deals with the cable companies when Sony and the Microsoft haters/paranoids began their panicked, highly succcessful slime campaign, as many of the media deals were supposed to be announced closer to the fall. But by that time everyone was backing out and losing interest due to the BS, and the removal of Kinect finished it off.

Microsoft will likely return to some of these goals, but only if Scorpio returns market and mindshare to the point where it becomes attractive again. I'm confident UWP will bring a large number of the missing apps back in, as the install base will be large enough to justify it. I know there's a lot of missing apps, and stagnant ones like VUDU that have UWP versions in development or cert as we speak.

Edited 1 times. Last edit by Jeff Kleist on 2nd October 2016 12:33am

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James Prendergast Research Chemist 2 years ago
@Jeff, that may have been the case but the point is that your vision of that only helps if you extrapolate the same behaviour across the whole world. It doesn't work that way and they would never have gotten 200m because making a device with features that only benefit one country and yet make everyone else pay the same (or more) price for that hardware which is then mostly useless/an afterthought in the consumer's own territory is not a way to sell units...

I'm not convinced that a deal with Comcast et al fell through to some 'slime campaign' - the thing about anger and complaints is that they come from some kernel of truth. The upset I saw about the XBO having to be online all the time, bunlding of Kinect and lack of international features was entirely justified. Not sure what else you might class as a slime campaign.
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Klaus Preisinger Freelance Writing 2 years ago
The maze consoles will have to navigate:

Our current company infrastructure is nothing but the result of our current technological and political limitations. There is a certain number of tech companies that just will not quit rambling on about the cloud. But the cloud is not the natural pinnacle of the internet. Large centralized service providers of webspace and bandwidth are not the natural evolution. They are the mere response to first generation broadband technology having cripplingly slow upload speeds. The cloud exists because you may have 100Mbit download, but your upload shuts down at 8Mbit. The entire large scale Internet structure is a response to those broadband connections sold between 1995 and 2015.

This limitation however, is already beginning to vanish. A company with a gigabit connection will toss the Microsoft Cloud-Clown from the room and respectfully ask for the Azure Sales rep. The same change will happen to the end consumer. You will see people having upload speeds at home equal or in excess of what you get today at an entry level hosting facility where you rent rackspace. This is ultimately where 200 million households in the western world will be on the prowl for a new device. You will not need a mighty Facebook server and internet infrastructure to handle a dumb text message. You will have mesh-VPN and distributed servers and services within the mesh running things.

Right now, the Comcasts and Vodafones of the world are but the squires helping the big Internet services make profits. They are wondering what went wrong and why so little of the money made from the internet actually lands in the pockets of those providing the internet to the end customers. Sure, there will be a digital divide again between cities and suburbs/rural areas.
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Jeff Kleist Writer, Marketing, Licensing 2 years ago
@James Prendergast: The slime campaign prevented most of those things being explained. Sony had a total lockout on used games, and Microsoft had a system (likely still to emerge in some form) that allowed you to sell, trade and lend your digital media (both were anti-Gamestop measures designed to return royalties to developers while granting new rights to consumers, . Sony went scorched earth, and used Microsoft's old HD DVD playbook. As one of the few who was on the Blu-ray side working against it during the Hi-def war, I recognize it when I see it. They knew what was coming and made sure Microsoft would never get a chance to explain the,selves.

The idea was to have cable companies shipping Xboxes instead of cable boxes. Think about how many cable boxes are in an average subscriber home. It really doesn't take that long to get to 200m. Without the guarantee of Kinect being there, companies weren't interested in developing the apps that integrated with it. The lack of international features again is a fault of those companies, and the natural progression and expansion. You certainly would have Sky and BBC apps in place early on for example, though mainland Europe would likely be slow to follow due to the myriad of regulatory hurdles and companies to deal with (similar to the tv scheduling rollout, but probably longer). Most people really have no idea exactly what kind of hellhole Europe is for video media, something the EU has been trying to fix eith a unified licensing bureau.

The problem is that people on the game side don't understand this part of the business,a no those who hate Microsoft for reasons both justified and insane just want them to die and are ready to believe pretty much anything. The same people screaming about Kinect spying on them have smartphiones with five Microphones, two cameras, a tracking device and a facebook account they post to ten times a day.
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Bob Johnson Studying graphics design, Northern Arizona University2 years ago
Cheap streaming boxes also thwarted MS's plans for the X1.
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Paul Jace Merchandiser 2 years ago
The same people screaming about Kinect spying on them have smartphiones with five Microphones, two cameras, a tracking device and a facebook account they post to ten times a day.
I also found it extremely ironic that nearly everyone complaining about Kinect spying on them most likely also had camera's in their cell phones and PC's, cell phones and PC's that they used daily. But the real reason that this conspiracy theory got dumped into Microsoft's lap was because the Xbox One launched not long after the world was introduced to a man by the name of Edward Snowden. Had the Xbox One launched a year earlier it would have been a non-issue.

Edited 1 times. Last edit by Paul Jace on 4th October 2016 3:03am

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Jeff Kleist Writer, Marketing, Licensing 2 years ago
Paul, I agree with you up to a point, but there is a strong hatred in Europe of Microsoft, much of it stemming from anti competitive things they did back in the 90s that they were rightly spanked for. Of course, Apple does exactly the same thing (for example, it is impossible to write a native Blu-ray player, or a competing DVD because Apple refuses to release the hooks for the DRM system to make such a thing possible, something Microsoft is required to do by court order. These same people were used by Sony to juice on the people influenced by Snowden. And then there was one fun guy leading the charge in one forum, who when pressed finallly admitted he belief that it would be used to gather evidence he was actually home If he was flagged for torrenting pirate material.
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