The Schapp End of Things

The new Xbox experience - the goals behind that and the vision is to deliver simple and fun entertainment for everyone. Drilling into that, it's delivering an interface that's more visual, more fun to use, it's easier to navigate, easier to find the content that you want.

And it's more social, which of course includes the new avatar system that we're bringing to the new interface. It includes our new Live party system, it includes our new primetime offerings where we have brand new games and TV shows - the two merging together to create a brand new offering. And our Netflix offering for our US consumers.

So we're packaging that up and helping to reinvent the console through the magic of software, which is pretty impressive and hasn't happened so much - people are used to upgrading their hardware. But we're doing that through software, adding additional functionality, and we hope that people like what we've done.

I think the key advantage is the power of the machine. I think we've got an incredible box, and we were the first machine to launch to a dashboard where you can enjoy games from the Marketplace, Arcade games that you didn't have to put a disc in.

Now the great thing is that we've certainly got incredible disc games - we've got the largest library, the highest rate of games - but what's great is that our service has expanded to where it's extensions to all of these games.

So Call of Duty and Halo with map packs, Rock Band and Guitar Hero with songs, they're doing incredible - 3.5 million songs downloaded, that's 85 per cent of the market.

We've launched our video store internationally, there are so many things we can do. So we see hardware, software and services as the key pillars. We think we've got great hardware, we think we've got the best software, and we think our services are second to none.

While we were leading the industry before, we hope that with the new Xbox Live we can leapfrog again, and show the industry what you can do online, and what you can do with games.

That's spot on. What's beautiful about Microsoft is that the company has amazing resources. Also technology resources - we've got incredible data centres, billing infrastructures, retail infrastructures, worldwide infrastructures that allow us to be in so many countries, in 14 different languages, be able to have daily updates of our Inside Xbox service, to be able to launch our video service, internationally the ability to add local content as we get new partners…

Frankly I don't think anyone else has the wherewithal and the resources that we have, and it's pretty exciting to see it all come together. And when we need to get help on something, we can turn to the big brother that has all these assets in the treasure trove and ask to use them - we need data centres there, that can have x number of millions of users on them? That's okay, we've got MSN, we've got that experience.

So it's nice to have that, but of course it's nice to have a box that's tailored to be in the living room with a broadband connection from the start, with eight years in the console space, and five years of leadership in the online space.

I think you've got a great analogy for where we see ourselves. We don't want to be these stiff, rigid zombies walking around that live in the Uncanny Valley. At the same time we respect who our consumers are, and the next level of consumers that is going to come, and I think what we've found is a great art style that is artistic, not ultra-realistic, not too 'kiddy', and allows a great level of customisation - because that's what it's really about, personalisation and customisation.

It's an extension of your gamercard, gamertag, your achievemnents, your profile, and this is where you can make an avatar that you might use in racing games, that you might use in casual games, you can have multiple avatars. You can use them in games in future, hopefully win some items in games that you can dress your avatar with.

So I think we settled on a pretty good art style.

Well, we certainly don't lay claim that we invented the avatar, but I think we're proud that while avatars are common across the web, rather than have every one of our publishers try to create their own avatar system, we can do it at platform level.

People can take these avatars and be able to enjoy games, enjoy our Netflix movies, they can share photos, play arcade games, so we're excited about it.

No, there won't be any microtransactions for costumes and clothing. When we launch it we're going to have a bevy of clothing and accessories, and what we hope to get into is a regular cadence of new avatar items. And what we're going to work on next up after we've wrapped up this new Xbox experience, is how we're going to package up these things so that we can have our publishers and third parties able to deliver add-ons for the avatars - so that's what we hope to have next year.

When we launch this Fall, all of the items certainly will be free on avatars.

Well what I would say on the subscription is that I would just remind people that we do have an Xbox Live silver membership, so people can enjoy Marketplace, game demos, trailers, previews, they can download movies, they'll be able to create avatars - all without having to have a gold account.

It costs a lot to run a Live service, and one of the nice things is that if you buy a piece of content from us you can continue to re-download it even if you delete it off of your hard drive. And the majority of content that we have on our bandwidth is free content.

So what we're offering is a premium service at gold level that allows us to continue to invest and innovate. When we launched we didn't have video marketplace, we didn't have instant messages, we didn't have video chat. Those have been added, and now what we've done is gone all-in, we've doubled down, and said this is where we're going next.

Ultimately I think the gold service allows us to continue to invest in the infrastructure, to allow us to have multiple millions of people online at one time with industry-leading reliability. And now we've got new features, and it's our goal to continue to have that premium service, and add value, but at the same time have the entry level service for people that want to partake.

What I would remind people is that it's been five years now. This is something that has taken a while - it's been a massive investment for Microsoft, it was one of the differentiators for the original Xbox to have a broadband connection. It was certainly a key differentiator for Xbox 360 to have Marketplace, to look at content, and download games - from the start.

I think we're really very proud of where we are today - 12 million up from 6 million active members over the past twelve months. We've doubled every year since the launch of the Xbox 360. I think you're seeing that kind of explosion happen, we've had Halo launch, we've had Call of Duty launch with great multiplayer, we've had Rock Band, Guitar Hero.

And I think it is hard for others, because we've invested for a long while, invested a lot of money, a lot of resources, and we've continued to innovate. I think we're proud that we have a leadership role, and I hope what you see with our new Xbox experience is that we're not staying at the top and being complacent. We want to go all-in and lead the industry to new heights.

I think you're spot on. Innovation doesn't mean that you have to do something completely brand new. World of Warcraft is a wonderful example - it's a game that I completely love. Now I played many MMOs before that, but it was the only one I invested a serious proportion of my life in to get my level 60 human warrior on the Kilrogg server…

[laughs] I think it's easy for people to say that it's not as fresh and new as something that we haven't heard of before. What I was proud of that we had in the briefing was avatars - we've seen them before in other avenues, on the web and so on. But we're bringing them to the platform, we're bringing them for everybody to use. You can use your in-game persona, or your online persona.

We've got great new casual games - You're in the Movies - have there been games with cameras before? Of course, but I think it's a great new innovative game that people are going to love.

We've got the first wireless microphone with Lips, we've got the ability to connect your mp3 player and use your own music - there's innovation in these titles, I don't want to discount that, but what we also talked about was Live Party. The ability for eight of us to grab together, we can chat all the time. We can be in disparate experience or all in the same experience.

And somebody can hit Uno Rush and automatically run the game on all of our machines - we don't have to go to our games library and find it. Another person can share photos, you launch it, stream your photos to me. We have Netflix [in the US] where we'll be able to watch a movie together - I think that's really innovative, it's one of our most requested features. I want to be able to get together with my friends.

I think our Primetime channel is another example of innovation where we've got time-slotted dynamic on-demand gaming, which is a bit of a mouthful, but if you think about it, it's not a retail game, it's not just your strict downloadable game - it's digitally distributed and it's dynamic. Every experience is going to be fresh and new - every day it's going to be different.

We're going to have live hosts, so take 1 vs 100, our new game partnership with Endemol - launching internationally - and what we hope is that from 8-9pm it'll be football trivia. So we'll hope to gather a community of football fans together from 8pm to play the game that will have a live host. Every one of our boxes shipped with a headset, so there's interaction there.

Now from 9-10pm it might be Chelsea fans, and from 10-11pm it might be Manchester United fans...but don't worry we'll have Liverpool as well…

[laughs] Arsenal...?

But you get how we can do that in a brand new experience with the whole community as well. It's not just me, it's me with the entire community, and it goes into what Endemol says - that a third of their viewers also play along with the game on the computer or with their mobile phones. So there's innovation.