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Believe the Hype

Neil Thompson on street dates, the Elite, handheld gaming and the Halo 3 frenzy.

Following part one of the exclusive interview with Neil Thompson earlier in the week, in part two he tells us his thoughts on Halo 3 and whether there can ever be such a thing as too much hype, as well as Microsoft's decision not to challenge the DS and PlayStation Portable, and who's been buying the Xbox 360 Elite.

Halo 3 seems to have been well received by the Japanese media?

I think Halo will be a phenomenon, full stop. To some degree it's kind of gotten there. Whether Halo 3 is the key stepping-stone in Japan to make that market go forward? I don't know enough about the Japanese market to really comment sensibly on that.

I'm sure it's going to help us drive forward there, and in North America and Europe I'm pretty sure it's going to be a significant stepping-stone for us going into the Christmas period. [This] week is going to be an exciting week, but the Halo 3 phenomenon will last well beyond [this] week for us.

To some degree it has to, but I think it will. The interesting thing will be the impact it has on Halo and Halo 2 - the joy of Halo is the storyline and the narrative of it, as much as the gameplay aspect, and I think people will get more immersed in the story of it and want to revisit what Halo 2 was about, and where it all started as well to some degree.

So I think Halo will be very successful for us, and a major plank in that Christmas trading period.

Were you disappointed that Argos broke the street date?

From what I understand of it, it was an honest and genuine mistake. I'm disappointed that it happened because of the turmoil it creates, but I totally understand that in every organisation sometimes it's tough to manage every particular aspect of your supply chain and everything, to the nth degree, so that something won't go wrong at some point.

If it wasn't Halo 3, nobody would have batted an eyelid, and nobody would have even noticed, it would have been an error that just happens, and away you go. I don't think there was any malice on the part of Argos at all, it was just an honest mistake.

Are you pleased that other retailers didn't use the oversight as an opportunity to start selling it themselves?

I'm happy at the moment that nobody has used that as an excuse to go and do silly things. We've been very clear with retailers that if they do choose to go down that path, then a lot of the support that we've given them, in marketing and things like that - that has an impact on it.

We're pretty forceful in our approach to these things, because we want it to be a fair market for all. What happens [on Wednesday] when they all have the product and decide to do whatever they're going to do with it, then it's up to the market. Then retail decides what the landscape looks like, but in terms of us being able to operate the supply chain effectively so that everyone is at the starting gate together, that's as much as we can do.

We've generally had very good support from retail on our street date agreements. When we do want to enforce them because we think it's good for the market, they've generally been very good at holding to it. You always get the one or two exceptions, but generally I've been pleased with the reaction we've had.

So you don't have any plans to penalise Argos in this instance?

Argos reacted incredibly quickly to the mistake, they issued us with a detailed summation of why the mistake happened, they obviously didn't seek any commercial benefit out of it. They've made us very strict assurances, they've been very helpful in communicating what happened with the broader community to help us manage people's expectations.

So, no - mistakes like that, we have to be somewhat flexible, we can't be too punitive in those situations.

How about the Elite - do you have any sales numbers that you're ready to release yet?

I have them, I don't have them to release though. It's gone very, very, very well. Our data is saying so far that a lot of people buying it are new to the platform. It was interesting to us, because we thought that a lot of people who came to the platform early would have chosen the Elite, but a lot of the data we're getting out of store visits, etc, is showing it's new people, which is fantastic.

Now I don't know if that's because it's got great memory capacity and people are anticipating Marketplace and those sort of technologies, or whether they just like black. I don't know. But certainly here and what we've seen in the US there's a very strong trend to the Elite being a major proportion of the overall mix of consoles that we sell.

What we're starting to find is the balance between the different levels of console that we have now, it is evening out somewhat - which I think is a great testament to the strategy that we had to begin with said that we need to offer to people at different points in their gaming experience, what they want from gaming and what they're prepared to invest in gaming.

If we offer a different SKU at different levels, we can service different parts of the market in the right way. From the ratios that we're seeing, and obviously Christmas differs slightly from the rest of the year because you have different purchasers coming into the market, it does feel to me that we are capturing different segments of the market with those SKUs.

I think our decision to take that route and to allow people to scale up as they wanted to was a good one. I think the release of Elite is just another iteration in the choice cycle path that we're going down.

We continue to see the Nintendo DS sell large numbers of units, and bring new people into the gaming market. There was some initial speculation that the Zune might have contained some gaming capabilities, so is there any regret, or any lingering ambition, regarding the handheld gaming market?

When we decided to enter the gaming arena, beyond PC games, I think it would have been an enormous mistake for us to then quickly say: "Well we'll get into the console business, and get into what we would call today the traditional handheld business."

Because both businesses are incredibly competitive, very complex, and to make money out of them isn't straightforward - you can't just throw money at and you will make money, is just isn't that simple, so I think we made the right bet on where we felt we could make a real difference.

Do I think we could have made a difference in the handheld market? Yes, I think we could, because I think a lot of the work we do in the handheld business on PCs, and in the handheld PC companions, and in phones, etc, I'm sure there're ideas and innovations that come out of that, we could have sparked it directly into that market.

But I think when we decided that what we were going to do was to help people in their living rooms and their bedrooms, that was absolutely the right strategy for this company.

The DS has been a great success for Nintendo, and I think the interesting thing that case writers looking back at Nintendo in the last two or three years will look at, is the simplicity somewhat of the technology. They may argue it's a complex technology, but in a lot of ways it's actually quite a simple technology.

I think that really goes to the point that consumers love complex technology, as long as they can press a button on and off. That's about as complex as they want their interaction with it to be as long as they can then enjoy it.

But I think what Nintendo did a really great job of is just getting that level of simplicity. And then again thinking about what content the broader market will absorb and like and get involved with without any barriers, with no learning as such.

I think they have done a great job on the handheld market and I'm sure that's somewhat derailed Sony in the way that they've had to think about their overall business, because I think the PSP has had to struggle against that. And when you're fighting on multiple fronts, if you're not careful, you can lose everywhere instead of trying to win in one specific place which is really what we've focused on.

But coupled with what Bill [Gates] said last year, is that a lot of what the Xbox journey is for us, when we look to the future, is about interoperability. Being a Windows company, we understand what it is to enable devices to talk to each other and to share things.

We think the secret of the future overall is allowing people to do what they want to do on their devices and allow their devices to connect in as broad a way as you can. So if you want multiple devices to connect, then you can. That's the kind of journey we're on.

It doesn't mean others can't be successful in a different type of journey but in a more specific way, but I think we're on a broader, more inclusive device journey that is going to take us somewhere.

Now, everybody always asks me: "What's the ultimate thing, then? What's the vision?" The way I look at it is that we're making multiple bets in different ways, and the way that we're building technology enables these things to connect. But consumers are ultimately going to help us to understand what they want to connect and where. Technology can do an awful lot, it's making it saleable, and what people want that is the challenge that we all face.

So I think we're on this journey - I don't think we really know where ultimately it's going to end, know that if we enable things to connect together, there's going to be some value there for consumers.

I'm sure in the short term you will see innovation coming out with the way that the guys used Forza last year to demonstrate how you could interact between phone, PC, and playing Forza on 360 by changing the decals on cars, changing your set-up, and all that sort of stuff.

I'm sure that will progress and progress, but where is the ultimate end? I don't know where that's going to go, but it really depends on a lot of other parties in this ecosystem that we're in. We're just trying to provide some fairy dust to bring together and see where it goes.

Regarding Halo 3, do you think there's such a thing as 'too much hype?'

If the product didn't deliver, then you run the risk. If you over-hype something that doesn't deliver on the promise, then you run the risk of a backlash and that can work against you. I honestly don't believe that's the case with Halo 3.

I think people that love the storyline of Halo will feel really good about where this takes them on this trilogy journey. The maps are awesome, and it's very much the Halo feel, so it's not a radical shift in any way, shape or form - I think it's a nuancing of all the best bits in its nicest format yet.

The really interesting thing about it - and again this is us leaping into the unknown - is when you look at what you can do with it outside single-player and multiplayer, and the sort of features that we've included, like being able to edit your own maps and take movies of games that you've played, then take those movies and go and play with them on Bungie.netâ¦

How users and consumers take that element of it, which is really just creative tools that we're putting in the game, we're not saying where this goes, we're just saying: "Here are some tools, go play with them and see what you can create." That's the bit that's the most exciting, but also the most frightening, because we don't quite know where that's going to go.

I think if people grasp that in Halo 3 and really immerse themselves in that I don't think the hype will be too much at all, because it's a whole voyage of discovery that's different to what they've discovered historically. The traditional single-player aspect that will go on, they'll love, but for me looking at it and playing with it was really interesting - it starts to really test your creative juices.

I think that's also really interesting for gaming as a whole, because for gaming as interactive entertainment, I think it really has to have that emotional, personal input from the player. And I think publishers and developers looking at this will say: "How do we get that interaction to the next level, and make people cry, and laugh, and that sort of stuff."

And I think this does take us to that step. Everyone will talk about the money, and stuff like that, because that's a headline-grabbing idea - that gaming is potentially going to be the biggest entertainment event that hits this country this year, bigger than any film premiere or anything like that. And that's what people of a certain age will find fascinating, because they think of gaming is just this weird thing that kids do.

But your proposition is right if the product doesn't live up to what you're saying about it, because consumers, in this day and age - feedback is instantaneous, feedback is global, and you cannot control it. As companies you have to be very careful about what you're promising, because there's no hiding place in today's connected world.

Neil Thompson is senior regional director for the UK and Ireland at Microsoft's Entertainment and Devices division. Interview by Phil Elliott.

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