Engadget & Joystiq interview: Peter Moore, head of Xbox
We got another opportunity to catch up with our pal Peter Moore, the man at the top of the heap over at Microsof'ts Xbox division. We chatted it up about the usual stuff: games, Microsoft's E3 presence, the 360 warranty debacle, and what's up with all the special edition stuff Microsoft keeps pumping out.
So, any new tattoos this year?
None. Out of limbs. You were there the other night...
What, no chest piece? You've got legs, too.
No, my
PR handlers would -- well, I'm game for a lot of stuff, and then they go, "No, I don't think so."
You could do full sleeves, the back...
I think the next thing would be what's (horribly) called a tramp stamp... [laughter]
So no tramp stamp for Peter Moore, unfortunately. So last time when we spoke with you last year, your competition hadn't launched yet. So you guys were kind of in a unique position to be the first next gen company out of the gate. Your system, you know you have a lot of second wave titles showing up. Even though the Wii was certainly a phenomenon at last year's E3, there was a lot of excitement about the Xbox. So now here we are, a little over a year later obviously and your competition has launched, in your own press conference your materials show that the Wii is -- not by much -- outselling the 360.
Numbers don't lie!
So where do you think the 360 stands in terms of your competition? You have the Wii that's actually outselling the 360 and you have the PlayStation 3 which obviously isn't although, sales have increased after the price drop. So where...
Apparently they have. I haven't seen any independent data that supports that.
At least according to Amazon. So where does the 360 stand?
I feel very good. If you believe that this industry is about games. Games industry about games --
As opposed to lets say, accessories perhaps.
Yes [laughs], peripherals. The point I was trying to make at the press conference is that the industry is evolving very quickly and the industry is evolving. Yes, hardware is still in the fore, sales of hardware are a key indicator, but its more complex then that. There are revenue streams, there are indicators of health that are coming from different places. The connected state of our consumer allows us and our partners and everybody to do new and unique and interesting things that both bring great value to the consumer in the form of delivering demos in real-time and bringing E3 home. A great example this week, everything that we are doing is posted.
If you're not one of the fortunate 3,000 now invited to E3, we started this trend -- and I noticed that competitors are doing the same thing now -- we'll are bring it home and propping the content and you can download it as it comes available. I feel really good about the health, the slides we put up, I don't try to change the numbers. The numbers are what they are and we feel that we have a pretty good race with the Wii and we're outselling the PlayStation 3 by about 2 to 1.
The health of the industry which is the bigger question, I think is strong. We've got three consoles which are all in market and performing. I've been in this industry long enough to know that that normally would not have been the case, and I think that we've all laid down our markets and thought about who we are and what we stand for, pricing, game content of what we think of the future and connected entertainment. I feel that we are in a great position. I feel very bullish not only for us, but for the industry as a whole.
So now that you have had a chance to play with the Wii and play with the PS3, what are your thoughts on those consoles? Not necessarily how they relate to the 360. But specifically on those two systems.
Well the Wii, the innovation that the Wiimote, and pulling in people outside of typically the core gamer group that either are lapsed gamers, casual gamers, or never played a game before -- I think is great for the industry. I love playing the Wii. It's got some very unique experiences, I caught glimpses of the press conference yesterday, going to fitness, health, and well-being is an obvious move and something that I'll watch with interest. The question that Nintendo has to answer and Reggie kind of tried to do that, but is the experience sustainable? Are third parties going to be successful? First party is very strong on Nintendo platform, as it always has been, so is there room for the third parties to be very successful? Reggie certainly said that that is the case. I think they seemed to go out of their way to showcase third parties where typically its a first party love fest at times.
So I've played the Wii, enjoy the Wii. My kids are in love with it, I have adult kids so I don't have the advantage of a lot of people that I work with, who have 9 and 10 and 12 year olds, I don't have that, but they all enjoy it, clearly it aims to that demographic. With regards to the PS3, I haven't played it a lot. I only got see the back end of the conference, I had to step away from my computer to get back to work when Kojima-san was on showing the Metal Gear Solid trailer; I didn't seen LittleBigPlanet, and, of course, KillZone. So but the experience, they need some big games. You guys write about it everyday, the consumer writes about it. They need something that consumers say,
this is why I need to buy a PlayStation 3. Killzone may be that, I don't know what else could be. Metal Gear Soli -- 2008. We're going to have to wait and see, but they have laid out who they are, we've certainly, as I said Tuesday night, put our cards on the table and the consumer will decide. It will be a very, very important holiday.
So getting back to what you said before, that the industry is getting strong, its supporting three consoles -- which as you know through experience with Sega hasn't always been the case. Microsoft just announced their last quarterly earnings at the end of the fiscal year, that you guys didn't make the 12 million unit goal -- the 12 million goal that was recently lowered from a previous goal. You hit 11.6. Why do you think that was?
Well you know, forecasting is an inaccurate science. We believe that 12 million looked like where we would be. We had some games move that we felt would generate some industry excitement towards the end of the fiscal year. It didn't. You could also argue that the ability for us to continue to talk about holiday meant maybe stalls for some people. We're in a generation that could be 150-175 million units of hardware. I really believe we can move that many units of hardware in this generation. When I look at the strength that exists currently in the form of the PS2, that gives me great confidence that we've got a long tail ahead of us in this generation. So missing a target -- an internal target -- by a couple of thousands is not giving me any cause for concern. We still sold 11.6 million units of hardware. Our attach rate through the roof. The lineup we've got of games this holiday--
What is the attachment rate?
5.9. Yea. And continues to grow obviously and that is unprecedented for a console at this point in its life-cycle. The point I was trying to make, is that we as an industry need to start looking more closely at attach rates and start looking at the way that the mobile phone companies, they call it ARPU - average revenue per user. Were looking now and are looking in the future at skyrocketing development costs, go-to-market market costs (what we call GTMs), bringing games to market in the tens of millions of dollars. Pure marketing costs in terms of television campaigns in terms of millions of dollars, and we've got to continue to invest in the industry, invest in the people making games, and the only way to do that is to continue to find new revenue streams.
It may be not necessarily that taking revenue from our consumers, but bringing in consumer companies that want a piece of our very desirable demographic. Dynamic advertising platforms, sponsored downloads, of course providing downloadable content either free, advertising supported, or for payment are other models we'll look at. So its an interesting time in the industry. We think that the growth of digital distribution is something that we pioneered with Xbox Live Arcade, its something that has great potential, of course balancing it with our retail partners as well. So there is a bunch of stuff going on that I've never seen in this industry and I think we're at just the tip of the iceberg of the opportunity.
There is nothing new -- HD DVD players sell very well. Nothing new to report. Me standing there again saying it's selling, you know, its one of those things that's part of the fabric of who we are. Its not fundamental to our strategy as regards in different to Blu-ray being
fundamental to Sony's strategy for Sony Corporation, not necessarily Sony Computer Entertainment. And I don't see our games machine as being a blunt object to win a high definition movie war. We are a huge supporter of HD DVD. HD DVD continues to be something that we believe in greatly. The HD DVD market is despite of what you hear, and the
PR machines of both camps are churning endlessly, is doing very well. Stand alone players are selling very well. Toshiba in particular doing well when bringing the price down to $299.
The bottom line is that I had 75 minutes to deliver the messages and I wanted to talk about games. E3 is about games. Hollywood is up the street, we wanted to talk about Disney and give that because we thought that that was a big deal. There was nothing noteworthy in HD DVD. We talk about it everyday outside of E3, but this is a games convention. We are very, very, very focused on delivering games and not confusing issues around high definition movies. We are very focused on HD DVD. If the consumer, and you've heard this from me ad nauseum. If you're fortunate enough to own one of these [points at HDTV] and you want to watch HD DVD for $199 which I do, and I love my HD DVD player, plug it in and off you go.
The E3 press was ostensibly not started by Microsoft's press conference. Sony announced their price drop on Monday, or kind of over the weekend.
Kind of a price drop! I dunno it still costs $499 and $599.
Well it was certainly a $100 cheaper so regardless of whether or not its overpriced to begin with...
But I want to make a point, its not $100 dollars cheaper. So, they are confusing the consumer. When you say price drop for a consumer, its a $100 cheaper to get into that. So yes, what was $599 is now $499. But the price of entry is the important thing in our industry. It will cost you 500 bucks to buy your entry level PlayStation 3. And what's not getting in the way of Sony doing their business is a lack of storage in their hard drive. Whats stopping Sony from growing their business, and I'm really hopefully that their business does continue grow -- and I've seen reports this morning that Capcom expects yet another price drop for the PS3 -- is the price of entry, and thats something that as business people are very cognizant of. I don't want to be anal, but thats just my perspective.
With that said, I think there was no way that but to expect that that price drop would encourage some growth of the PlayStation 3 platform. Considering that you guys just missed your internal numbers, the Xbox 360 has gone a staggering 600 days without a price drop--
I haven't counted them, but that's pretty cool.
--compared to PlayStation, PlayStation 2, Dreamcast -- Xbox which went 180 days or so before its price drop and now the PlayStation 3. The PlayStation 2 went went 525 before a price drop, and its an enormously sucessful console and you're even pushing that number. Why 600+ days before a price drop? You could have hit those numbers with a price drop. Shame Kim said that a price drop is in the works.
I don't know what Shane said. Clearly people I think are misinterpreting what Shane said, but let me be very clear that 600 days should be good news for people, good news for the industry. One of the things were looking at the need for all of us to look into consumer segments. Yes, of course ultimately there will be a price drop -- we're not going to be more than 600 days or 1200 days at our current pricing. This business is built on getting your pricing in line. This is my point back to Sony. Getting your pricing in line to attract new consumers so that you continue to replenish your consumer base. There are people who sit on the sidelines until one $199 is the pricepoint. We've seen that in previous consoles. Sony has said themselves that 80% of their volume comes at $199 or lower, and so, huge news for our industry that we're still all pretty solid and our software prices are holding well, and what that means is that we can continue to invest into new games. We're very comfortable with our pricing right now. We have nothing to announce for pricing, but you guys will be the first to know when we do.
I think that to say that not announcing price drop is good news -- maybe for you guys. But for the average consumer it's not good news. I think a lot of people really want to have a price drop when all they are seeing from a Xbox in terms of a consoles is the addition of HDMI, or this and that peripheral, or this new Halo 3 Special Edition. What people really want is to get another console or to get their first console for less money. So I guess our point with this is, are we going to see a price drop this year?
You could ask me that question all day long and you know what the answer's going to be!
I'm still obligated to ask. [laughter]
I have nothing to announce about pricing. But when we feel is the appropriate time we will do our price drop, of course.
How about an ancillary question then.
Sure try a different way. [laughter]
Lets go around the corner. [laughter]
I know how all this works. [laughter]
So you're talking about Sony getting its pricing in order. They've introduced this 80GB console and there is going to be...
I'll throw it back, why didn't they drop it to $399? You don't think that the consumer isn't screaming out for a $399 PlayStation 3?
Yes... but the PlayStation 3 also comes with a lot of very costly features out of the box that the 360 doesn't. Namely Blu-ray and a larger drive.
Believe me it's going to be about price. It will be about price. Its like when I buy a car they advertise it and they show it starting at $20,000. Price as shown -- $33,000 because its got GPS, its got Bluetooth, all this stuff. This is about price. We're a mass market industry that needs to bring in hundreds of millions of people.
So you already have three console SKUs for the 360. A lot of people still think that there is a generally mixed or muddled message for the Elite.
The only muddled message is where do you find one right now, because they are sold out.
Yeah. So for starters, can you comment on Elite sales?
Well yeah, they are very good. I typically don't do anecdotal, I wait for NPD to speak for us.
But you're confident that those numbers are going to be impressive?
Oh yeah! Its done very well. Lets be clear, what we are doing -- you're right, because the industry has never done this before, multiple SKUs. Do you remember the abuse --
they're going to do two different SKUs? The abuse we got when we announced the Core and the 360.
Well, we just don't do that in the video game industry. But then we started to see, as you layer in software and services and then we started to see abuse was
how can you offer me this and only offer me a 20GB hard drive? And we said you're right, hence the Elite. Is it going to be hundreds of millions of units? No. Is it a particular consumer that were aimed at? You bet.
So, you guys have just announced an additional SKU? The Halo themed Xbox.
Special Edition.
Special Edition.
Yea.
But this unit has an HDMI port, like the Elite, and a 20GB drive like the premium.
Ok. Well I don't know if we've announced that. II'm not sure if--
That was in the USA Today article and also--
Ok, fine. [laughter]
We've got that on lockdown.
If Mike Snyder said it it must be true...
And so did Bungie. So could you comment on how you might price a product like that? Is it going to be a Premium price? (But its got HDMI.) Is it going to be Elite price? (But its got 20GB.)
The way we work with something like that, is that retail is well aware of the product, we're building out our pre-sale programs, and then there will be an announcement. It won't be months, it will be clearly weeks. What we need to do is, we owe it to retailers to not announce their price for them, clearly there will be a suggested retail, as there always is. It's a special edition. When I was at Sega we'd have have 8 SKUs going here at the same time. The Sea Man edition, the Hello Kitty edition, the Sega Sports edition. I mean this is nothing new in our industry. Its a limited edition, we run it once on the lines.
But it's a little different when it has different features. It all of a sudden has HDMI whereas the regular premium doesn't.
I don't think there is an issue there.
Lets move on to one of the big things you discussed previously. It seems to me like one of the angles of Microsoft's press conference was your exclusives.
Yeah. I still believe that content you can only buy a particular piece of hardware that makes the world go around. That has always been the core premise of this industry, providing consumers with content you only get -- you need them to choose you. And why should I choose you versus choosing the other guy?
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