Is Xbox Still Gaming To The Core?

Late April, 2005. The NDA was signed and delivered, and I was waiting for the call from the US. Having foolishly failed to remember the connector for capturing an audio feed, I relocated to a quiet corner of the office on a different floor and carefully laid out two analogue tape decks next to the phone to record the conversation via its external speaker, just to be sure.

An embarrassingly backward way to discuss the future of gaming, perhaps, but that was my set-up when the call came in from chief Xbox officer Robbie Bach, who was about to reveal the name and the direction of the second phase in Microsoft's 20 year gaming plan, a few weeks before the official announcement.

"Microsoft's desire to widen the appeal of Xbox beyond the hardcore is clear enough. But at what cost?"

I was reminded of this interview when I read this week of some recent comments by Bach - now ex-box - reflecting on Xbox 360's stellar performance and how Microsoft ruthlessly capitalised on Sony's costly ball-fumbling with PlayStation 3.

"Some of the success of Xbox was due to the fact that Sony did some really not so smart things," Bach told a business audience in Seattle last week. "The transition to PlayStation 3 was really, really bad. And really hard. They mismanaged their partners, they mismanaged their cost structure. They made their next platform so complicated that developers couldn't develop for it."

At the same time, Bach recalled, Microsoft went on a full-blown charm offensive with key publishing partners, convincing them it wasn't in their best interests to continue to foster a market in which one format holder held all the cards.

It worked. And the likes of Activision and EA supported 360 "disproportionately to what they should have, mathematically." It also summed up Microsoft's early attitude to the games business.

The vast corporation had few friends and many doubters when it launched the original Xbox in 2001. As good as the hardware was, the company was forced to work tirelessly to win the hearts and minds of the trade and the core gaming audience so crucial to the platform's formative years.

This success-at-any-cost mindset ensured executives were far more open and approachable than the media had become accustomed to with Microsoft's lofty rivals. And for core gamers, it meant the HD experience out-of-the-blocks first, with a growing library of seriously impressive games and a best-in-class online service, making Sony appear flat-footed in its hubris.

Today, the global installed base for Xbox 360 sits officially at 67.2 million, particularly strong in the US and UK, and ahead of PS3 at 63.9m. The stuff, no doubt, of Bach and his colleagues' wildest dreams back in 2005.

But it's a position that also excludes the context of over 95 million Wiis sold, the steady rallying of PS3, and the explosion of smartphone, tablet and social network gaming.

"The vision of Kinect for gaming has remained beyond the frequently clumsy reality: nowhere more awkwardly underlined than with the canning of Peter Molyneux's Milo"

Microsoft's mantra at the dawn of this generation was "software and services", which has seen 360 steadily evolve to reveal the company's original, Trojan horse ambition of becoming the de facto entertainment hub of every household.

And this is where things may get a little sticky for Microsoft hereon in. Having fought and triumphed in a battle on a single front, it now finds itself embroiled in expensive skirmishes on all sides - with potential dangers in how it balances out its bets.

During that 2005 interview, I asked Bach why the console was called Xbox 360. Because it will "revolve around the gamer," he insisted. That was undoubtedly true in the beginning; but today an increasing number among its loyal gaming audience are doubting the sentiment.

Little by little, with the ad-and-entertainment heavy Metro dashboard, the relegation of games several tabs away, the burying of additional games content and the casting out of indie games into the digital wilderness, and the scrapping of Inside Xbox video content, Microsoft's desire to widen the appeal of Xbox beyond the hardcore is clear enough. But at what cost?

A gaming platform can no longer survive through the custom of core gamers alone. Kinect was Microsoft's great gamble to extend the life of 360 and capture the casual audience Nintendo engaged with so effortlessly. And, on the surface, it's been a roaring success.

Leaving little to chance, Microsoft staked a reported $500m on marketing Kinect and was rewarded with an astonishing 8 million sales in its first 60 days, making it the fastest-selling consumer electronics device in history.

It has the installed base, then, but do consumers still care about Kinect content? UK software sales suggest a dwindling of interest, with key first party-published titles such as Kinect Sports 2 shifting a third of what the original managed, and Dance Central 2 just a quarter.

Meanwhile, sales to date of 2012's flagship, massively hyped Star Wars release have not exactly set the galaxy alight. And eight times as many have bought Just Dance 3 on Wii as on Xbox 360.

With a few exceptions - such as the charming efforts of UK studio Frontier - the vision of Kinect for gaming has remained beyond the frequently clumsy reality: nowhere more awkwardly underlined than with the canning of Peter Molyneux's Milo and his subsequent departure from Microsoft.

Kinect 2.0 will have a bigger, more integrated role to play in the next Xbox, both in gaming and entertainment, where we may make it some way closer to that original, cheesy promise of "magic disguised as technology". It remains hard to envisage how it will gel seamlessly with a core gaming experience - but that was possibly never the point.

Having successfully taken the game to Sony this generation and broadened the scope and reach of Xbox, then, Microsoft finds itself pulled in several directions at once and is starting to show the first signs of strain.

To come from nothing to where it is today in the console space in a little over a decade is a stunning achievement by anyone's reckoning, testament to how much Microsoft got right along the way in philosophy and practice.

But not even the mighty techno-seers of Redmond can afford a working crystal ball. After all, in 2005 Bach also told me: "Nintendo is a really great company but, with respect, a great toy company. I think they'll do great in that niche, but this isn't about the toy business anymore. This is the mainstream entertainment business". Some niche.

"With so much uncertainty over where the console business goes from here, platform holders need their loyalists and evangelists more than ever"

Last week, Bach compared Xbox 360's battle with PS3 to Microsoft's attempt to take on Apple with the ill-fated Zune. The latter failed horribly in part since, where the company was able to pounce on Sony's blunders, Apple simply did not make any of consequence. "They have made very, very few mistakes over the last 10 years," he noted ruefully.

And Apple, needless to say, is now a huge competitor in the gaming space, with a product and service neither of which existed when Bach first shared his vision for Xbox 360. Soon, too, in the growing battle for the living room, with the Cupertino firm's long-rumoured smart TV likely to prove a powerful obstacle to Microsoft's wider entertainment goals.

With so much uncertainty over where the console business goes from here - indeed, where it even fits into the entertainment landscape of tomorrow - platform holders need their loyalists and evangelists more than ever as a solid foundation in a rapidly changing world.

Microsoft should think carefully before doing anything further to alienate them in the hasty pursuit of its ambitions. Having come so far on the back of others' errors, it now risks making itself vulnerable through its own.