Xbox 360 the only console to "defy gravity" says Microsoft

When I look at that 7 years to the end of the lifecycle here, I'm excited that we're that one console that's been actually defying gravity. I do think we have a lot of help with Kinect coming into that. We built off that strong core base and then brought in that controller free gaming benefit with Kinect. So to your point - how can you position this thing later in the life cycle? - it's actually a neat place that we happen to be. We think we're the one console that's out there that speaks to everybody and delivers their entertainment and makes it more amazing.

And if you look at what we've got, if you're a core gamer, and you haven't stepped over to our box yet, there couldn't be a better time with the games we've got - we just shipped Fable and Forza Horizon and Halo is shipping in a week or so, and then we've got Gears of War coming up the first part of next year and then content for Call of Duty exclusively first on Xbox Live. We're seeing tons of people becoming dual console owners, especially at this stage in the lifecycle if they haven't already jumped into 360. With a starting price of $199, you might as well jump right into our box.

If you're a casual fan, we've got Dance Central 3, Kinect Sports Ultimate, and then Nike+ Kinect Fitness, which is going to be shipping. Great things available for people to play controller free if they are a fan of the Wii or if they're a little intimidated by the controller, we've got something for them. The entertainment offerings that we announced over the past couple of weeks, whether it's Xbox music, movies, or TV, the sports partnerships we've got with NBA, major league baseball, ESPN, on top of the games that we're bringing, is amazing. And then you look at what we're doing across all screens with Xbox SmartGlass, whether it's with Windows 8 PCs or phones, tablets, on top of the TV, being able to have that supplementary experience or flip content back and forth is an amazing thing for people who are looking to get more from that experience.

And then when you wrap it all up in some of the value bubble that we've got this holiday at $50 off the normal price, I think we've got something for everybody. Core content, broad content, entertainment, great price. And at this stage in the lifecycle, offering the best of all that in one box - we love the position that we're in. And being #1 in the US for about 20 months in a row is pretty good too. So we like how we're rolling in with momentum as well.

I think any time you're innovating, you're doing big and bold things and you wait to see where they end up. I do look at Kinect as a major innovation in the industry today. So there are broad games for Kinect, the controller-free experiences for the broader audiences - Dance Central 3 was one of the highest rated Dance games that are out there today (88 metacritic I think was the rating on that particular title). We've got Kinect Sports Ultimate, which is combining Kinect Sports 1 and 2 for PDLC, so there's lots of great content and I think the work we're doing with Nike is just some great controller free experiences that everyone can jump in and play.

"We've only scratched the surface...Kinect is going to be something that everyone's going to want to own"

Matt Barlow

And when you look at the way core has adapted to Kinect, the things that they're valuing with it - the voice control stuff is really starting to catch on. When I look at some of the stuff we've done with Skyrim, some of the integration we have with Skyrim, some of the work with FIFA...voice integration has been unbelievable. If you look at some of the reviews we have on Mass Effect 3 and some of the people who play through using some of the voice control capabilities as well in that game. We're starting to strike the right chords in the core audience, but I feel like we're better off having an asset like Kinect and being able to have the broad audience appeal and appreciate it and then trying some different things with the core. I think another thing that I know the core really does like with Kinect when they're using it are some of the controls for media, whether it's gesture control inside a Xbox video app or even just a voice search inside the dash, and being able to find things through Bing and find content and control.

There are plenty of uses for this particular technology, whether it's gesture or speech, and we've only scratched the surface. We've only been in this thing a couple of years now and some of the innovation we're seeing both coming in this recent release that we talked about for entertainment as well as some of the stuff that we're doing in the future, Kinect is going to be something that everyone's going to want to own. Whether you're core, whether you're broad, whether you're entertainment or game based - the present's great. The future is going to be even better.

We're at 20 million now, and again, that number's just continuing to grow. And I know we've seen holiday cycles like this. Gift givers coming out to buy Kinect is really going to be a large chunk of the console units sold these days. So 20 million units of Kinect and at the end of this holiday that number should be creeping up as well.

From the marketer's perspective, this is the right kind of challenge to have. I'd rather have this challenge of having to talk about too many great things than only one or two decent things. And yeah, you do really have to show, especially when you get into the device that does more than just one thing, what things do you do better than other people. And I think if you start looking at our television spots that we're running for our platform that we started running over the last week or so, you see that theme of we do make entertainment more amazing, whether it's a game experience, where all of a sudden there's a Nike trainer with you in your living room, which we show on the spot - I get the feeling that for fitness or for gaming, Xbox with Kinect delivers something that no one else has. Whether you're trying to search for content on the web, using your browser on your television set, with the device that you use each and every day, like we show in our spot, only the Xbox can make browsing on the television more amazing. If you look at taking a library of music and having it stream for free on your television set - only Xbox with Kinect allows you to do that.

I'm not going to say it's an easy message to communicate - it is a lot of message - but that means that there are a lot of people we can reach with the benefits of our product. And they aren't benefits that you need a lot of words to explain. You show the thing, people experience the thing, and you get it. It's the only box you can play Halo on. It's the box with the most online members who are playing Call of Duty map packs. It's the only box that has Nike+ Fitness. It's the only box where you can play Xbox music and have it stream from a Windows 8 slate.

There are a lot of great things that we do uniquely, but to your point, it would be awesome to have an unlimited marketing budget, but I think that with the dollars that we got the way we're communicating it is going to have us have a real effective holiday.

The thing that we're trying to do with this program is just really give people choice. And that's why I'm most excited to be able to have this - it's really the first in this industry to have this. Usually you pay up front and that's all you get. And we like giving people the opportunity to say, hey, I'd rather pay as I go and have that initial start price come down as low as possible. And then we give people the choice to balance between the two. It's a lot like buying a car or leasing a car. You can argue either side of which one's better, but I think it's most effective that we've given people that opportunity.

So we're excited about the program. Retailers are excited about the program. Consumers who are on it are excited about the program. And it's one that we're really proud to be able to offer as choice. And then we're getting people like you or me to pick which way we want to go. Do I want to pay $199 for the standalone SKU and add Live as I go? Or do I want to pay $99 and sign up for a couple years of the service? Just choice.

I can't speak for what they're doing, but I can tell you that the reception we've gotten from the pilot we ran as well as the response from retailers and customers has been really a thankful one and has been positive. So we can see this as certainly part of what we're going to be offering from here on out and as we get results coming in we're going to look at expanding it as we go. If we continue to see the type of positive feedback and response that we're getting. Like I said, I'm excited to be able to offer it to people for the first in this particular industry and we're seeing really positive signs for it in the future.

I think the safest assumption is that this type of practice is one we're looking at this holiday and in the future.

You're hitting right on some of the things that we're right in the middle of working on, James, which is great. I do think the SmartGlass is a real pioneering feature for the Xbox platform and we haven't started the marketing of it in a broad fashion yet. So we're really waiting for the software update to land, for the Windows 8 devices to land, and the marketing you're going to see is really going to ramp as we approach the holiday selling season. So it's not only the marketing that we're going to do - just from an education perspective - getting people to download the app and give them a little tutorial on how to use it. That'll be some of the base layer - here's what the thing is, here's how you go and get it and here's how you download it on the apps that you're using.

But then the next wave that's really going to come in to show some of the partners that are coming on board or the experiences that we're working on, whether it's a primary one of using the web browser or it's flicking content one way or the other from the slate or the device screen and back. We'll start to market those particular experiences with those partners or inside those experience sets that we've got. You're also going to see retail partners doing a lot more to demonstrate that on their floor. So without giving away who they are, because they want to keep some of that aside a little bit, they are going to be really showing how the Xbox can be the hub for entertainment.

So if you think about these consumer electronic superstores around the globe, who do really well in selling television sets, maybe even in showing some of their own video services, they'll be focusing in on Xbox SmartGlass, not only to sell TVs and Xboxes, but to sell phones, slates, TVs, and other devices. It's a cool way to show how far consumer electronics and entertainment technology has come and I think it's going to be the magic wand that people are using and experiencing at retail and at their friends' homes this holiday.

You heard the same enthusiasm that we heard coming out of E3 and I haven't seen that do anything but build. So I think that they're seeing this as a neat way to continue telling their stories and connect with their customers with their IP and brand as they play. I think the list of publishers who are going to be looking to make statements using this technology with their games, we'll learn more as we go to holiday and into our second half, the first part of the year. I also think entertainment partners are going to be a big part of this as well. We chose entertainment properties in some of the things that we could do - I can't talk to brands and I can't talk to IP at the moment, but you're going to see TVs and movies, music, sports and other forms of apps that are going to be connected in. There is going to be a lot of great entertainment that SmartGlass is going to make even better by connecting people with more information about the stuff they care about.

I think this holiday season is an amazing jump off for all those people who may have been interested in the Wii and now want to be interested in high definition gaming. I can't think of a better console for them to choose than one that has the most games available, the highest rated games available, than the Xbox 360 platform. And when you look at the alternative experiences that we're going to bring with SmartGlass, the entertainment providers that we're bringing on board, with sports and music and movies and TV, and then if you think about those preeminent best selling blockbuster games that they're going to want to play - Halo, Call of Duty, Assassin's Creed, Forza, Nike+ Kinect Fitness - they either play first or they play best on Xbox 360 and nowhere else. Like I said, jump off is great and we like the way we're positioned to pick those customers up. They really should consider an Xbox 360 if they're looking for the best high definition gaming and entertainment platform.

We certainly see that global opportunity as being one that we're going to continue to grow. Even though last year at E3 I talked about how we were the number one console globally, we still think there's some room to grow in some of those markets that you talk about. Just last week I was in Russia and in a month I'm going to Brazil, so you're definitely hitting on some of the markets that we're putting a lot of attention on, as is everybody in this space or the consumer electronic space. I see the Xbox 360 both today and into tomorrow as being a device that's going to make a lot of sense in every market around the world, particularly in some of these developing markets.

"[Rare and Lionhead are] going to have all kinds of new IP they'll be generating in the future and they'll be making really innovative and spectacular content for everyone"

Matt Barlow

Because when you look at the content that's available, you look at the price that we're at today, you look at the services that we provide, these people are looking for entertainment and this is the box for them. I can't tell you what the future's going to hold with pricing or with how we're going to approach these particular markets, but I can tell you that even with today's pricing, we've got the best value in entertainment, starting with $199 for a box with all we provide. There is no better value and we are already that number one share leader.

I think Rare and Lionhead are just incredible studios. I look at the body of work those guys have delivered, both for controller based and Kinect based games. It's really going to be a matter of just looking at audience size and, more than that, unleashing their creative freedoms in a way that's going to delight millions of people around the world. So I can't tell you exactly what types of games you are going to be playing from them, but I can tell you this: they're going to have all kinds of new IP they'll be generating in the future and they'll be making really innovative and spectacular content for everyone.

In terms of specific marketing around the 10-year thing, I can't really talk about those things broadly at the moment. But I can tell you it seems like every day's a celebration on the service. There are a lot of great things happening, whether it's just bringing new members on each and every day, bringing new content available for the first time ever, and this latest release we have around entertainment I think was a big one. So I'd love to give you more as we approach times where I can talk about those types of things. Our biggest celebration and our gift around 10 years is our latest entertainment release that we just had - SmartGlass, Internet Explorer, some of the great partnerships - if you're not on Xbox Live, now is a great time to be.

I think when you look at general business models and game play experiences, you're going to see Phil Spencer and Microsoft Studios doing a lot of work in that area and whether they pan out to be commercial hits or IP successes or strong ways of playing, part of his job is really kind of innovating in this space.

And Happy Wars, I can't give you the exact numbers - I just don't have them off the top of my head - I couldn't be happier with where we are with Happy Wars right now. Great response from the community in terms of total play time and when we look at where it stacks up in terms of the titles that people are most frequently playing, it's in an amazing place right now. We couldn't be happier with this entry, with this particular product type. I can't tell you what the future's going to be, but we're going to be continually innovating our platform and bringing the best experiences to our customers on Xbox Live.