Don Mattrick vs Kaz Hirai

I think that it's collecting or aggregating the power of software, hardware and connectivity services.

Gaming's evolved and grown into something that has very high performance, high fidelity in terms of graphics, and content creators are building amazing experiences that are more sophisticated, more intriguing, and the service side - what our team's built through its commitment to Xbox Live - is pretty incredible.

So the package I think is what I would really describe. The impact that package has on the consumer is obviously the most dramatic of any generation. I think it's going to bring about more change in relation to our category - more innovation, more creativity, building bridges with other traditional forms of entertainment like movies, TV, music and other digital assets, and there's the hard work that everyone's put in over the past 20-something years to get to this point.

I think that there are so many different perspectives on that, but one of the things that I think is most important perhaps from a gaming experience is the fact that with PlayStation 3 we've been able to move the consumers from a standard-definition environment to a high-definition environment.

Also the fact that the Cell processor when compared to the Emotion Engine. Put it this way, the leap between PSone and PlayStation 2 was considerable, but the leap from PS2 to PlayStation 3 is even bigger. Including the high definition, as well as the raw graphics and computational power that the Cell processor brings, and I think that the publishers and development teams have yet to unlock all of what the console can do.

You probably saw the testimonial video [in the press conference] - some of the development teams are now actually starting to talk about finding out, harnessing the power of the SPUs, and not having to rely on the core processor, so there's some more head room there as well.

And when you look from a macro standpoint, that's one of the biggest leaps that we've been able to achieve with the PlayStation 3, if you compare with consoles from previous generations.

Xbox Live. I think that being the company to build a gaming community, to do it globally, to have all the functionality that we have inside of that, is a pretty staggering accomplishment.

We announced at the show that we've seen our membership from last E3 go from 6 million to over 12 million, and in the two and a half years we've been operating Xbox Live on 360 consumers have spent over a billion dollars.

A lot of people are talking about rolling out a service or talking about making it work for people. What we've demonstrated is we have that service, we have a large audience that's participated and is valuable, and it's awesome.

I think that it goes without saying - the most important product is the games that play on the PS3 first and foremost. That's always been the most important. I think what differentiates this generation of hardware is, in addition to the games, all the other non-game service and content that we can provide to the consumers through the PS3.

[In the press conference] we talked about the video delivery service launching here in the United States, and that's a non-game content service that we're providing. We didn't have much time to talk about it and demo it, but Life with PlayStation - completely unrelated to a gaming experience, but nonetheless something you can enjoy on your PS3.

Home is somewhat related to games. It will start as being a very games-centric experience, but it has the potential to expand into other non-game service and applications. This is a B2B play, but the dynamic in-game advertising for example - again, another revenue source that's not related to the traditional way of selling videogames.

So games have always been important, but if I were to single out another element that is going to become more important to the PlayStation business, it's all the non-game-but-network-enabled services and content, which really allows us to expand the horizon, and hopefully the installed base of the PlayStation 3.

And if we can really enhance these services, as well as different content that is considered to be non-game, I think we have two avenues to bring consumers into the platform. One via the traditional way of great videogame console, but there's so much stuff to do. On the other hand, if you're not interested that much in videogames but if there's so much other things to do, they'll buy the PS3 for the other services they can enjoy - and then, since it's a videogame player as well, there are some games they might enjoy. So we can have it both ways.

Is your question "do we have innovation?" I think Live's a great example of that. Microsoft is a company that thinks in long lead times, it has the ability to invest, it has the ability to stay committed to a category, it thinks globally, so those are pretty amazing attributes.

The other thing I think that we've shown as a company is we can deliver new functionality, new value and increased accessibility through the new Xbox experience [interface]. That's never been done in the history of videogames - someone delivers a brand new experience through software that makes their core experience more functional, more dynamic, more accessible and kind of recognises the unbridled growth that we've made in the category. I think that's a leadership stance.

When you think about the prior generations, usually the first company to get to 10 million units has a pretty great business and we were the first to achieve that. The company that creates the best financial ecosystem for content partners, a place where content partners can make profit and grow and scale their business, that tends to win.

When you add up hardware, attach rate, software sales, Live usage, all of those things are there and what I really give this team a tremendous amount of credit for is they're just going into their ninth year. Think about what any other consumer electronics company or entertainment company achieved in their first nine years and then compare it to what Microsoft has achieved. I can tell you that Microsoft has brought more innovation, more great experiences, more software, more innovation than anyone. Period. People kind of lose track of that - that we have a vision; that we're committed to the space and every year we stay we get better.

In relation to Europe, we just had Chris Lewis lead and take on responsibility for our business as it relates to Europe in a dedicated manner. That was in March, so we've got lots of desires for growth and I think our team's doing a great job. We had a record year last year as a business. We went from a loss to a profit, which is a pretty important milestone, and we're anticipating the industry's going to have record growth out in front of it, and we're going to have record growth out in front of us.

If you look back at the history of our business - whether it's PSone, PS2, PS3 or PSP - it's pretty much the situation where we've decided where we want to go, and provided the content and services to make sure it gets us there. There haven't been too many instances where people can point to us and say: "Aha!" It's been pretty much all original, whether we're talking about the way we architect the hardware, the peripherals, as well as content and services as well.

Obviously with games we have first-person shooters, so I guess somebody can point to that and say it's not original, but I think that's taking it to the extreme, and I don't think that's where you were going with it. But there haven't been too many instances that I could really point to that says we're basically just following whoever else is going into the market with something that resonates, and then we follow along.

Even a great example would be that there's been all this talk about casual gaming, social gaming, and all that good stuff - that's true to a certain extent and I don't deny that, but quite honestly it's something that we've been doing since about year six of the PlayStation 2. And unless we've been successful in the casual gaming market, you don't get to nine years and 130 million units - because you've got to appeal to the real light users at that point in time. So casual and social gaming? Yep, been there, done that and we have a pretty good track record. The input device may not be so eye-catching, but the numbers speak for themselves.

Nintendo's an awesome company. When I think of Nintendo, I think about youth, so I traditionally think 14 and younger. I think about a few key software assets that they have that are awesome assets - things like Zelda, Mario - those are great things.

I also think that Nintendo has tended to be a first party experience, so the products that they make have garnered the majority of revenue, and the profit is usually whatever that revenue percentage is plus 5 or 10, so there's a very small amount left for other content creators. The consumers tend to have a lower usage pattern in terms of hours and dollars spent in the aggregate.

I think it's wonderful - they're bringing young people into the market, those young people have families and friends, they're anticipating, they're learning about our category and that's kind of a natural evolution.

I've heard about this sort of casual more accessible process since I started in 1982. I can remember when we did our first product doing interviews with people asking, 'who's going to create this casual product, make it more accessible?' and I'd say well I think there's going to be all kinds of art in our category, that at its core what makes our category special is we make you the hero.

We put you into the story and there's just not one story, or one degree of immersion, or one degree of interaction, or one degree of fidelity. This concept of one-sizes-fits-all - I don't know about you, but I don't have just one CD that I listen to or one TV channel that I keep on all the time, so I think people are over-indexing on that and missing what's really happening.

What's really happening is people are spending more time in interactive relative to other forms of entertainment - huge win for us as an industry - and at our core we're immersive and it comes through interaction, through that feeling of participating, through the emotional connection, like a great song at a point in your life and you hear it later and it brings back positive memories. We're building more positive memories with consumers around the globe and our business is going to grow in scale, there's absolutely no doubt about it.

I think we would approach it from the other way around, to basically say that whether it's a first party game, or a third party game, for the user to really enjoy the experience the controller we already have doesn't really do the job - and so we need a controller that looks like this, and does X, Y and Z - then let's go ahead and make sure that we have something like that so the gameplay can be enhanced.

We'd approach it from the software entertainment side.

I think again in our business we're in record levels. We talk about all these different statistics where we've got clear leadership. I think Nintendo's doing great work, and again I think it's kind of up to people like you to kind of weigh in and have your own opinion, so clearly I'm biased and think that what MS is doing is great now and has the most headroom and most potential for growth in the future.

I think that 'winning' and 'won' are two different things. Where I stand, we look at it in the context of a ten-year life cycle as we've done with PSone and PS2, which is certainly on its way. So it's really a matter of looking back after ten years minimum and asking what you've actually accomplished in terms of the installed base, in terms of the business that you generated for the internal first party studios, in terms of the business you've generated for the third party studios, in terms of the business you've generated for the retailers.

And that's when you actually look back and say, "Yes, this platform was successful, it wasn't successful, it was so-so," - whatever the case may be. So we're still only two years into the PS3, and I think the true test is really like the situation we find ourselves with PS2, where nine years later and 130 million units later we can look back and say, "Yeah - it's been a pretty successful platform."

So I know some people have been talking about who will be number one in this generation, and what have you, but before we get into that question, what about the lifecycle management? If we want to compare apples to apples, let's see a ten-year lifecycle, because I don't see that anywhere else. If somebody wants to say that they're going to have a larger installed base, we should compare notes after ten years, because otherwise we're not talking about the same thing.

And we certainly don't do the consumer the disservice of basically saying that the consoles have gone by the wayside because we have a new one. Right now, a prime example? PS2 is nine years into it. Where's the Xbox? Where's the GameCube?

Same thing with the original PlayStation. At some point we looked around and asked what happened to the Saturn? Where's the N64? So if we're doing that, let's compare apples to apples, and for me, because we're on a ten-year lifecycle, unless we're talking ten years it doesn't really make that much sense to me.