Microsoft Spring Showcase

We're really trying to communicate that this will be another landmark year for Xbox 360 customers and Xbox Live. Mainly because we've really focused on a strategy of exclusive content, so titles like Gears of War 2, Fable 2, Banjo, et cetera. As well as the continuing leadership we have in the online space with Xbox Live. So we wanted to make sure that, even though we had a great 2007, 2008 is going to be an even better year for Xbox 360.

I think it's a close race no matter what. I understand the Sony guys have declared leadership already. I think we'll let the data speak for itself. The main thing to emphasise is, it's a tight race in what has already been a Sony stronghold. So any progress we're making there is great progress, from our perspective.

I just look at the two data points I mentioned this morning. Since we reduced the price of Xbox 360 in Europe we've seen tremendous sell-through run-rate games as well as market share games, as a result of that. Then with the launch of Grand Theft Auto a couple of weeks ago, obviously this is the US, but the same thing is happening a lot of places in Europe - the biggest games retailer in the US announced today that 65 per cent of Grand Theft Auto units were sold on Xbox 360, versus 35 per cent on PlayStation 3.

That's traditionally been on the PlayStation franchise. So we feel really good about the momentum we've been able to generate, especially recently with both the price reduction and the launch of Grand Theft Auto. Then you combine that with our online leadership and our great content line, and we feel very good about the prospects.

You don't think we're going to win in Japan?

Look, we've acknowledged for a long time we wouldn't win in Japan and it was going to continue to be a tough market for us. We took some different steps in this generation. We produced two very well critically reviewed titles in Blue Dragon and Lost Odyssey. Unfortunately, it remains a difficult market for us.

I do think in the long run we're going to see more success in Japan. But because of our success in the rest of the world, oddly enough - because Japanese developers and publishers, they all have to run businesses as well and you can't survive just on the Japanese market.

They're going to recognise that Xbox 360 really does have a tremendous amount of success with installed base and in the rest of the world, and that's where I think you'll see more support and hopefully more Japanese content. It's not going to be because Microsoft Game Studios did one or two titles a year; it really is going to be because the overall platform is compelling.

I'm not going to go out and say our hope is to win in Japan, because that's not realistic. Do I think we have room for progress and improvement? I absolutely do. So the battle's not over. Microsoft generally doesn't have 'Quit' in its vocabulary. So whether it's Europe or Japan or North America, there's still a lot of work ahead of us.

I'm very happy we didn't get into it, because launching a handheld platform is like launching another Xbox 360. You have to be fully committed, as an organisation, from a resource standpoint, to doing that. Frankly we've got a lot on our plate with Xbox 360 and Xbox Live. We don't have any experience in that space.

Our content assets don't naturally lend themselves to driving success in that particular market. So we're happy to let Sony and Nintendo slog it out. I do think mobile is probably the more important platform in the future, and the number of Windows mobile devices and hardware that's capable of running Windows mobile in the future is really a compelling opportunity, and one where we don't have to worry about launching a new hardware platform too.

Just rumours, just rumours. We don't...

See, the standard answer. No, what I would say is that we have a tremendous amount of R&D efforts going across the programme - not only in hardware but in content and the online services too. I'm very proud, actually, of the success we've had in the hardware, accessories and peripherals area. It's been a commercial success for us, a great business.

We've also had a lot of critically received pieces of hardware. So I think it is fair to say we're always going to continue to push our innovation in the hardware space, just as we are in the software space. But what form that will take, what technology that will really emphasise...I do think that would be a mistake, if we just tried to come out and copy what Nintendo has done. What Nintendo has done has worked well for them, but we have to think about what our innovation aspect is going to be.

Where?

Sure, sure. I do think it depends on the category too. While I do think there's room for improvement and innovation and trivia-based experience, I do think there are some fundamentals of that experience too that are going to look very similar. The fact we included four wireless controllers in the box, I do think hey, that's somewhat innovative in that space. Now you don't have to deal with the rats' nest of the wiring.

In the future, I think online will be a more differentiating aspect for us. Each of the competitors has its own unique approach, and those approaches have strengths or weaknesses. Nintendo - physical play. Sony - emphasising Blu-ray. And for us obviously, it's online. I think online is going to be where you see most of our differentiation efforts emanating from, whether it's online experiences or continued distribution of digital content and so forth.

Really? Well, maybe he knows something we don't. Until I hear that from Take-Two I'm not going to believe anything that Sony says. We feel very confident in the exclusive content we're going to get for Grand Theft Auto IV.

I think that's a big contributor to the initial success we're seeing on Xbox 360. The fact that almost two-to-one people are buying Grand Theft Auto on Xbox 360 versus PlayStation 3 speaks volumes. I think a large part of that is because they understand we're going to have additional content to complete the Xbox 360 later this year.

Honestly, I can't answer that, it's not my product. It's distributed by Electronic Arts and best to ask them, because I don't know the answer.

Yeah, I think we have a marketing partnership with them where that's a good thing for us. But we would not be involved in setting the price of the product, right? We've had exclusive content in on our platforms before, and there's been no differentiation in pricing. As far as simultaneous release of product...I can only speak for Microsoft Game Studios, but that's been a big priority for many years. I can't remember the last time we had a release that was not virtually simultaneous with Europe.

Yeah...On the one hand I'd say Microsoft feels bad about that. On the other hand it is fairly complex, actually, to secure rights in many different markets. I don't have enough appreciation for that because it's not my part of the business, but what the Xbox Live guys have to go through to get the rights and then to ingest all that content...I do understand.

The reality is it's getting there later, but it's not as simple as localising the title. I'm glad I don't run this part of the business because securing the rights to that video content is a pretty heinous effort. It's pretty challenging. So that explains some of the timing delay.

Not this year.

They launched with Resistance and we've sold nearly 5 million units of Gears of War 1. I think we won that battle. That's why I believe it's going to be the biggest title this holiday. Killzone's out of the holiday, despite some of the earlier statements that were made.

We'll see what happens with Resistance 2, but we've gone head-to-head before. I still feel very confident in the quality. You're seeing it here - what Epic is doing with Gears of War 2 is taking a very good title and really extending it even farther, in my opinion. So I still think we're in very good shape to have the biggest hit of the year in the holiday.