Original vision for Xbox One hasn't changed - Xbox CMO

In the last console generation, backward compatibility was a big selling point for the systems early on. The PlayStation 3 ran PlayStation 2 games, Xbox 360 ran Xbox games, and the Wii ran GameCube games. But as the new systems established themselves and "next-gen" system sellers arrived in sufficient number, all three platform holders lost interest in the feature.

Sony was first to abandon the idea in October of 2007 (less than a year after launch), when it stripped backwards compatibility with PS2 games out of the PS3 hardware to facilitate a badly needed price cut. Microsoft gave up on it a month later (two years after launch) when it added games to the Xbox 360's list of backward compatible titles for the final time. Nintendo stuck it out all the way until 2012 (six years post-launch), when a $100 Wii Mini console launched without the controller and memory card ports that would have been necessary to support GameCube games.

"We have tens of millions of folks who use Xbox 360 every month. And the number one thing we've heard from them that we can do is, 'I don't want to give up my games catalog.'"

This generation has played out differently, with only the Wii U supporting its predecessor's games. That's going to change soon, however, as Microsoft announced during its E3 media briefing that it will be updating the Xbox One with the ability to play Xbox 360 games, starting with a batch of about 100 later this year. But is backward compatibility really that big a deal this deep in the generation, with the Xbox One heading into its third holiday season on shelves?

As one might expect, Microsoft's corporate VP and CMO of Xbox Mike Nichols believes it is. Speaking with GamesIndustry.biz at E3 last week, Nichols said backward compatibility with Xbox 360 games is still the most requested feature among Xbox 360 owners considering an Xbox One purchase.

"We have tens of millions of folks who use Xbox 360 every month," Nichols said. "And the number one thing we've heard from them that we can do is, 'I don't want to give up my games catalog. I'm still playing. Because not only do I give up my games catalog in some cases, now I lose my online gaming friendships, etc.' So we didn't feel great about that compromise, that decision that people had to make. So it's pretty core to what we're doing, and based on the response of fans, it does seem like there's an awful lot of energy around it."

Nichols thinks that existing Xbox 360 user base has largely opted out of the current-generation consoles entirely to this point, and isn't worried that the PlayStation 4's success to date has been coming at the Xbox community's expense.

"We haven't seen that much switching in the category," Nichols said. "There hasn't been a lot of that, meaning from PS3 to Xbox One or from Xbox 360 to PS4. It's happening in both directions to some degree, but it's mostly been about the Xbox 360 and PS3 base, how energized they are, and how much of a leap forward do they feel like the next-generation system is."

"We haven't seen that much switching in the category. There hasn't been a lot of that, meaning from PS3 to Xbox One or from Xbox 360 to PS4."

The key for Microsoft is just to give those holdouts a reason to upgrade. Between the recent price drop, backward compatibility, and a robust holiday lineup featuring a new Halo, an exclusive Tomb Raider, and a remastered Gears of War, Nichols hopes Microsoft has made a convincing argument in favor of an Xbox One purchase this year. Of course, that's not to say the company is ready to move on from the Xbox 360 completely.

"There's tens of millions of people using 360 and loving it today," Nichols said. "They're the ones who made Xbox what it is, in a way, and that'll continue to be the case. There are new games coming for 360, not as many as for the new-generation consoles, but there are games coming: Black Ops III, the EA Sports games, and that sort of thing. That'll continue to be the case... If somebody is just looking for a kind of entry-level option for gaming, they just want to play Minecraft on something and that's it, Xbox 360 continues to be a great option for that too."

The Xbox 360 set high standards for success and longevity that the Xbox One has (to date) struggled to live up to. Part of that goes to the system's original unveiling, where a focus on live sports and TV functionality helped alienate gamers (along with restrictive online connection requirements that would eventually be reversed). Microsoft quickly shifted its focus to games, and hasn't made a big show of the system's non-gaming applications since.

"People buy the systems for the games," Nichols said. "It's the number one feature, so we want to make sure to really message to people, 'Look at how awesome this is for gaming.' That said, usage of the non-gaming parts of the system are incredibly high and growing. So there's a little bit of a distinction between why you buy something and what you use that we've observed here. The number one feature is the games, but the usage of watching videos, YouTube, and everything else has been growing quite a bit. And that's continued to be a focus for us.

"[T]here's a little bit of a distinction between why you buy something and what you use that we've observed here."

"So whether we talk about it in advertising or define ourselves in that way is a bit of a different thing from, 'Are we investing in it to make it really great?' The original vision of the Xbox One--to be something really awesome beyond gaming; best for gaming and really awesome for all these other things--that's continued in where we've been investing. But our marketing is a bit different. It really kind of focuses on one angle of it. And this year with the greatest games lineup in Xbox history, you know that's for sure going to be the continued emphasis."

That might explain the Kinect's complete absence from Microsoft's media briefing. While Nichols said the motion-sensing camera is still a part of what the company is doing with the Xbox One, he said it and other "user experience improvements" of the company's plans (like the Cortana feature from Windows Phones being implemented into the console) were relegated to a separate event.

"Our customer satisfaction is highest amongst those people that have Kinect today, so it's important for us to continue to offer it for folks," Nichols noted.

E3 also saw Microsoft announce that it is partnering with Valve in some fashion on the company's push into virtual reality. The week prior to the show, Microsoft partnered with another major VR player in Oculus. So why is the company getting its hands dirty in augmented reality with the HoloLens, but satisfied to assist others when it comes to virtual reality?

"Our approach by default is actually to partner," Nichols explained. "Windows 10 is kind of the unifying thread behind all of our devices. Xbox One will run Windows 10, PCs, tablets, phones, HoloLens, etc. So our strategy really is to say in the case of both VR and holographic computing that we want Windows 10 to enable devices that do these things. In the case of virtual reality, there are already players doing interesting work there. So what we're really focused on is helping them be successful. In the case of holographic computing, nobody was really doing that before, really. That's something that we felt like we needed to innovate ourselves. But that's not going to limit other people from doing their own takes on things, and we hope Windows 10 would enable them to do that."

"We consider Valve as much a partner as anything else... Competition is nothing new to this particular category, and I'm a big fan of competition anyway, so I think it's all good.

That VR partnership will further entwine an already unusual relationship between Microsoft and Valve, one that could become less friendly if the latter's Steam Machines and Steam Link make it a significant player in the battle for the living room.

"We consider Valve as much a partner as anything else," Nichols said. "Obviously, most of Steam is on Windows devices. They're a developer on Windows, and we announced that we're working with them on virtual reality. We're working with them to make sure Windows 10 is going to be killer for their VR plays. Beyond that, the new devices they're releasing, rumored to release or whatever, that's all good for customers, gives them more choice. This is a competitive category. There's three big folks in terms of platforms, and then there's a whole bunch of competition, obviously amongst publishers and creators. Competition is nothing new to this particular category, and I'm a big fan of competition anyway, so I think it's all good."

However, competition goes both ways. Just as Valve is eyeing the success console makers have enjoyed, so too is Microsoft taking notes on what Valve is doing. For example, the new Game Preview program on Xbox One sounds a lot like Steam's Early Access. But one key difference is that Microsoft does not share Valve's laissez-faire approach to curation.

"We're going to pilot it first, to make sure the whole thing is of sufficient quality, that our customers really like it, that developers are getting value from it, etc.," Nichols said. "Number two is we're going to have a trial of every game that's in there. It's going to be a mandatory thing to participate in the program that you have to offer a trial for a certain amount of time so people can get used to playing the game and can decide if they want to buy it or not. So those are things we're doing to make sure it's rolled out in the right way. That said, we tend to do a little bit more curation on Xbox than on other kinds of platforms, and that'll continue to happen. In particular, the things that we promote, for sure, but even things to be on the system, you still have to go through the certification process like you've had to do in the past. We're trying to make that as streamlined as we can while protecting the user."