Interviews// Peter Moore: The Exclusive and Essential Interview: Part Two

In the first half of our transcription of SPOnG’s interview with Xbox Vice President Peter Moore, we covered the emergence of Xbox as a console superpower, launch plans for Xbox 360, and whole lot more. If you’ve not done so already, read the most candid Microsoft executive interview to hit the web to date right here.

SPOnG: We expect Sony to launch a spoiler campaign around the time Xbox 360 launches. A slimline PlayStation 2 console for around or even under the $90 mark has been mentioned several times. Any thoughts on this?

Peter Moore: Well I keep on hearing this and I scratch my head. We’re talking about two different sets of consumers. If you don’t already own a PS2 or an Xbox, then you’re not the guy we’re talking to on the night of launch. You're not the guy with his name on a waiting list to pay the opening price when the 360 comes in. I think whatever Sony might do might make them [Sony] feel better about wherever they’re at, but it won’t affect our business one iota.

SPOnG: Perhaps they're thinking they can appeal to the parental set, offering a console at perhaps $200 less that is still a viable platform?

Peter Moore: We’re going to be talking to the consumer who wants the next-generation console with high-definition experiences and wants to connect to people around the world. That wants to know that he or she is part of a growing community, that is not only about games. You can connect your iPod, you can stream your music, you can connect your digital camera, you’ll see HD movies streamed through your Windows Media Centre to Xbox. Your PSP can connect! Anything with a USB port. So we’re not talking to a consumer who’s looking to buy a cheap console.

SPOnG: Touching on price for a moment…

Peter Moore: That’s about as much as I’m going to say on price.

SPOnG: Ken Kutaragi has been on record to state that the PlayStation 3 will not be cheap, setting the expectations of the market and the consumer…

Peter Moore: I was in Japan for a meeting last week and Kutaragi-san said something along the lines of, “[PlayStation 3] will not be priced for home use…” Which…well, I don’t know if it got lost in translation, but it’s not the thing to say. From a pricing point of view for 360, we’ll price accordingly for the market and to hit the business objectives which are to grow our business. But you certainly won’t hear from me that Xbox 360 is going to be priced outside of the home market.

SPOnG: And that’s surely a lesson learned from the first Xbox?

Peter Moore: Yeah, especially in Europe. One thing we’ve learned is shipping in March at 479 Euros is maybe not the right thing to do…we’re going to go at the right time and we’re going to price to meet the consumers’ needs.

SPOnG: Will Xbox 360 ship as a significant loss-leader?

Peter Moore: I’m not going to talk about the cost of goods or whatever, but you know what the business model is. What you’ll hear from us is that we have ambitious goals to drive forward and to able to hit market pricepoints accordingly around the world. This is a global business now. And I know Europeans always feel they get shafted. Marketing is a key factor and pricing is a weapon, there’s no doubt. And if you over-price, regardless of what your profit needs are, you’re just going to be left with an inventory in your warehouse and your goods won’t sell. You’ve heard us talk about running a profitable business this generation. We’re still in investment mode, but in this next-generation the company has said publicly that there is profit on the horizon and the investment will all pay off and I’m very confident, from looking at our planning, that we can already see those scenarios playing out.

But to do that we need to grow to scale. And scale means making sure you price accordingly to the marketplace in particular regions and we have every intention of doing that.

SPOnG: So, we’re talking what? Sub-$500?

Peter Moore: Priced accordingly!

SPOnG: You can’t commit to it being under $500?

Peter Moore: No.

SPOnG: What market share do you believe Xbox to have and what do you expect Xbox 360 to dig out?

Peter Moore: Here in the US, Xbox, and even looking at the recent figures, it’s somewhere between 30% and 35%. Our internal figures tell us we’re at the high-end of that – closer to 35%, which is very comfortable for us. In Europe it varies. In the UK we do phenomenally well, Northern Europe we do phenomenally well. In France and Germany, we do well…and in central and southern Europe we struggle. We have very specific plans to correct our mistakes. We think globally but act locally. My goal would be to have the kind of success we have now in the UK replicated around all of the 16 European countries we’re doing business in. So market share right now fluctuates wildly. From negligible in Japan to very, very strong in the US, with Europe being somewhere in between.

SPOnG: J [Allard] always said to us, over the past four years or whatever, that you’d launch before Sony…

Peter Moore: We’ve always had the goal and we believe we would have been incredibly more successful if we’d have launched in the same time period as the PlayStation 2. In some areas, Japan being one, we were over two years behind. And there is a first-mover advantage and our belief is… well, the facts now bear out, that since E3, we’ve both got very powerful consoles coming to market. But there isn’t a huge difference in power when you break everything down. And that’s something our engineers have done here and analysts have done and they’ve all said, “You know what? They’re both driving Ferraris and it’s just down to the drivers at this point.”

SPOnG: Bill Gates just said exactly that!

Peter Moore: Yes he did. And an analyst said that coming out of E3. You can make all kinds of technical arguments as to quite frankly why our console is better…certainly ease of development. People look at the technical data and they say [PlayStation 2] is more powerful. But what you need to figure into this is the ability of a developer to get to that power. One thing that we learned, certainly in the first generation, is that we need to take the silicon into our own hands, which we’ve done, then optimise that for what developers are looking for. We’re already seeing the results.

At E3, what you saw was all running on alpha kits. And despite what everyone else was showing, which was, well I don’t know. Whether it was real or not…as ever, I guess we’ll never know. What you’ll see going forward, whether it’s X05 or TGS, is quantum leaps in games like you’ve never seen before. First mover advantage – driving hard.

As I said when I spoke at ELSPA, there are some magic numbers we need to get to and our plan is to do that. We’ll do that through great-looking games and hardware delivered at a market-appropriate price and put the right level of marketing behind it to drive that first-move into first mover advantage.

SPOnG: Do you stand by the figures you quoted?

Peter Moore: Yes. Here’s what I said at ELSPA. I was pushed on the stage for our targets and goals and I said, “What history tells us is that whoever gets first to 10 million hardware units deployed has a very strong chance of becoming the ultimate successor in the whole generation.” I was pushed and I said that history shows that the figure is achievable in 12 to 16 months. Yeah, I stand by that. I said that and I still believe that. Doing 10 million in 12 to 16 months puts a console in a very strong position.

SPOnG: We touched on Japan before. There are 50 publishers confirmed as committed to Xbox 360. Can you tell us more?

Peter Moore: To one extent or another we showed 38 titles and we have 50 publishers confirmed, yes. Where [Xbox 360] is today in Japan is one of our success stories. Now the proof of the puddin’s always in the tastin’. And you'll see that this holiday at launch. But I couldn’t be more proud of where we’re at there [Japan] right now. The first generation saw a very disappointing launch and the progress for the first generation has been disappointing.

SPOnG: Why did the Xbox perform so disappointingly in Japan?

Peter Moore: it was a combination of not having the right content at launch, and when I say right content I mean not even having the promise of a role-playing game or anything like that. It wasn’t there. Secondly, the industrial design was not palatable…