Thousands of lights twinkle in the dark.
It's early June in the University of Southern California's Galen Center in Los Angeles. Microsoft is holding its annual press conference during the first hours of the first day of a week devoted to the video game industry. The gamers, game journalists, and game executives in the audience are wearing plastic wristbands that glow with different colors that correspond with game demo after game demo, trailer after trailer. Everyone becomes part of Xbox's games.
And that's the point. More than ever, as a way to bring order to its house, Xbox is facing a crowd-sourced future.
The Xbox E3 2014 Media Briefing was 90 minutes of games. From Microsoft's own huge franchises such as Halo and Forza, to partner's mega titles like Assassin's Creed and Call of Duty, to indie darlings such as Threes and Ori. There were no execs talking about sales numbers, app partners, and other business details. During gaming's most attention-grabbing days of the entire year, Microsoft was all about games.
"We have a value proposition that this is the only place to play all of the big games you want to play: Call of Duty, Destiny, Watch Dogs, Battlefield, Halo, Forza, Sunset Overdrive," says Yusuf Mehdi, corporate vice president, devices and studios at Microsoft. "Within that, we feel really good about what we've done."
Recent business moves were only mentioned briefly at the conference. A month before, on May 13, MS announced that it would decouple the Kinect camera from the Xbox One, lowering the cost of the console to $399—the same price as Sony's PlayStation 4. And in March there was a restructuring at Microsoft and Phil Spencer, the head of Xbox's game studios, would now be the head of the entire Xbox Division. It was as if these big announcements were made early to get them out of the way so that the press conference could focus on the games.
Xbox needed a course correction. According to official numbers, the $499 Xbox One is being outsold by the cheaper PS4, with 5 million units sold worldwide versus 7 million PS4s. So for E3 2014 the company focused on its publishing partners and the indie developers it was working with. Xbox would thrive on giving fans more games. This was the ammunition it needed to catch up to Sony.
"Our focus has been on our fans, the Xbox 360 fans in particular. There are 80 million of them that have yet to upgrade to an Xbox One," says Mehdi. "When we show them the Halo: Master Chief Collection, and we went on sale this week for $399, I think those are things that get people to say that it's time to jump."
The field looked very different last year. Before Microsoft or Sony launched their new consoles, details leaked out, intentionally or not. Both would be quite powerful and both would be made for online play. But the new Xbox would not look like the consoles of the past. It would always require an Internet connection. Game ownership would be checked online. This meant that friends could no longer simply borrow games and gamers would not be able to buy and sell used games. Fan outrage online dominated game and tech journalism for weeks.
At a May 2013 press conference, Microsoft officially unveiled the Xbox One, so named because it would be an all-in-one entertainment device. Beyond showing games, the press event also had sections devoted to the Kinect's voice control functionality, Skype video conferencing, the TV functionality, partnership with the NFL, and the announcement of a Halo TV series produced by Steven Spielberg.
At Microsoft's June 2013 E3 press conference more games were shown, but concerns about always-on Internet, always-on Kinect camera and microphone, and lack of lending or used game support were not addressed. When the $499 pricepoint was revealed awkward silence filled the auditorium. (Sony's press conference later that day revealing how PS4 wouldn't have any online or lending restrictions and would only cost $399 got roaring applause.) Microsoft's press releases and reps would later confirm details like the always-on Internet and Kinect, as well as restricted lending and used sales.
Then it was leaked that changes were being considered. And a week after E3, Microsoft announced it was changing things before the launch in November 2013: No longer would it require the Internet all the time; it was allowing unrestricted lending or used sales, just as previous consoles. In July 2013, the company revealed that indie developers would now be allowed to self-publish games. In August 2013, it was announced that Kinect would no longer be required to play the console.
Microsoft saw the outcries online, heard the fans' complaints, and changed direction. Whether this about-face had an effect on launch sales is unclear, as Sony and Microsoft both sold about 2 million units during the peak holiday sales period, supply seemingly limiting sales of both consoles. For each month of 2014 though, PS4 has outsold Xbox One in the U.S.
Since the restructuring in March, Microsoft has had tunnelvision about giving people what they want, and not just with games. For Xbox 360, they would update the console once or twice a year. The Xbox One gets monthly updates that tweak UI, add features, or launch new entertainment apps. Just like the company's strategy for the console, the box itself would continuously evolve.
"We look at it through the lens of listening to our customers and seeing what they are asking for and the features they most want to see, and responding as fast as our engineering team can build it," says David Dennis, director of program management at Xbox. "That's the beauty of a connected device like this. We can continually adapt it, tweak it, and update it to be the product that our customers want it to be."
In March, the company added the ability for players to broadcast their gameplay online through Twitch. Coming next month will be improved tracking of game achievements, goals that earn gamer points and let you compare your gaming ability to your friend. For the first time, the app will be connected to the Internet, allowing you to clickthrough for advice or even walkthrough videos on how to get an achievement.
By the end of the year, Microsoft will release another such connected app: Twitter for TV. Users will see what topics are trending on Twitter in regards to television, including tweets about the show you are watching. There will be a list of the television programs being discussed the most and then you may click through to watch them. Such cross-functionality between tech and entertainment fits the original, futurist vision of the Xbox One.
Dennis says, "The stickier and the richer the applications and the experiences are on the platform, the more people use it. The more engagement you have, the more usage you get, that's the snowball rolling down hill that gets bigger and bigger. "
Now the company is creating platform to try to ensure continued engagement.
Earlier this month they launched a new site, feedback.xbox.com, where fans could submit their own ideas on what should be updated on the console. Fans can also vote on the submissions of others.
"We had 2,000 or 2,500 submissions in the first 24-hours, so the community is certainly giving us their voice," says Dennis. "And when we look at the top ten things they are asking for, they are all on the road map of things we are already working on."
But do such fan-driven companies succeed? To take one example: Frito-Lays saw a 12% sales increase when it conducted a contest last year to introduce potato chips with flavors decided by fans. Then again, Kickstarter is littered with projects that failed to find the crowd-support they were looking for, from films to video games, and even the New York City Opera.
There is something to be said about giving the public innovations that they need, rather than what they want. Steve Jobs is likely rolling over in his grave because of the tactics employed by Xbox and others. And Henry Ford is believed to have said: "If I had asked people what they wanted, they would have said faster horses."
Can Xbox thrive on a hybrid strategy? Giving gamers the games they want for the Xbox One, while still adding entertainment and tech partners to build the futurist experience they originally intended? With plans to expand Xbox One to 29 new markets including China by September, Microsoft will have a greater stage to demonstrate the effectiveness of its's evolving strategy.
Back in Los Angeles, Yusuf Mehdi is gazing into a possibly bright future. "Today, of the 5 million people on Xbox One, they are averaging five hours of use a day. It's mind boggling. A big part of that is online gaming, but another big part is just broader entertainment. So we are going to continue to release new features."
And for now, at least some of those features will be exactly what Xbox's customers are craving.