Microsoft corporate vice president Peter Moore at the E3 2006 conference

 

Note: This Q&A with Microsoft entertainment and devices corporate vice president Peter Moore ran on N'Gai Croal's Level Up, in four separate installments, from May 15th-18th 2007. We now present it here in its entirety, under a single permalink, for easier printing, emailing and archival purposes.

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Microsoft corporate vice president Peter Moore

 

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Beginning today, we're kicking off with the first installment of our four-part interview. Moore, who prior to joining Microsoft in January of 2003 was a veteran of both Reebok and Sega of America, sat down with us for lunch during the 2007 Consumer Electronics Show at the Brazilian restaurant Rumjungle. Upon arriving at the eatery, we found Moore deeply ensconced in the final ticks of the Philadelphia Eagles win over the New York Giants for the NFC wild card playoff spot, discoursing with his handler all the while about various nuances of the game. Thus began our wide-ranging conversation.

From hearing you talk just now, it sounds as if you're a pretty big football fan.

Oh yeah.

American football, I should specify.

When I first came to this country, it was very clear to me, as much as soccer still rules my life--I lived in L.A. and became an L.A. Rams fan, of all things--and I determined that unlike most Brits who come here and go to the British pub and for whatever, I was going to learn baseball, which I did, and watch the L.A. Dodgers. Steve Garvey, Ron Cey, Mike Scioscia, Tommy Lasorda, Bill Russell--all of those guys. I was a salesman, a shoe salesman, I lived in Long Beach, and I would drive north in the day and then come back and learn baseball with one of the great teams. Then I learned American football. And then worked for Reebok for eight years in Boston, which made me a Patriots fan. So yes. Sorry.

No, that's okay. Do you miss sports in your current incarnation? Obviously you guys got out of the sports business. You were big on sports games at Sega; first as a platform manufacturer and then again as a third-party publisher. Do you miss it?

Well, I don't miss it personally, because I've got so many opportunities still. I subscribe at home to every sports network that I possibly can.. Soccer in particular. I subscribe to Fox Soccer Channel, which every soccer fan in America now has got 24 hours a day. It goes from English Premier League, to Spain in the afternoon, to Italy in the evenings, to Argentina at night, and left to my own devices, I'd just sit there watching Fox Soccer Channel. But I'm also a very big American football fan. I was at the Seahawks game last night; I'll be at the Super Bowl, as I typically find a way of getting there.

I love baseball. I am a die hard Red Sox fan. I love the drama and what baseball means to American culture, and the history of baseball. I'm too young for Ted Williams, but I feel like I've read every book about Ted Williams and what that era meant to Americans; a guy who fought in World War II and then fought in Korea, and yet in between was one of the greatest hitters that baseball's ever seen. Baseball even more than football weaves itself into the fabric of American culture.

And of course, I was a P.E. teacher in my first life, so I did a lot of work on the psychology of sport and the sociology of sport. In fact, my thesis was for my bachelor's degree--this was in England, before I'd even been to America--was the theory of centrality in American sports: the closer that an athlete was to the decision-making process in the game, the less likely he was to be black. I don't know if you've ever heard of that theory, but a guy called Harry Edwards at Berkeley, who I started reading about in 1974, had the theory of centrality, and the theory holds out. I learned how to do pie charts--if you look at the center in football; the catcher in football; in those days, the QB or the pitcher--I'm still talking the mid-'70s at this point when I was doing this, the further away you got from the action, the blacker it became. So what they called the skill positions, cornerbacks and wide receivers, were more likely to be black. But to this day, a center is likely to be white. Even to this day, the stats bear it out. So anyway, that fascinated me about American football. I learned about tackles and guards even before I'd seen a game, by doing this as part of my college education. Harry Edwards is still to this day a very well known professor at Berkeley who looks at, in particular, black athletes. He was behind Tommy Smith and John Carlos in the [1968] Olympics, with the Black Panther movement. Harry Edwards has always lived on the fringe of--well, you know of Harry Edwards.

Absolutely.

Great guy. Incredible human being.

Edging back towards games. You're obviously well-read, cultured, knowledgeable. How much of that do you get to bring out in your day-to-day? Or is all of this off to the side now?

Well, I look at my life--I was a lad from Liverpool that was born to very hard-working, working-class people. My mom was sent away during the war. My dad left school at 14. My dad fought in the war, Royal Artillery--really, quite frankly, uneducated--he would have told you the same thing--and clawed his way into running a business. We owned a pub, and my dad had no business--my dad couldn't really write, and my dad would take down everything he could in a written ledger. This was before calculators, and would do longhand multiplication, and eventually our pub became what turned out to be like a million-pound a year business. Built it through hard work, charisma of his personality.

My father also had a harelip and a cleft palate. Had a huge speech impediment. If he were still alive and sat here today, there is no way in the world you would understand him. My dad would be speaking English, but you combine a Liverpool accent, a harelip and a cleft palate all together, and it's almost unintelligible. But through sheer power of will and charisma and personality, and the power of his love of Liverpool Football Club, he parlayed into actually building a business around that, because people loved to come to the pub to argue with my dad about football. Little did they know that he was clever enough that they were spending a lot of money doing that buying drinks.

To this day--my dad made me open the pub while he rested, because working in a pub is a lot of hours. I would come from school when I was 12 and I would open the club--completely illegal--at 5:30 pm and then I would go upstairs and bring him downstairs at 8 o'clock and he would take over till midnight. But from 12 years old, I was dealing with adults--I was serving them alcohol. My personality comes out of dealing with adults at an early age and [later] being a schoolteacher. So I look at that, N'Gai, as the underpinnings of who you are as a human being. And while it has no direct bearing on the business, it's who you are; it's self-esteem and self-confidence, nothing I haven't seen in my life, stuff like that. I've grown up seeing my parents just sweat their way to giving us a better life and then my hope is that my kids give their kids a better life. You look at what you expect of generations; without my dad getting us out of Liverpool, I'd still be in Liverpool today. God only knows what I'd be doing. Very proud of being a Liverpudlian, but wouldn't want to live there.

This might be making to too much of things, but let's look at your professional history. Reebok was behind the market leader Nike; you were competing with them and trying to go toe to toe with them.

Yeah.

Sega; behind Sony and Nintendo, and competing with them.

Right, right.

Then Sega went third party, and you were competing with EA. And now you're at Microsoft, competing with Sony.

Yeah.

Obviously, Microsoft has very deep pockets. In terms of your childhood or your previous business experience before Microsoft, is there something in you that draws you to go up against a market leader?

Absolutely. Particularly when I went from Reebok to Sega, I've always enjoyed being that feisty second-place guy that's clawing hard to get respect in the marketplace, build market share and get the credibility from a business point of view that's needed. When we finally become the market leader, you ask yourself, "Okay, how do you keep the adrenaline flowing every day?" And I often wonder whether that has been in the last six to nine months part of Sony's problem, where you get the this concept of the arrogance of the incumbent: you don't know failure and you don't know struggle, because all you've known is success. As a result, you have a different bearing on the way you do business every day, because it comes from a platform of being number one and successful, instead of a platform of being number two and striving for success.

They're two typically different mind sets. There's pioneers and settlers. The pioneers get the arrows, but a lot of guys like to be pioneers, get in, launch, and find something else to do. It's a startup mentality a lot of people have. I'm not sure I'm quite there, but there's a lot of people that enjoy building things, getting in there, establishing them, then stepping away and going to do the same thing again. I love the idea of the fight, the challenge. Getting respect where respect doesn't exist. Building something that didn't exist before. Sega was the perfect company for that, because there was a history of irreverence, and it was a company that, quite frankly. had been the number one with the Genesis and done very well, challenged Nintendo, gotten to the top spot, but then for whatever reason, wasn't able to maintain it.

If you do get to number one--

That doesn't mean I'm leaving. [Laughs]

No, no, no, that wasn't what I was going to say. But if you do get to number one, do you already have a plan for it? Or are you going to be like Robert Redford at the end of "The Candidate," looking at the camera and saying, "What do we do now?"

What I won't be is--you know, one of my heroes is Sir Winston Churchill. I take that from my parents regaling me with stories of growing up in Liverpool; the blackouts; the Germans coming over every night; and the only thing you had was listening to Churchill. But when victory was declared in Europe, they kicked Churchill's ass out of there, because they didn't need a warrior; they needed somebody to rebuild the country.

I don't think I'm that. The plan would be to continue to build on that success. You come at success differently if you've known a lot of failure or you've known a lot of struggle. When we get into market leadership, the goal is to continue to build upon that and make sure that you don't fall into complacency and slip back into second place. There was a time when Reebok was the number one company and Nike had been knocked off the top perch. The aerobics craze catapulted Reebok into huge prominence and market leadership. But then they didn't recognize the movement toward different styles, and when aerobics started to die out, they had no plan to replace that business with anything else.

Next: Was Xbox 360's year one software truly next-gen? And why hasn't the $299 Core boosted overall Xbox 360 sales to a greater degree?

Microsoft's Peter Moore and the Kansas City Chiefs' Larry Johnson 

--but your position doesn't seem unassailable right now.

So my comment--I'll tell you exactly what I said, because I said it in London a year [ago] last summer, and this is where the ten million number was first heard. It was at the ELSPA conference [Entertainment & Leisure Software Publishers Association], and I said, "History tells us that the first guy that gets to ten million is in a really, really strong position." Those were my exact words. And I still stand by that. History tells us--in our industry anyway--as you know even better than me, that getting that critical mass develops a lot of goodness in the ecosystem. You've got publishers who now have an installed base of substance to sell into. You've got developers who are now used to developing games; are getting used to the architecture; feel comfortable about what they're developing into from a technical point of view. And you've got consumers who are getting a lot of games to choose from, so the selection of games becomes broad and it becomes deep. All of that comes together. So ten million, I think, is a good critical mass, particularly if you can achieve it before the second holiday. And that's always been my point. I don't think anybody ever said, "He who gets to ten million first is in an unassailable position."

I'm pretty sure J [James "J" Allard] said "First to ten million wins."

Did he? Ah...then if J said that, you're going to have to ask J. I can sit here today and tell you I have never said that. But boy, I'd rather be first to ten million than trying to play catch up.

I spoke with John Riccitiello for my blog, and he told me that the reason that hardware sales for 360 were slow for much of 2006 was the lack of truly next-gen software. Would you agree with that?

Not really. The question--and I saw your blog on that--John's comment was just a personal comment as an observer on the industry. From Call of Duty 2 onwards, which I thought was truly next-generational when I first saw it, to looking at games that were coming in 2006: Oblivion, I think. It depends on [what you mean by] next-gen. A lot of people say next-gen" and they just put it down to graphical fidelity. That's a component, but utilization of Xbox Live...I even say sound and audio, which people don't pay a lot of attention too, but I think audio becomes an important part of what we're doing. We're certainly spending enough money on that now in our development budgets. And a lot of people, yourself included, have pointed at Gears of War as being truly next-generational in the way it looks, plays and feels. I think there are a lot of components, N'Gai, into next-gen, graphical fidelity being just one.

Right, but I think his point, though, was that there was certainly software that was getting really good reviews; there was certainly software that was selling well; and it wasn't pushing sales of the hardware. And so he was looking at it and saying that the big games of the previous generation, games like Sims on the PC, like Grand Theft Auto III, games that defined the previous generation--he hadn't yet seen those defining games that sort of push people out and make them get the hardware. Even based on the numbers, assuming it was about a 2 million hardware units Christmas, based on about 2.7 million units of Gears of War sold, my guess, and I don't have the numbers right in front of me, is that's not matching the hardware push Sony was able to get in its second Christmas out of games like--

Grand Theft Auto III...

Grand Theft Auto III, Final Fantasy X, Metal Gear Solid 2.

Did you think Grand Theft Auto III was next-gen when it came out?

[Pause.] Did I think it was next-gen? Are you asking me?

Yeah.

Well, it took me a minute to get to it. And the sales certainly bear that out. It really started taking off in early 2002. I'd actually seen it much earlier, and I was like, "Wow, this really does start to feel like something different."

Different, yeah.

And as I got into it more, realizing the world that they had created, it definitely felt like a breakthrough. And I would say even before that--because it was more anticipated--Metal Gear Solid 2 definitely felt like a breakthrough because of the way it was bringing the environment to life.

Do you think that Grand Theft Auto III moved hardware? Because Sony refutes that.

[Laughs.]

They do. Whether it's sour grapes, or what, I don't know. But I was surprised. I'll answer: it definitely moved hardware. I was in the throes of that whole thing and it definitely moved a lot of hardware. But for whatever reason, Sony isn't willing to admit that it moved a lot of hardware. Grand Theft Auto III was absolutely next-gen, no doubt. In its experience; in the way it played; the ability to roam freely and do things in a way you'd never done before.

Back to what I was trying get at: why was there a discrepancy between the software sales you were seeing and the hardware being consistently under 300,000 units a month all the way through October.

I think one of the keys is that people were buying a lot of games. Certainly the attach rates have been phenomenally strong. That's the first criterion that publishers look at, then they say, "Okay, people are buying a lot of games; it's my job to be able to sell into what is a pretty virile environment economically for buying games. There haven't been the huge games. One of the problems with Grand Theft Auto III, if you recall, was that it cratered the entire ecosystem for three months because nobody took GTA out of their PS2 drive, and it was a very difficult Christmas for publishers other than Take-Two. So I guess my point would be that you're seeing a wider diversity of games being bought. You're seeing it spread more horizontally than vertically, as you saw during that period of time. The attach rate is something we focus on a lot.

But again, when you look at the numbers through June 2006, the attach rate on the original Xbox was somewhat lower, but that's because more units of the original Xbox were sold. In fact, the total amount of software sold through June was roughly the same. So again, if you're going to point to the attach rate, it seems like part of the reason the attach rate was so high was because fewer Xbox 360s were sold. Obviously, I'm not disputing that the installed base for Xbox 360 was extremely active--that's great for publishers, and ultimately great for Microsoft--but the fact of the matter is that the reason the attach rate was higher than the original Xbox is because less 360 hardware was being sold.

The one thing that's important to me is the ecosystem. Am I offering consumers a wide array of gaming experiences? I think the answer's yes. More importantly, EA will tell you that they have doubled their sales on a unit basis this year over last year. And that's important to me. I care about consumers, I care about retailers and I care about publishers. I also support developers where I need to. All of those constituents are very happy with the state of the business right now.

Another thing that some people have pointed at to explain slower-than-expected sales of Xbox 360 last year was the $399 price point. It's obviously more expensive than consoles of the past.

Yeah.

But you also have a $299 SKU available at the same price as the PS2 and the original Xbox, both of which sold more units over the same time frame, through at least November; I don't have December NPD sales yet. Why didn't the $299 SKU drive more hardware sales for the platform?

Why didn't it?

Why didn't it?

Because I think in this early going, the $299 SKU, or the Core system, is a long-term part of our strategy on a global basis to apply different price points for different consumers. If there's one criticism that you and everybody has had of the original Xbox, it's that we were too hardcore, we didn't offer a broader reach of game experiences, of different price points for the hardware that we should have done. And we never got below $149 when the Xbox finally rode off into the sunset from a sales point of view. We're running about 80-20 right now, Xbox 360 to Core system, but we're seeing some strong Core system sales, particularly in Europe, where price point is so much more sensitive. We look at the business now, and you're exactly right. At $399, where the bulk of our sales still are, we've done pretty well. The question you have to ask is, how big is the global business at $399, or 399 Euros, or 279 pounds, whatever we accrue it to be now at the current standing? And at what point do we think we've done well as an industry in being able to drive strong sales of hardware; $60 software; as well as get new revenue streams from online, such as advertising that helps our publishers, subscription fees for Xbox Live, you name it. We're entering a different phase of what the business model is all about, and I feel very comfortable with our number that we've sold. I feel very, very validated that we've hit our number, and exceeded our number right now. As well, we hit our Live numbers, and are on target to hit the 6 million number by June very comfortably. So when I think of the business, it's very difficult to go back and compare it to the previous generation, because the business models are starting to evolve very, very differently.

Yeah, but at the end of the day, if Sony was able to sell that kind of hardware at $299, and Xbox 1 was able to sell that kind of hardware at $299, it seems to me that you should have been able to--

But there wasn't a $399 choice, right?

There wasn't a $399 choice?

When you're talking about the launch prices of the PS2 and the Xbox--we're offering a lot more of an experience now and there's a cost to that, as evidenced by $500 and $600 for the PS3, we're at $299 and $399. When you have something at $399 that offers as much as we do, then something's going to suffer in the early going, and the $299 SKU--I'm not quite sure where you're trying to take me on why the $299 SKU...it is a long term--

I'm just asking the question. It seems to me that--

We should have sold more?

You should have sold more. Presumably, if the experience is that great; if there are all these people that still aren't actually playing online--a lot of people who are Xbox owners are, but there are plenty of people who don't. If they look at their friend, and they see that he's got Call of Duty 2, he's got Oblivion, he's got Fight Night Round 3--these are all great games, regardless of whether or not you go online--shouldn't that person at least buy in at $299? Look at your own message: it's about choice, it's about not making you overpay for features. Shouldn't that person have said, "Let me get in at $299, let me get some of those games and then when time comes, I'll buy the hard drive, I'll go online. Heck, there's Silver even, I don't even need to pay to go online yet." So I'm still not understanding why--

I think they've stepped up for the $399 SKU.

They what?

I think they must have stepped up for the $399 SKU. If we're trying to figure out the guy who paid $299 before, all I'll say is that they've stepped up and paid $399 this time around. That's the only thing I can attribute that to.

But if that were true, the numbers would be the same. So clearly there's some--you would have thought, I would have thought that the $399 SKU would have been additive to at the very least what was the original Xbox's installed base.

No. No. You're assuming more consumers are coming in earlier at a higher price point than were there previously.

No, I'm saying, at the very least, someone should look at it and say, "$299--I can buy in just like I did before, and if I've got more money, I'll get the $399 model." So shouldn't you be able to capture the same amount of guys you got at $299 with the original Xbox, as well as some of the guys--

We never looked at it that way, N'Gai.

How did you look at it?

We looked at it saying, "We need to install a base; we need to get to our ten million unit mark; we think our mix is going to be--and we were pretty accurate--we think our mix is going to be 85-15 in the early going; that mix will start to evolve as we start to evolve both our geographic reach, as well it will allow us pricing flexibility in the out years to be able to drive prices down to where the real meat is of $199." As you know, the real sweet spot becomes $199 and below. Eighty percent of the PS2 installed base has now been sold at $199 and below. I mean, that's where the real money is.

To allow us to be able to do that, we felt the Core system was very, very important. Is it paying off right now? Potentially. But it will really pay off in the outgoing years, when it will allow us to get to price points that we potentially we couldn't get to if we just stayed with the Xbox 360 [Premium.]

So you don't think that in hindsight, looking at the bulk of sales being the Premium SKU, that it might have been better from a positioning perspective, a marketing perspective, to have held off on the Core until this year--

No.

--or whenever, say, there was a price drop on the Premium SKU?

No, we wanted to establish the Core early. We felt that having two SKUs in the market was something we wanted to establish from the get-go. We spent a lot of time with retailers before we put these plans to bed--this would be back in 2003--we were sitting down with retailers and giving them our early plans. We also spent a lot of time with third parties. A year before launch, we had made our mind up what we were going to do, and third parties liked the idea of having this. Even developers--because of course, we were throwing a different wrinkle--in that a hard drive wasn't required; that was a change from what the developers had to deal with. So we spent a lot of time with the development community, letting them know what our plans were.

This was done not in a vacuum and not as a unilateral decision from Microsoft that our partners disagreed. Retailers in particular liked the flexibility we were giving them on pricing. It allowed them to be a little more promotional than they could typically be in the early going.

Next: In which Moore discusses the Stamper Brothers' departure from Rare, explains exactly where the troubled studio fits into Microsoft's plans, and riffs on the essential differences between the comedic sensibilities of Brits and Yanks.

Peter Moore (back row, third from left) and his 1974 Yale High School Division I National Championship soccer team

In Part II of our four-part Q&A with with Microsoft entertainment and devices corporate vice president Peter Moore, we debated the timing and impact (or lack therof) of the $299 Xbox 360 Core with early adopters. Today, in Part III, Moore discusses the implications of the then-recent announcement that the founders of the Microsoft-owned developer Rare were leaving the company (as we've previously stated, this interview was conducted in January of 2007), explains the kinds of games he envisions the studio making in the future and talks about why Microsoft is absolutely comfortable with Rare's perverse sensibility.

What should we make of the Stampers' departure from Rare?

Nothing. Chris and Tim have been tremendously loyal to Microsoft since the acquisition of the company. They've been behind everything we continue to do. Certainly Viva Pinata, both of them were instrumental in their own way of getting Viva Pinata up and running. Their legacy will live on with Banjo-Kazooie. The time had come after many, many years of service to Rare that the founders move on and do something different. We wish them nothing but the best. They've put us in great position with Gregg Mayles and Mark Betteridge to come in and step up. Betteridge in particular has been there 19 years, and it's great that we can have somebody with Mark's background in the company be able to step into the shoes. Nothing to be made of it whatsoever.

I asked Phil Harrison about Rare--

I saw that.

--and why they were having trouble regaining former glory. They used to put out games that were five million unit sellers, seven million unit sellers, much higher Metacritic ratings than where they're at. He said that he felt that they were a company that was always prone to insularity; got moreso with Nintendo, and then maybe got a little defocused by the windfall that they got from Microsoft. Perfect Dark Zero certainly got good reviews when it came out--very good reviews, though not GoldenEye-level, but good reviews--

Yeah.

But in hindsight, there are a lot of people saying, "Maybe we scored it too high." Hindsight's 20-20--

The same people who scored Kameo too low. But that's a personal opinion. [Laughs.] So that's fine. It all washes out in the end.

Viva Pinata is certainly a return to form according to reviewers. There are a lot of people who are very passionate about it.

Absolutely, yeah.

But sales aren't there, considering that Microsoft spent $375 million to buy Rare. On the balance sheet, that's already been written off, for sure. But how do you start to earn out on that investment? What's the plan for Rare in the future? Where do they fit in and what are they going to do for the company in order to deliver the hits that they were presumably purchased to make?

Well I certainly think people underestimate the platform-driving presence that Perfect Dark Zero and Kameo had, in particular Kameo. It signaled that this wasn't going to be the same as Xbox 1, which was dominated by Mature-rated games, if you will, and for many people will go down in history as the Halo box or the shooter box. Kameo was very important. Kameo has done well; Perfect Dark Zero hit our expectations from a sales point of view; but these were two launch titles--and in Kameo's case, brand new intellectual property--that allowed us to get where we needed to go very, very quickly.

Viva Pinata, sales have been...fine. I think that the thing that people underestimate is the power of Viva Pinata to continue to sell on an annualized basis, as well as the ability to build intellectual property that's very unique and different. The animated series is doing well. 4Kids [Entertainment] in New York City is delighted. The second series has been greenlit for this year. And as a result, we feel real good that in Viva Pinata, we have established brand-new intellectual property to a consumer that typically has not been somebody we've been able to get to, which is the 8-12-year-old. Also by putting a very rich online element into it.

I'm a big fan. I first saw Viva Pinata in 2003, as they were starting to concept the whole thing out and prototype it out. So don't underestimate the long-term ability of Rare to continue to have a positive effect on the Xbox 360 and further platforms in the future.

But even the reviewers who have liked it, who have been passionate about it, most of them say that it's too hard for kids.

I think--I don't know how much you've played, but you've got the regular offline mode, which--my kids are older now, so it's hard to do what I used to do, which is sit and watch them play. I love co-op in it, because I've got a 15-year-old daughter now, at least I can do co-op with her. It's one of the few games where I can play with a 15-year old.... [Pause.] Sorry, the Patriots just picked off and ran for a touchdown.

You know--it may be something--you may be right. For an eight-year-old or a nine-year-old, it may be a bit challenging. And a lot of people I talk to like that element of it. Because there are some key elements in there: building, collecting, sharing, nurturing, that are very important. I don't want to get too philosophical or wax lyrical, but there are a lot of life lessons in Viva Pinata. It's interesting when you talk to people, or their kids talk to you. I had this instance a couple of weeks ago, in which a parent told me that their daughter had to smack a Pinata over the head with a shovel--you know how when they get bad?--and it was traumatic to her, because she had to have some violence in there, she had to do it to keep control of what was going on in the situation. And it taught her a life lesson of being tough. I thought that was very interesting.

Do you think, though--there's a certain perversity in Viva Pinata, in a good way, and I think in a very British way. In the United States, a lot of fairy tales have been Disneyfied and bowdlerized over the years. One thing that's always been true of Rare and their games is a very British sense of humor--

Yeah.

--and particularly this one, with mating and incest and all of these things that are in the game if you choose to explore it. Not necessarily in a way that would send parents running out of the room screaming, but this isn't your typical Disney--

Yeah.

--or Pixar or DreamWorks kind of game. Was there ever any sort of discomfort about that--

No.

--or were you as a Brit saying, "Hey man, I'm on the same wavelength. I get it."

I love intelligent--I mean, I don't want to be disrespectful; I've lived here a long time, but I liken it to the BBC version of "The Office" and the NBC version of "The Office." You can take that TV program and encapsulate the difference between British sense of humor: the wryness, the sarcasm and the sense of irony--which, without being disrespectful, is rooted in intellectualism and all goes back to Monty Python, where you've got a bunch of highly educated people who can talk about the Spanish Inquisition, right? For better or worse, the great majority of Brits in those days knew what the Spanish Inquisition was. That doesn't play in Peoria. You can't use the Spanish Inquisition as a comedy line in a [U.S.] sitcom. You could do on the BBC.

Many of us--and Chris and Tim are a little younger than me--but so many of us grew up in the '70s in the U.K. with that whole sensibility. Whether it was Peter Cook and Dudley Moore--again, London School of Economics-educated people--or whether it was Monty Python. Then there was all of the BBC sense of humor, which is wry, intellectual, sarcastic and irreverent--we call it piss-taking; giving each other stick; picking on each other's physical deformities--that's very politically incorrect in America, which tends to vanilla everything. So you get the [U.S.] sitcom mentality, which has to appeal to everyone from the East Coast to the Midwest to the West Coast. As a result it loses its edge.

Rare has that edge, because it's born of an educated British sense of humor. I love it. Certainly Conker's Bad Fur Day, even Grabbed by the Ghoulies has a little bit of that piss-take if you play it all the way through. Conker, certainly toilet humor, a lot of it. It's just a unique sense of humor that Rare's always been famous for, and we have no lack of comfort with it whatsoever.

Back to Rare for a minute on the games side. Should we take from Viva Pinata and the new Banjo Kazooie--you talked about the importance of Viva Pinata, even before it shipped, for broadening the audience--should we take from those two games that Rare is being put in the playroom, and not going to be doing the Perfect Darks of the world anymore now that you've got Bungie wildly successful, Gears of War wildly successful? Does it make sense to say we want to build out the platform side? Or are they as free to imagine new concepts across all genres as they've always been?

I certainly think their strength is the former. But their ability to continue--which they've always done--coming up with great ideas for games that are potentially a little off-center, if you will, we always allow them the reins to sit down with us when we do concept reviews and allow their creativity to say, "Here's something three of us have been working on. We've got an idea, and we'd like to prototype this out." Always very willing to hear that from Rare.

Next: Moore discusses his plans to fend off Nintendo and Sony, how Vista can save Microsoft's Media Center and his thoughts on Super Columbine Massacre RPG!

 Peter Moore rocking out on Guitar Hero II at a February 2007 Xbox sales and marketing meeting

In Part III of our four-part Q&A with Microsoft entertainment and devices corporate vice president Peter Moore, he explained why, despite Rare's inability to regain its former sales dominance, the U.K. studio was still essential to Microsoft's ambitions to broaden its audience beyond shooter fans. In the final part of our interview, Moore turns his attention to the competition among Xbox 360, PS3 and Wii. (Once again, as we've noted previously, this interview was conducted in January of 2007, before the December 2006 sales figures were available.) But we also get him talking about the prospects of Media Center for Windows Vista and the then-recent removal of Super Columbine Massacre RPG! from competition at the Slamdance Film Festival.

Sony's going to announce that they've shipped a million units of Playstation 3 in North America. [Sony Computer Entertainment America CEO] Jack Tretton was very clear with me that that did not mean that half a million just came off of a factory floor in Guangzhou; that these were units that were pretty much on store shelves--

Okay. Then that's sold, not shipped.

No, that's shipped.

Okay.

That's shipped. The implication is that their production kinks are largely worked out.

Sony officially stated that on Tuesday back in Tokyo, if I recall, that "Our production problems are behind us." I can't remember the gentleman's name, but "Our production problems are behind us, and we will meet our six million unit mark on March 31st." Okay.

So assuming they're through the difficult period, let's back up a little bit. Now that all three consoles are in the market, let's take Sony first. What, if anything, do you need to do specifically to counter them for 2007?

Well, I still think it's all about the games. Many of us get distracted with other things, but 2007 is all going to be about the games. It's going to be about unique experiences, to your point, what is going to be truly next-generational. I think Microsoft Game Studios plays a huge role in 2007. I think the ability for us to be able to effectively deploy some of our exclusives with third parties, whether it's BioShock or the next Splinter Cell, is going to be important. But in a year where we're delivering Crackdown, Forza 2, Shadowrun, Mass Effect, Too Human and a little thing called Halo 3, we're feeling pretty good about where we're at in first party. And then with titles like Alan Wake, Fable 2 on the horizon as well, when you roll all of that together, we need to continue to deliver reasons for people to buy our console over somebody else's. I mean, it's as simple as that.

You read the boards as much if not more than I do. One of the things that Sony has to do is start delivering a slate of content that's both exclusive and truly next-generational. The only thing that gets into that conversation right now is Resistance: Fall of Man. I think they've got to build upon that and build upon that very quickly. So back to our original conversation: we're feeling good about where we're at; we've exceeded our number; the ecosystem is looking very healthy; and we've hit some form of a critical mass with a lot more good stuff to come.

Once you come out of the holiday, are you projecting to be above 300,000 units a month in 2007, consistently, without a price drop?

We're not projecting anything about 2007 right now. One of the titles I forgot to talk about was Lost Planet, which I'm very excited about, by the way. No, I think the key numbers, N'Gai, that you need to focus on--[Microsoft president of entertainment and devices] Robbie Bach will be on stage tonight, as you know, with Bill [Gates]; we'll announce 10.4 million sold globally; we're feeling good about our guidance for the fiscal year, which is 13-15 million; and we're also reiterating that we're going to hit our 6 million member mark for Xbox Live. On top of that--you can extrapolate whatever you want to figure out 13-15 million, but that's our guidance. Obviously, we're not going to update that, because we're just going to reaffirm it.

So to Nintendo, which certainly seems to be getting the bulk of the attention right now with the Wii.

Yep.

They seem to have very good supply, even though it's not enough, and they seem to have really strong demand. They seem to be reaching into audiences that traditionally haven't gamed much. How concerned are you about Nintendo's ability to impact your business? You're seeing publishers like EA building studios specifically for the Wii; you're seeing publishers step up their support for the Wii; and while none of that seems to be coming at the expense of 360 or PS3--no-one's canceling for those platforms--people are saying, "Hey, we may have underestimated the Wii. We need to get behind it in a big way." You said $199 is the key price point--they're closer to that than anyone. So how much of a concern do you have about the impact that Nintendo can have on your business?

One thing I admire about Nintendo is that they recognize what they need to do to be successful as a company and they do it. They also say what they're going to do as a company and then they do it. There's no surprises, there's no backtracking, they deliver on what they need to do. They delivered good inventory and they delivered an innovative experience.

The jury is still out, N'Gai, as to whether that experience can carry that platform at a mass market level to as many homes as I they think they think they need to on a global basis. It's still--I think the Nintendo Wii experience is an innovative experience. I've said that since the first time I saw Iwata-san pull it out from under his podium at Tokyo Game Show three years ago. I played Wii and I enjoyed playing Wii. The question is, is it a sustainable experience that will continue to have great third party support? Because, yeah, third parties are getting behind it, but I'm not sure the numbers bear out that it's going to be something all third party publishers can drive big numbers at.

As I think you know, Nintendo is a very first party-focused, and the numbers bear that out as regards what Zelda has sold versus anything else. I'm not seeing huge third party successes on the Wii right now, and that might improve as the installed base improves. But I will, as I've gone down on record many times, applaud their innovation, applaud their launch--I think they did a very, very solid job in getting the product out there and appealing in particular to some of their marketing efforts with broader demographics and what have you--I thought they did a great job there. The jury is still out, if we sit here a year or two years from now, as to whether that is sustainable at the levels that we need it to be as an industry to get to that mass market level.

When you look at the success of the DS, which has the same characteristics that you would point to: primarily driven by Nintendo's own software; hardware sales through the roof; third parties not doing terribly great, not doing horrible--there's a couple doing well--but hardware sales are through the roof. So what is it about the Wii that would make you feel it might not be sustainable?

I think that Nintendo would say that the Playstation 3 and the Xbox 360 are serious competitors in the same space as the Wii. I don't know what really competes with the DS, because I don't believe the PSP truly competes; I don't think that Sony ever intended it to compete in that space. The portable space, it's very difficult for you to try to compare a portable experience at a price that's almost disposable income with a console experience that's a very important part of the way that entertainment is consumed in the living room. As a result, the DS is doing incredibly well because of the uniqueness of its experience, but at the same time, it doesn't really have a competitor in the same space that is offering an alternative experience. Because the PSP is not proving, as you point out, to be a viable competitor in the portable handheld space.

So all I'm saying is that the jury is still out; I'm not saying that the Wii is going to taper off in 2007. The jury's out. As is the jury out on this salad. I keep nibbling and going nowhere. You make me feel bad that you're not eating that burger.

That's okay. The work comes first.

All right.

Which I'm sure you can identify with.

Oh, sure.

Going into the games side of things, Nintendo's having incredible success with a casual pack-in like Wii Sports. Wii Play is coming, it hasn't shipped yet. You talked about wanting to broaden the Xbox 360 audience--Viva Pinata is a slow-growing property as opposed to a hit--are those areas that you feel you can tap into? Is the vehicle packaged product, or do you think that Xbox Live Arcade is more the place for people to get that kind of fix?

I think it's a combination of both. One of the things you have to be cognizant of is that as strong as Live Arcade is, not everybody is connected, and it's actually the un-connected consumer that you want to be able to give a choice of packaged product to. We're now at 20 million downloads of Arcade games, it's unbelievable how many people are downloading Arcade games.

But again, you're talking about homes that have broadband, and there are a lot of homes that enjoy videogames that aren't connected, or don't want to connect or can't connect. We need to offer packaged products and different experiences to those consumers that do that. So as giddy as we can be sometimes about Xbox Live Arcade and that great casual experience that it provides and offers those consumers, we also need to continue our work on top of what we're doing with things like Viva Pinata and Banjo to offer more and more broader experiences going forward to consumers that may not want to connect or can't connect. That's important.

What's your take on Warner's announcement of Total HD: a single disc that plays both Blu-Ray and HD-DVD?

Boy, I tell you, I mean--I'm kind of a spectator to this whole thing, because it's not core to my business, although we do offer the choice of the HD-DVD player. But I did hear this morning as I was flying in that they announced the price point on this thing, which was $1,200--

You mean the combo player?

Yeah. I mean, we're having enough--if I talk about we as an entertainment industry--we're having enough of a challenge to commit to this stuff without offering them something that's even more expensive. Clearly, I think this is a ploy to get Disney involved with things other than just focused on Blu-Ray, but I don't know. We're very clear, N'Gai, and I'm sure you've heard this until your ears bleed: we want to offer choice, and I'm not going to burden the box with $200 extra for a high-def movie format that people don't know whether it's going be successful or not. Right now, a minority of people have the equipment necessary to take full advantage of high-definition movie scenarios.

So if you want it, and you're fortunate enough, as I am, to have a big screen and a nice rig, then I go out and buy my HD-DVD player, and I love it. I absolutely love it. But I'm in the minority. I'm not an average consumer. I have a 110-inch screen, and sometimes I squint every now and again and say, "Eh, if I had to pay real money for all this stuff, I'm not sure that it's enough of a quantum leap that I remember VHS to DVD being." I remember being blown away when I saw that, as many years ago as it's been. I'm not yet seeing that, where if I was a consumer that had to really say "Do I want to do this or do I want to do that with my money," that I would say, "Boy, I've got to do this." I think you've go to have at least a 50-inch TV to really take advantage of this.

Just a couple more questions.

Yes, sir.

On the IPTV front, on the digital transmission of entertainment, the set-top box. It seems to me that even the original Xbox, which some would say was not successful relative to the PS2's installed base was still far more successful than Windows Media Center as far as getting placed in the living room, as far as getting placed on top of TVs, next to TVs.

Okay. Some would say that, yeah.

Some would say that. I'm assuming not you.

[Laughs.]

What learning, if any, is going out of your group towards the Media Center group, to increase the likelihood that consumers will start to in meaningful numbers put their Media Center-enabled PCs into their living rooms?

Well, there's two scenarios. Just so you know, this evening we're showing IPTV running on an Xbox 360. That will be demonstrated by Robbie, and a good friend of yours, Albert Penello will be on stage--clean-cut and all showered and sparkly--and showing IPTV on Xbox 360.

The other thing of course which I've started to enjoy now that I've had Vista for about five weeks--I run Vista Ultimate; and I have Media Center in there--and utilizing my 360 using the Media Center part of what I do with Vista Ultimate is such a seamless experience. That is one of the challenges--and we'll admit to this--if you asked Media Center Edition customers a year or 18 months ago, it was very difficult to get it set up. I don't know if you've tried it at home, but you're again not the average consumer, you're a technically savvy guy that figures it out.

Joe Blow had a tough time figuring out Media Center. The one thing I will tell you about Vista Ultimate is that it's plug-and-play. It is very simple. When my 360 got cranked up and I signed on to Live, Windows Vista recognized my 360 on my home network, and it was simply "Do you want to connect this to your home network? Yes or no?" and punch in the eight digit code that was showing on the TV, and I was up and running. It is very, very simple, and Vista is doing that for us.

So I think Vista Ultimate helps the Media Center Edition, which in the last 12 months has really started to gain steam. And I think Vista will continue to help drive that. I think they're finally breaking through.

Yeah, I don't think the question is Microsoft's ability to sell them, because they steadily reduced the price difference [between Media Center and non-Media Center PCs.] The thing is getting them in the living room. Or, as you seem to be saying, maybe 360 is the way that it gets in the living room and Media Center doesn't actually get there physically.

They've got a better 10-foot experience now than they ever have before. It was still, to be blunt, a good two-foot experience; it wasn't a great ten-foot experience. I'm stating to feel now that it's a great ten-foot experience. But it becomes about choice. What you'll see this evening, you'll see us talk about Media Center; you'll see us talk about IPTV running on an Xbox--you'll see IPTV running on an Xbox 360. We'll talk about Xbox 360 itself and Video Marketplace, and it really becomes about choice: how you want to consume your media.

The idea is, and you've seen some of the interviews Robbie's done recently on connected entertainment: it's utilization of multiple devices and bringing them all together and Microsoft being the glue that does that. The keynote tonight will show you in real-time how we're answering a lot of those questions. We're still very bullish on Media Center, there's no doubt about that. But I will say, even as an employee, it's a better experience now than it was 18 months ago when it as pretty painful, quote unquote. But boy, it is so simple now, it's surprising.

The last question, and I'm not sure that you're aware of this, but the Slamdance Film Festival has a sidebar for games, a games festival. One of the games they requested be submitted for competition was a game called Super Columbine Massacre RPG!

I remember that, yeah.

It got a lot of controversy last year. Now it seems, through either sponsors threatening to pull out, actually pulling out, or the taste or moral judgment of the overall festival organizer, they decided to pull it from competition. Looking at this separately from your position running Xbox, but as someone who cares about the future of the medium, what do you make of that, considering that the festival would have been unlikely to pull a movie dealing with the same subject matter, like "Bowling for Columbine" or "Elephant"?

I think you see there is still from authoritarian figures misconceptions about our industry. I don't know if you know who Boris Johnson is; you saw his "Garrote the Game Boy" statement. This is a guy that--I don't know how to describe him if you don't know British politics--is a classic, outspoken Tory member of Parliament that lives on the edge of his publicist all the time, because that's how he gets exposure. The sound bites of "Garrote the Game Boy," and I can't remember the other thing on the Playstation, whatever it was. We still as an industry have this misconception--for better or worse, N'Gai, the ability now for consumers to develop their own entertainment, whether that's consumption on YouTube; user-crated content. This was a little more than user-created content, but it wasn't a lot more, it wasn't exactly a huge development studio that did this.

The First Amendment rights to create entertainment experiences about real events still exists in this country, whether we like it or not. Now, the organizer of this festival was well within his or her rights to say, "You know what? I'm making a personal judgment, and I don't think this is appropriate." Fine. What we tend to do, certainly at Microsoft, is the ratings are something that we rely upon, we support and as you well know, we will publish M-rated games. We do not try and apply personal, subjective opinions about entertainment content, because that's a very slippery slope.

Now, I don't question this guy or this lady whatsoever. That's their choice, it's their festival, they can do what they want. But does become a challenge when individuals apply personal preferences, likes and dislikes for things and then enforce that on the consumer. I think we need to continue to make sure our ratings are enforced and are defensible.

Peter, thanks very much for your time.

My pleasure. Now please, eat, for god's sake.