Forbes: Can you say how long this unbundling announcement has been in the works?
Mehdi: Over the last couple months we've been having discussions about how we can continue to iterate on the program.
Does it have anything specifically to do with the recent change in leadership with Phil Spencer taking over?
Not really, for years now we've been trying to be very customer focused, looking to our fans and taking their feedback. You can track all the way back to E3, where after we got out we had a lot of good feedback about how you can play games, used games, and online connectivity. We've been very responsive, and this is consistent with that approach.
You do seem a lot more responsive to fan feedback than most. In doing that, how do you balance your own vision for the Xbox One with what fans want, which has proven to be quite different at times? Where do you draw the line?
Yeah, that's a tough call. I think in general we prioritize listening to our customers and being fan-driven. I think that's really the key. But look, a lot of times when you're trying to pioneer a new system or new technology, it's harder. You have to take some risks, outline your vision for the future and share it with customers. Hopefully when you do, they see [your vision]. The good thing about our fans is that they know their stuff, the games, the system, and they're good guides as to how to take the system forward.
So now that Kinect is optional and there's a $399 price point, there are a lot of comparisons to PS4. What do you view as your main differentiator now if someone's buying a standalone Xbox One system compared to PS4? The consoles are starting to seem pretty similar these days, especially in the wake of this announcement.
I think there are four main areas in terms of how ours system is differentiated. First is that the reason people buy these consoles is to play games. We've got the best games line-up. We had the best games line-up this past holiday if you talk to most experts in the games industry. As we go into E3, you're going to see an incredible games line-up. Knock on wood, I believe we're going to have a great games line-up for this coming holiday as well.
Second thing is people buy games to play with their friends. We have had the best multiplayer gaming system in this space for many years with Xbox Live Gold. We've really set the standard. You get better matchmaking capability with SmartMatch, you get better protection against people who cheat. Xbox Live Gold is the best place to come play with your friends.
Third is the original vision we had for Xbox One, which is an all-in-one entertainment device, and it still is, even with the $399 SKU. You still get Xbox One as an input one device where you can still watch live TV, do two things at once, input switch. A lot of the things you do with entertainment you just can't even do on other systems. We're really built for the future.
And finally you can still add on Kinect to create all these additional experiences with voice commands, biometric recognition, recording gameplay and more.
Those four things make it very differentiated, and now that the price points are the same, and people looking at games and entertainment experiences are future-proofing, I feel that we have a very differentiated system.
Both the PS4 and Xbox One have sold very well, but there's been a bit of a sales gap. Do you view that it's mostly due to the cost, and now that the price is lower on the unbundled Xbox One, you'll gain a bit of ground on Sony?
It's hard to really assess the gap in sales. They're in many more markets right now than we are. They're in 40+ markets, we're in 13. People have been more satisfied with the Xbox 360 than the PS3, so in that respect people have less of a need to upgrade in the short term due to regular updates for the Xbox 360. We could point to any number of things. That said, we've heard from a lot of our Xbox fans who say, "Hey look, I want an Xbox One, but at $499, I probably have to wait a little while before I can afford to get one." I do think we're going to get people now who move over, and then buy the Kinect later. So I do think the [price point] broadens the appeal and hopefully brings more people to Xbox One sooner.
In the wake of this, now that the price has been lowered and you've said people are waiting to buy it, do you think that at launch it was a mistake to bundle the Xbox One with the Kinect at a higher price?
No, I think it was the right call to bundle with Kinect. In the beginning of a new console generation, you're trying to set the bar for a new experience, and I think we did that with Xbox One. The proof is really in the usage. 80% of people are using Kinect which is remarkable compared to the last generation. We're doing 120 voice commands on average a month with over a billion commands issued. People who wanted the experience came and bought it. We were sold out all through the holidays. I think it was the right call, and now is a good time to offer more choice for people who haven't been able to get that experience.
What do you see as the future of Kinect here going forward? Do you think that it's lived up to its potential or struggled in some ways?
The way I look at it is that you should take a five year vision. I think in five years, we will laugh at any computing device you can't walk up to and talk to. Voice is going to be there for all devices. We're a pioneer with Kinect in the living room. And it's not just voice, and it's voice and biometric ID. The ability to pioneer that, and with the success we've had so far with five million people, it's remarkable. We feel great about it. And look, we're going to learn a lot, and our partners are going to learn a lot, and our customers are going to learn a lot, and we're going to continue to shape it. But I think we're breaking a lot of new ground and we're delighted with the progress.
Do you worry that now that the Kinect is optional, there may be less developer support for it as they make games going forward?
One thing I should say is that we made this decision in conjunction with our games publishers and our entertainment partners. As you can imagine, we have really strong relationships. The two of us looked at the problem the same way. We love Kinect, we love the way it's going and the possibilities. At the same time, we also wanted to have a broadened base of users. Some games are fully Kinect-based, and some are better when you use Kinect, but can also work fine without it. In each of those cases, this is still the right call.
A price cut for the Xbox One was rumored for a while and everyone was wondering how you'd do it. When you were devising ways knock the price down, was removing Kinect the only thing on the table, or were there other options considered?
The way we think about this is that the ability to offer more choice as to how you package these bundles is a no-brainer. This way we're allowing more people to come and try it, and based on the feedback we'd gotten, that made sense. Certainly, it's part of the general marketing of Xbox One. We've had promotional offers with games included with Xbox One. If you look back to Xbox 360, we've done temporary price reductions. We're going to be doing those throughout the lifecycle of the console. The way I think about this is that you're repackaging to allow you to have a better opening price.
Mehdi: Over the last couple months we've been having discussions about how we can continue to iterate on the program.
Does it have anything specifically to do with the recent change in leadership with Phil Spencer taking over?
Not really, for years now we've been trying to be very customer focused, looking to our fans and taking their feedback. You can track all the way back to E3, where after we got out we had a lot of good feedback about how you can play games, used games, and online connectivity. We've been very responsive, and this is consistent with that approach.
You do seem a lot more responsive to fan feedback than most. In doing that, how do you balance your own vision for the Xbox One with what fans want, which has proven to be quite different at times? Where do you draw the line?
Yeah, that's a tough call. I think in general we prioritize listening to our customers and being fan-driven. I think that's really the key. But look, a lot of times when you're trying to pioneer a new system or new technology, it's harder. You have to take some risks, outline your vision for the future and share it with customers. Hopefully when you do, they see [your vision]. The good thing about our fans is that they know their stuff, the games, the system, and they're good guides as to how to take the system forward.
So now that Kinect is optional and there's a $399 price point, there are a lot of comparisons to PS4. What do you view as your main differentiator now if someone's buying a standalone Xbox One system compared to PS4? The consoles are starting to seem pretty similar these days, especially in the wake of this announcement.
I think there are four main areas in terms of how ours system is differentiated. First is that the reason people buy these consoles is to play games. We've got the best games line-up. We had the best games line-up this past holiday if you talk to most experts in the games industry. As we go into E3, you're going to see an incredible games line-up. Knock on wood, I believe we're going to have a great games line-up for this coming holiday as well.
Second thing is people buy games to play with their friends. We have had the best multiplayer gaming system in this space for many years with Xbox Live Gold. We've really set the standard. You get better matchmaking capability with SmartMatch, you get better protection against people who cheat. Xbox Live Gold is the best place to come play with your friends.
Third is the original vision we had for Xbox One, which is an all-in-one entertainment device, and it still is, even with the $399 SKU. You still get Xbox One as an input one device where you can still watch live TV, do two things at once, input switch. A lot of the things you do with entertainment you just can't even do on other systems. We're really built for the future.
And finally you can still add on Kinect to create all these additional experiences with voice commands, biometric recognition, recording gameplay and more.
Those four things make it very differentiated, and now that the price points are the same, and people looking at games and entertainment experiences are future-proofing, I feel that we have a very differentiated system.
Both the PS4 and Xbox One have sold very well, but there's been a bit of a sales gap. Do you view that it's mostly due to the cost, and now that the price is lower on the unbundled Xbox One, you'll gain a bit of ground on Sony?
It's hard to really assess the gap in sales. They're in many more markets right now than we are. They're in 40+ markets, we're in 13. People have been more satisfied with the Xbox 360 than the PS3, so in that respect people have less of a need to upgrade in the short term due to regular updates for the Xbox 360. We could point to any number of things. That said, we've heard from a lot of our Xbox fans who say, "Hey look, I want an Xbox One, but at $499, I probably have to wait a little while before I can afford to get one." I do think we're going to get people now who move over, and then buy the Kinect later. So I do think the [price point] broadens the appeal and hopefully brings more people to Xbox One sooner.
In the wake of this, now that the price has been lowered and you've said people are waiting to buy it, do you think that at launch it was a mistake to bundle the Xbox One with the Kinect at a higher price?
No, I think it was the right call to bundle with Kinect. In the beginning of a new console generation, you're trying to set the bar for a new experience, and I think we did that with Xbox One. The proof is really in the usage. 80% of people are using Kinect which is remarkable compared to the last generation. We're doing 120 voice commands on average a month with over a billion commands issued. People who wanted the experience came and bought it. We were sold out all through the holidays. I think it was the right call, and now is a good time to offer more choice for people who haven't been able to get that experience.
What do you see as the future of Kinect here going forward? Do you think that it's lived up to its potential or struggled in some ways?
The way I look at it is that you should take a five year vision. I think in five years, we will laugh at any computing device you can't walk up to and talk to. Voice is going to be there for all devices. We're a pioneer with Kinect in the living room. And it's not just voice, and it's voice and biometric ID. The ability to pioneer that, and with the success we've had so far with five million people, it's remarkable. We feel great about it. And look, we're going to learn a lot, and our partners are going to learn a lot, and our customers are going to learn a lot, and we're going to continue to shape it. But I think we're breaking a lot of new ground and we're delighted with the progress.
Do you worry that now that the Kinect is optional, there may be less developer support for it as they make games going forward?
One thing I should say is that we made this decision in conjunction with our games publishers and our entertainment partners. As you can imagine, we have really strong relationships. The two of us looked at the problem the same way. We love Kinect, we love the way it's going and the possibilities. At the same time, we also wanted to have a broadened base of users. Some games are fully Kinect-based, and some are better when you use Kinect, but can also work fine without it. In each of those cases, this is still the right call.
A price cut for the Xbox One was rumored for a while and everyone was wondering how you'd do it. When you were devising ways knock the price down, was removing Kinect the only thing on the table, or were there other options considered?
The way we think about this is that the ability to offer more choice as to how you package these bundles is a no-brainer. This way we're allowing more people to come and try it, and based on the feedback we'd gotten, that made sense. Certainly, it's part of the general marketing of Xbox One. We've had promotional offers with games included with Xbox One. If you look back to Xbox 360, we've done temporary price reductions. We're going to be doing those throughout the lifecycle of the console. The way I think about this is that you're repackaging to allow you to have a better opening price.
