E3 2006: Shane Kim Interview - Interviews

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E3 2006: Shane Kim Interview

If there was any doubt as to where the focus of Microsoft is in relation to where its Xbox 360 is headed, Shane Kim, General Manager of Microsoft Game Studios, let it be known in an interview at E3: it’s online through Xbox Live. After a recent upgrade to its Xbox 360 Dashboard and the acquisition of in-game advertiser Massive to boost the Xbox Live revenue stream, it is through the exceptional Xbox Live service that Microsoft hopes will be its big advantage in the upcoming second round of a console war with Sony and Nintendo.

“Xbox Live has been around five years. Ask a gamer what [console online setup] is better now,” Kim said. “They [Sony] have to deliver on that. We’re well on our way to 6 million [Xbox Live users] connected with 3 million now.”

The Xbox Live numbers to date have to be giving Kim plenty reason to see a real chance for the Xbox 360 to hold its own, particularly against the PS3 in November. Microsoft had expected 3-4 million downloads of content since last November’s Xbox 360 launch. After E3 in May, that number had reached 24 million. Of course, a week of free Xbox Live gold membership had something to do with that, but 24 million is an impressive number regardless.

While much of what downloadable content that has been released so far has been free, Microsoft is beginning to roll out more premium content, where the gamers will incur a charge to download. Its not a new concept, as the original Xbox has had premium content and Xbox Live Arcade games can be bought online via Xbox Live, but expect to see much more premium content headed to the Xbox Live marketplace. Kim, for one, believes gamers are willing to open their virtual wallets for new content.

“People will pay for compelling downloadable content,” Kim said.

As far as in-game and online advertising, Kim sees that as a possible way for developers to cut increasingly larger and larger development costs. And Microsoft’s purchase of Massive is reflective of Microsoft Game Studio’s intention to do just that, although it still is open for debate how much of a cost-cutting measure it may be.

“I don’t’ know how big [in-game and online advertising] will grow, but it will grow,” said Kim.

Another area Microsoft plans to grow is through its Live Anywhere feature that will connect gamers not only on Xbox 360s but on PCs as well. In other words, Xbox 360 players will be able to play against PC players in cross-platform titles, connected through Live Anywhere. This will be a new feature in the newest version of the Windows operating system, the upcoming Vista .

“Live Anywhere increases the power of our platform,” Kim said. “There’s a whole wealth of possibilities. Shadowrun is an example of that. We want you to be able to enjoy it on any system.”

Once again with the 360 just as was the case with the original Xbox, Microsoft has had a hard time establishing a significant foothold in the Japanese console market dominated by Sony and to a lesser extent Nintendo. Kim concedes that much.

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But he said that Microsoft learned many lessons on how to approach the Japanese market from its first foray into Japan with the original Xbox. Kim also said that Microsoft is completely committed to seeing the 360 succeed in Japan, and sent a strong message to Sony, particularly in the wake of the sticker-shocking PlayStation 3 price announcement. The dual-SKU PS3 will cost either $499US or $599US.

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“Sony earned their success,” Kim said. “But they only can rely on customer loyalty for so long. The price [of the PS3] definitely helps us if we have better content to offer at a better price.”

That dual-SKU strategy of Sony directly mimics that of Microsoft, which has two separate 360 SKUs: the higher-priced unit with a hard drive and the cheaper Core system without a hard drive. There was much debate in the gaming press that Microsoft would have been better served having just the higher-priced SKU.

After all, that is the system most gamers seemed to want to buy despite the higher price, and having to possibly “settle” instead for the Core system led to many a disappointed gamer last November.

It also resulted in no higher-priced Xbox 360s being on store shelves at Christmas and a three-month wait until the next batch were ready. The suggestion was thrown around that Microsoft would have been better off focusing its production lines on churning out only one system instead of splitting between two, because, as the prevailing logic goes, one SKU would have led to many more Xbox 360s getting into the market quicker.

Kim certainly wasn’t going to concede that, but he did say that Microsoft saw a definite advantage with the lower-priced Core system outside the North American marketplace. “The Xbox 360 Core system is very important to us in various territories,” he said.

His reasoning was that in many markets it was more important to provide a lower-priced 360 because that is what gamers in that market can reasonably afford. Whether that is true or not, Microsoft completely stands behind its two-SKU strategy.

No matter what the reaction to its dual-SKU approach has been, Microsoft is satisfied with the results, as more and more Xbox 360s are getting into stores and into gamer’s homes. “[Xbox 360] supply’s catching up with demand,” said Kim.

Microsoft’s Xbox 360 will have some early advantages over the PS3 and Wii, according to Kim, and one of the biggest will be that the only next-generation console the have the next Madden at the beginning of the National Football League season will be the 360.

Does Microsoft have enough with its competitive Xbox 360 software advantage (first to have Madden, Gears of War on the horizon, Halo 3 next spring, simultaneous Grand Theft Auto 4 release) and its stellar Xbox Live to significantly chop into Sony’s majority console marketshare?

Not even Kim can predict that, but it certainly is clear that Microsoft has much more of an advantage in 2006 than it did when it launched its original Xbox five years ago, and Microsoft’s goal is clear. “We want to win this generation,” Kim said.

- Lee Cieniawa

lcieniawa@armchairempire.com

(June 8, 2006)


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