News

Mr. Xbox says game over

Ed Fries quits Microsoft before Xbox 2 makes its debut
January 13, 2004: 3:33 PM EST
By Chris Morris, CNN/Money Staff Writer


NEW YORK (CNN/Money) – Ed Fries, the head of Microsoft's games division, has resigned from the company, catching employees and industry observers by surprise.

Fries resignation was announced Tuesday in an e-mail from Robbie Bach, senior vice president of Microsoft Games. In that note to the staff, Bach added that the company was planning no other organizational changes at this time.


Fries
"Although we will definitely miss Ed, he leaves Microsoft Games on a solid path with great strategy. Everyone must stay focused and keep moving forward," wrote Bach. "We hope Ed takes this opportunity to sit back, relax and allow himself a moment to enjoy the contributions he has made to the company and the industry."

Fries decision to leave comes as Microsoft prepares to unveil details about the next Xbox console.

"We're kind of at the point in the project that you have to decide 'are you going to sign up for another five years for the next version or not'," he said. "That's just the natural point to look back at it and ask 'Is this what I want to do? Is everything how I want it to be?'"

The departure comes after months of discussions between Fries and Bach. Fries said the company offered to change his job responsibilities in order to convince him to stay, but the two parties could not reach an agreement.

"For me, I'm looking for a situation where I have a lot of freedom around the development of our products and the way those products come to market," he said. "I've had some of that to date, but not as much as I would like."

Fries was a key component of Microsoft's (MSFT: Research, Estimates) success in the gaming industry. An 18 year veteran of Microsoft, he took over the fledgling games division in 1995. At that time, Microsoft Games consisted of little more than the company's popular Flight Simulator program for the PC. In subsequent years, he was actively involved in the development and launch of the Xbox gaming system and oversaw the acquisition of several major game developers, including Bungie Software (which is responsible for "Halo", the Xbox's most successful title) and Rare.

Eight years later after he took the reins, the games division consists of 14 separate studios and has anywhere from 60 to 70 games in production at any given time.

Shane Kim, chief operating officer for Microsoft Games, will replace Fries on an interim basis.

Fries said he plans to remain in the gaming industry, but is not revealing his plans at this time. He added he leaves Microsoft with no ill will.

"I'm very grateful to everything Microsoft has done for me," he said. "I've had the incredible opportunity to work with amazing people and work on amazing projects. ... The closest thing I can relate this to is graduation. It's exciting to go on to something new but it's sad to leave at the same time."

Microsoft's Connors Says Current Xbox Model Won't Be Profitable


Jan. 27 (Bloomberg) -- Microsoft Corp., which is trying to
compete with Sony Corp. in video-game consoles, will try to
design the next version of its Xbox machine with cheaper parts
because the current model won't ever be profitable.

``With the current cost of goods, there's no way to make
money with this generation of the console,'' Chief Financial
Officer John Connors said at an investor presentation in Boston.

He didn't say when Microsoft would introduce a new Xbox.
Analysts expect the next one in 2005 or 2006.

--Dina Bass in Seattle dbass2@bloomberg.net

MWAHAHAHAHAAA

[Lurch1982]

Not seeing how that isn't expected. They've known that they wouldn't be profitable until either the Xbox Live system is fully implemented (not yet) or the next generation. This was a brand-building generation.

Note to Microsoft: Don't use Thompson DVD drives.

Xbox for $99? Xbox 2 in 2005?

Microsoft might have a few surprises for the game sector up its sleeve.
January 28, 2004: 3:09 PM EST

http://money.cnn.com/2004/01/28/com.../column_gaming/

NEW YORK (CNN/Money) – For the past two years, Microsoft has established a reputation as a follower in the video game war. When Sony acted, Microsoft reacted – especially when it came to price cuts. Things could be about to change.

Microsoft's Xbox may be on the verge of a substantial price cut, falling from $179 to $99 by Labor Day, according to P.J. McNealy, an analyst with American Technology Research.

"It is our belief that the price on the consoles in North America could see a stepped drop this year, with both the PS2 and Xbox being cut to $129 between now and the May E3 trade show, with [Microsoft] then cutting the Xbox further to $99 in the late summer," he wrote in a research note released Wednesday.

McNealy also believes Microsoft will launch its next generation console in late 2005 – a year earlier than has been previously rumored. That would put the Xbox 2 on store shelves up to a full year before Sony's PlayStation 3.

Microsoft, when asked about the report, said it does not comment on rumors and speculation.

The predictions are pretty bold – but not without merit. It's no mystery that the price of home video game machines will be coming down this year. After 2003's lackluster $20 cuts, Microsoft and Sony both saw console sales falter. Xbox hardware sales fell 18 percent in North America between 2002 and 2003. PlayStation 2 sales were off 49 percent in Holiday 2003. (Only Nintendo, which dropped GameCube prices to $99, saw sales increase.)

The price cut would result in a flood of red ink, though. When Microsoft launched the Xbox in 2001 for $299, it reportedly lost $100 for every unit it sold. Component prices have certainly gone down since then, but the console has never reached the break-even point.

But at this stage of the game (so to speak), Microsoft doesn't seem to care much about that. Deep price cuts – especially if they go unmatched by Sony – would drive up the number of people who own and begin growing accustomed to the Xbox. And having that deep installed customer base is the key to driving sales of a next generation machine.

So $99 would certainly build brand awareness as Microsoft prepares for the launch of its next machine. But I'm not sure a 2005 launch is necessarily a good move.


Xbox for $179 has not attracted new buyers.

Yes, being the first to market would let Microsoft do away with that reputation it has as a follower. It might also force Sony to either step up production of the PS3 or increase the technical specs.

But showing your hand a year before the industry's 500 lb. gorilla does carries a significant amount of risk. Just ask Sega, which tried doing that with the Dreamcast – and got booted from the hardware business as a result. Gamers looked at what the Dreamcast could do and were generally impressed – but decided to save their dollars for the PS2, since they considered it a sure bet.

Microsoft, certainly, is in a much stronger position than Sega. The Xbox's buzz factor is on the rise – and will soar higher if the company opts for a $99 price tag. But it hasn't yet established a reputation that's strong enough for it to sway Sony loyalists. (Not to mention there's a fringe faction that refuses to buy the machine simply because it's made by Microsoft.)

Certainly, it could hurt Sony during the crucial holiday sales period – both 2004 (with Microsoft offering a lower price point) and 2005 (with Microsoft offering a state-of-the-art product). But a rush to market could give Sony time to wind up for a devastating punch.

Look at the software situation. "Halo 2" – the second installment of the most popular Xbox game (by far) – is due later this year. Exactly when is a mystery – Microsoft will only offer "it will be ready when it's ready". It's possible we won't see the game until this holiday season. That would leave an insufficient amount of time to prepare another installment to launch in conjunction with Xbox 2.


One more time? Click for past columns.

Obviously, it's not essential that the system launch with its best game. And an argument could be made that holding "Halo 3" to meet the PS3 launch head on might be wise. But the Xbox has so far been unable to deliver another game line that is anywhere near as effective at moving hardware.

All Sony (SNE: Research, Estimates) needs to do is announce that a new "Grand Theft Auto" title – and perhaps a new "Jak" or "Ratchet and Clank" game – will launch simultaneously with the PS3 and it could suck the wind out of Microsoft's (MSFT: Research, Estimates) sails.

And the nightmare scenario in Redmond has to be releasing the Xbox 2 a year early – only to have it move off shelves at a lackluster pace.


--------------------------------------------------------------------------------

Morris is Director of Content Development for CNN/Money. Click here to send him an email

They should be smart enough to start dropping very soon. I wouldn't be surprised to see it hit $130 for the holidays. Should've dropped in November, though. The less aggressive they are with pricing, the less aggressive they'll be with brand building. This is just one more reason they should launch Xbox 2 next year. They're unlikely to get away with beating Sony by a year, though.

I don't see how a launch next year would be bad. Launching with Sony is great, and if they somehow beat Sony to the punch (if nothing else, they'd cause severe PS3 shortages), that's even better. Further, if they really do drop to $100 this year, they're probably going to be losing more money than they would on a $300 next generation system.

As for a Halo replacement, the solution is simple: Perfect Dark. They bought Rare for a reason, right? Its 1.3 million units in this country may not be huge, but they're certainly more than Halo had to work with when it launched. Combine that with PGR, Amped, and something from Tecmo, and the lineup will attract gamers. Then follow that up with Halo 3 the next year.

I'd be surprised if Sony can secure GTA exclusivity again.

[ January 31, 2004, 10:39 AM: Message edited by: Goat: Is It In You? ]

Microsoft has quietly circulated the specifications for its next-generation Xbox video-game console, indicating how the company plans to carry on its war against dominant player Sony.

The details suggest Microsoft is far more concerned about keeping the cost of its Xbox Next console low than it is with including dazzling technological features or driving its rivals out of the business, according to a variety of industry sources.

People familiar with Microsoft's strategy say the company apparently believes it can capture a much larger share of the market if it launches its machine before Sony fields its PlayStation 3 console in 2006.

A Microsoft spokeswoman declined to comment on strategy details.

The new Xbox reflects some tough lessons learned in the current console battle, in which Sony has outsold Microsoft 5 to 1. The Xbox has put Microsoft on the map with a generation of gamers. But it has also been a money loser, albeit a relatively small one for a company with $53 billion in cash.

Microsoft launched its Xbox console 20 months after the PlayStation 2 debut. By the time Microsoft sold 1.5 million consoles, Sony had sold more than 20 million PlayStations. To date, Microsoft has sold 13.7 million Xboxes, while Sony has sold more than 70 million. In the United States alone, console sales amounted to $3 billion in sales last year.

For gamers, the new Xbox will be impressive, giving them the ability to play fast-action, realistic 3-D games on a high-definition TV set. Microsoft's emissaries have told industry developers and publishers that the next Xbox will be ready to launch in fall 2005 with the following specifications:

• Three IBM-designed 64-bit microprocessors. The combined power of these chips means the Xbox Next will have more computing power than most personal computers. The chips are used in Apple Computer's high-end G5 PowerMac machines now.

• A graphics chip designed by ATI Technologies with speeds much faster than its upcoming R400 chip for the personal computer. This chip will help the next Xbox to display games with the resolution of high-definition TV.

• Compatibility with the original Xbox, which is based on Intel and Nvidia chips, isn't guaranteed. Microsoft is concerned it would cost too much money in hardware or in licensing fees to enable the Xbox Next to play old Xbox games. This is risky in part because Sony's strategy has been to maintain compatibility with its old consoles.

``I can't imagine that Microsoft would be so insanely stupid as to make it incompatible,'' said Jon Peddie, an analyst at Jon Peddie Research in Tiburon.

Microsoft is leaving itself wiggle room to react to competitive moves by Sony and Nintendo. A few details are to be decided. In contrast with the current Xbox, the next one will have no hard disk drive -- unless Sony puts one in the PlayStation 3. Instead, the console will rely on flash memory to store saved games and permanent data, much like the current PlayStation 2.

The machine also will have about 256 megabytes of dynamic random access memory. But Microsoft will upgrade that to 512 gigabytes if Sony puts in more. The previous Xbox had 64 megabytes. And lastly, it isn't clear if Microsoft will include the current DVD video technology or Blu-Ray, its successor. Blu-Ray will hold much more data, but it's unclear when it will be ready for market.

The current Xbox has an eight-gigabyte hard disk drive. That drive is useful for online games and storing game art, but many developers chose not to make use of it. As a result, Microsoft seems to have decided that saving the $50 the hard drive costs outweighs its benefits.

In telling the developers what will be in the box, Microsoft is helping them get started on games that will be ready when the console launches. But it is also soliciting feedback, and some developers are pushing Microsoft to make changes.

``I would really like to see a hard disk drive in the box,'' said Tim Sweeney, chief executive officer of Epic Games in Raleigh, N.C., who has made his opinions known to Microsoft. ``For a console to really have a useful online component, it has to have the hard drive to store downloaded maps and other data.''

Sweeney says it is dangerous for Microsoft to wait until Sony reveals the details of the PlayStation 3 or to pay too much attention to cost issues.

``Sony isn't as motivated to launch a new console because it is No. 1,'' he said. ``If Microsoft waits for them, it is in effect allowing Sony to design Microsoft's box.''

Regarding cost issues, a Microsoft spokeswoman would only say, ``Microsoft is in this for the long term.''

Developers like Sweeney say they are pleased it will be apparently easy to develop games for Microsoft's new box. That was one of the main advantages that Microsoft has had over its rivals. Current information about the PlayStation 3, sketchy as it is, indicates that it could be extremely difficult for developers to master.

The top executives of both Electronic Arts and Activision said this week that they have not received formal ``software development kits'' from Microsoft yet, but they did say they have begun creating next-generation games. Internally, Microsoft has begun developing game prototypes, and it is using G5 systems to do so.

The same developers who have seen the Microsoft specifications say Sony hasn't shared as much data with them. Sony appears to be willing to wait until 2006, in part so that it can milk the profits from the current generation PlayStation 2. In the meantime, Sony is launching an all-in-one PS 2/video recording box dubbed the PSX and the PlayStation Portable.

Microsoft's schedule may change -- it has a big meeting coming up for developers this month. But for now it appears it will release information about the new box at both the Game Developers Conference in San Jose in March and at the Electronic Entertainment Expo in Los Angeles in May.

Microsoft Employee Fired for Blogging Arrival of G5's at Redmond
From: MacMerc.com

Microsoft Employee Fired for Blogging Arrival of G5's at Redmond 10/29/2003 10:25

MacNN reports that Michael Hanscom was fired by Microsoft for his blog post "Even Microsoft wants G5's" which included pictures of a delivery of G5's.

Getting in Bed With the Customer

By Chris Kohler | Also by this reporter Page 1 of 1

02:00 AM Feb. 06, 2004 PT

You can't take the voluptuous, bikini-clad vixens from Tecmo's Dead or Alive Xtreme Beach Volleyball to bed with you -- but if you buy an Xbox in Japan this March, Microsoft will give you the next best thing.

This month marks the two-year anniversary of the launch of the Xbox video game system in Japan, and so far, things have not gone as planned for the Redmond, Washington-based software giant. In fact, Microsoft's entry hasn't yet sold 500,000 units, making it one of the worst-performing game consoles in the country's history.

Still, the Xbox has its supporters -- and by and large, they're fans of the Dead or Alive games that feature a bevy of barely legal, high-resolution digital girls who fight in skimpy outfits and play volleyball in skimpier ones. The DOA games are the only two Xbox titles to break 100,000 units sold in Japan.

So, to celebrate the Japanese release of Dead or Alive Online next month, Microsoft is rolling out a special edition Xbox set with an extra-special bonus -- a dakimakura, or "hugging pillow," that features a life-size, front-and-back print of teenage character Kasumi in a skimpy bikini.

These character-print dakimakura came into existence in the late '90s as a way for animé fans to get up close and personal with their cartoon sweethearts. "They were originally very popular among fans of doujinshi (manga fanzines)," said Kunio Muto, a technology reporter for the Nihon Keizai Shimbun, "but over the past couple of years they have secured a spot in the otaku (obsessed fan) market."

Hugging pillows are printed with life-size artwork of popular animé characters, and are basically life-size teddy bears for adult males, but otaku's relationships with their dakimakura can get a little more personal. "Searching Google Images with the term dakimakura is enough to understand the people who buy these items," said Muto.

"I guess they're supposed to be used ... as pillows to hug, of course ... and for other obscene purposes that I would rather not mention."

So why does Microsoft think that dakimakura will sell 5,000 Xboxes? "This isn't something that's supposed to attract new Xbox users; it's aimed at current Xbox DOA fans. The Xbox's image was cemented as the 'DOA machine' after Extreme Beach Volleyball's mild success last year. Microsoft has changed its direction from 'winning family users' to 'exploiting hard-core fanboys,'" said Muto.

Shinpei Masui, a university student in Kyoto who is the leader of his school's gaming-enthusiast club, agrees. "To the average Japanese gamer, the Xbox is only for DOA Volleyball. Nobody really pays any attention to the other games. That said, the kind of people who buy DOA are mostly obsessed fans, and they buy it because they like the characters, not really because they enjoy the actual game play. And I think the creators intended this game for that kind of person, which is why it's sold more than other Xbox titles."

So does Microsoft have any chance of reaching the non-pillow-hugging market with the Xbox? The bulkiness of the hardware might ensure that style-conscious Japanese consumers may not bite unless the system is redesigned to be smaller and lighter. "Among the general public, it's seen as a big game console by Microsoft that's not selling any good. Size matters in Japan," said Muto. "Among hard-core gamers who care about technology, it used to be known as a game console to play American and European games whose 3-D capability surpasses all the other game consoles out there."

Masui agreed with this assessment. "Recently, my friends and I have been playing 007: Nightfire, and we've become a little more aware of American games. The high-quality ones have interesting qualities that Japanese games don't, and so we've begun to think about buying an Xbox to play games like Halo."

"However," Masui said, "there are really very few Japanese who think this way."

The Xbox Kasumi Blue limited-edition set hits Japanese shelves March 25. In addition to the Kasumi pillow, it includes a clear-blue Xbox system, one similarly colored controller, the DVD movie playback kit and remote control, the Dead or Alive Online software and 12 free months of Microsoft's Xbox Live online broadband gaming service. It will cost ¥22,800 ($216).

Meanwhile, closer to home, the new game, renamed Dead or Alive Ultimate, is scheduled for U.S. release March 23 -- hugging pillow not included.

Anyone else as disturbed as I am?

That was certainly more than I needed to know.

Only in Japan. A bunch of pillow ****ers will be spawned from this.

That is wrong on so many levels.

Thats the idea. They want the biggest Xbox people on their machine. and since DoA was their biggest seller they will be selling pillows which will assist the players to cope while playing Breast or Alive.

New details on the Xbox-bound action RPG, Sudeki, have been revealed. The biggest revelation is that of the main character, Tal, who is the son of a prestigeous general. Tal is ready to step out of the shadow of his father, and his first mission is to investigate the appearance of strange new creatures in the area. As one would expect, this leads to a much longer adventure.

While the player controls all of Tal's actions in battle, his team mates will be controlled by AI. However, the player can switch between characters in battle with the push of a button. The aforementioned team mates include a sorceress named Ailish, a gun-toting scientist called Elco, and a martial artist named Buki.

Another interesting element of combat is that when the player pushes the Start button in battle, it will not pause the game, but will slow down time instead. All the battles are in real-time, and all spells, attacks, and special abilities are all mapped to hotkeys, which means that no menus will be seen during the battles.

Sudeki is scheduled for a March 2004 release in North America. There have not been any announcements on compatability with Xbox Live, and the developer Climax says that it is unlikely.

Xbox 2 set to go multiprocessor; hard drive may not be built-in
Rob Fahey 09:47 02/02/2004

Microsoft's plans for next-generation machine include some major surprises

A senior source at Microsoft has revealed that its next-generation console is set to use multiple PowerPC processors in parallel - while the hard drive may not be shipped as standard, being supplied as an optional extra instead.

This information confirms reports received from developers over the past weeks, with the first solid facts about the Xbox 2 slipping out after Microsoft briefed a number of its key development partners on the current state of the system.

Our sources indicate that the console will use "four or more" of the IBM PowerPC processors, an architecture which will force game developers to significantly rethink the way that games are programmed in order to take full advantage of it.

It seems likely now that all three next generation consoles will utilise multiple powerful processors - with Sony's PS3 expected to use up to eight of its new Cell microprocessors, the Xbox 2 now known to be a multi-processor architecture, and Nintendo's "N5" (about which, admittedly, little is known) also likely to follow down the multiple PowerPC route, as Nintendo also has a deal with IBM and will almost certainly end up using very similar chips to Microsoft.

The real surprise in this leaked information, however, is that rumours which circulated last week claiming that the Xbox 2 was not guaranteed to have a hard drive installed as standard are, in fact, completely true.

Although all aspects of the specification are subject to change at this early stage (bear in mind that at this point in the lifespan of the original Xbox, almost none of the specifications as announced made it into the final product unchanged), our source confirmed that developers have been told "not to bank on" having a hard drive as a standard component of the system.

Although a final decision on whether to cull the hard drive from the specification is thought to be still under discussion, Microsoft is known to be toying with the idea of supplying the hard drive as an add-on peripheral (not as part of an "Xbox 2 Live" kit, as some sites reported last week, since such a thing won't exist - the console will be sold fully online-enabled), while using extremely high capacity flash memory cards for data storage.

If the company does go ahead with a basic specification that doesn't include a hard drive, it's likely to be seen as a backwards step by developers and consumers alike - especially since it's widely assumed that the PlayStation 3 will include an internal hard drive, and may even incorporate digital video recording functionality similar to the recently released PSX.

Crucially, the removal of the hard drive will also make the provision of backwards compatibility with Xbox games even harder - already a major difficulty for the system, since the architecture is so radically different to its older sibling. Many games use the Xbox hard drive as a kind of "scratch disc" to improve load times and overall performance, which means that it may not be possible to play a significant number of Xbox titles on Xbox 2 without first investing in the hard drive peripheral - if at all.

The decision to remove the hard disc is thought to be based at least partially on the cost of the component, which has added significantly to the overall cost of manufacturing the Xbox - a console which has made major losses on each unit sold since its original launch. It's also unlikely that it has escaped Microsoft's notice that both Nintendo and Sony make significant profits from the sale of memory cards for their consoles.

In terms of other specifications, much is still up in the air. It's thought that a firm decision has not yet been reached regarding the amount of RAM the system will have, while the graphics chipset, which is being supplied by ATI, is expected to be "nothing revolutionary" according to our source, but a significant leap in power over existing PC graphics cards.

Although it's already briefed key development partners on the new architecture, Microsoft is waiting until the Game Developers Conference in San Jose at the end of March to raise the curtains on Xbox 2 in front of the development community as a whole. A special Microsoft conference event is thought to be pencilled in alongside the GDC event itself.

However, comments from other sources close to Microsoft in the last few days have suggested that what the company actually reveals at GDC will depend largely on Sony, with the giant software company thought to be prepared to change the Xbox 2 specification in order to avoid losing ground to the PlayStation 3. It's likely, then, that if Sony does not reveal more of its next-generation hand before GDC (and the company has played its cards remarkably close to its chest so far, with only broad details of the Cell processor being mentioned to date), Microsoft may choose to reveal only broad outlines of Xbox 2 in San Jose - leaving final decisions on matters such as the hard drive and the RAM capacity of the system until after Sony has announced equivalent details of the PS3.

Microsoft reshuffles games unit, names Moore VP

By Ben Berkowitz

LOS ANGELES (Reuters) - Microsoft Corp. on Friday promoted longtime industry executive Peter Moore to a job overseeing global game production and marketing, and formally named Shane Kim to head its video game development studios, both effective immediately.

Moore ran the U.S. games arm of Japan's Sega Corp.'s before joining Microsoft in January 2003 to oversee its game sales and marketing efforts in Europe and Japan.

His new title is corporate vice president for worldwide content and marketing, heading the game studios, global marketing efforts and relationships with third-party publishers. Microsoft's games content and marketing previously operated separately.

Moore will also retain oversight of the Japanese market in his portfolio. Microsoft's Xbox has struggled for acceptance in the Japanese market since the video game system's launch in February 2002, and Moore said that market was his "pet project."

"We're really starting to show some progress (in Japan)," Moore said, noting that tastes were changing there and consumers were more open than in the past to playing games brought in from the United States and Europe.

Kim becomes general manager of Microsoft Game Studios, after holding the job on an interim basis since mid-January, when veteran studio head Ed Fries resigned. Kim was his top lieutenant.

The studio oversees game titles like "Age of Mythology" for the personal computer and "Halo" on the Xbox. Microsoft executives had sought to name a permanent replacement for Fries before E3, the key industry trade show in May. Kim will report to Moore.

The reshuffling comes less than a week ahead of the Game Developers Conference, an annual industry gathering in San Jose, California, where game designers and industry leaders meet to discuss trends and technology.

Financial analysts, game publishers and game retailers widely expect both Microsoft and its chief competitor, market leader Sony Corp. <6758.T>, to cut the prices of their consoles to $149 from $179 no later than mid-May, when the industry gathers in Los Angeles for E3.

A Microsoft spokeswoman denied the company was cutting the price of its console, though analysts were unswayed on Friday.

UBS analyst Mike Wallace, in a note, reiterated comments first made in late February that a price cut on the Xbox was likely by April 1.

"We think Sony will wait to see the impact of the Xbox cut on its share before potentially cutting the PS2," Wallace said. "Sony also needs to wait a few weeks after the end of its fiscal year (March) before cutting price to avoid marking down the inventory in the current fiscal year."

Rumors have circulated on the Internet for weeks that a price cut on the Xbox was imminent, including scans of what appeared to be retail newspaper ads showing the console at the lower price.