Everyone in games is talking about PlayStation this month. A big Sony announcement next week is getting tongues wagging. The long-awaited start to the next generation is almost upon us and PlayStation is at the starting line.
Over at Xbox, however, the focus is on the here and now. With just Gears of War on its first party radar, there’s been little to shout about. And its expected new console is still nowhere to be seen.
Instead, Xbox has been working tirelessly to make 360 the UK’s No.1 home console. In fact, it’s just a few thousand sales away from eclipsing Wii at the top of the hardware charts.
Even with renewed trade engagement from a revamped SCE UK, Microsoft retained market leadership thanks to exclusives like Halo and Minecraft. Its points cards are the biggest selling accessories in the UK. Momentum carries over to new releases: 65 per cent of Dead Space 3 launch sales were on Xbox 360. Globally Xbox has sold 76m units and 24m Kinects. There are 46m Xbox Live subscribers. The average user spends 87 hours a month on Xbox, ten per cent up year-on-year.
But with Sony snapping at its heels, troubled times for retail, and the emergence of new business models, Microsoft still has a job on its hands if it wants to maintain its position out front. So we sat down with senior regional director Jon Grimes and the new Xbox marketing director Harvey Eagle to uncover their plans for the future of Xbox.
How would you evaluate your 2012 performance?
Jonathan Grimes, Microsoft regional director: We remain the No.1 console for a third year running. If you look at Halo 4 and Forza Horizon we’ve had some great performances on software as well. It’s obviously been a tough market for a lot of people. But to come out on track with where we expect our volumes to be, we are really pleased.
Harvey Eagle, marketing director: We’ve passed eight million consoles sold in the UK according to GfK Chart-Track. We are on course to overtake Wii in terms of total lifetime sales. That’s a huge milestone.
Grimes: To be the leader in our second generation is a huge achievement. We are still the relative new guys to this We have got great people in the team that have been with us a long time, and now it’s about strengthening that team.
Could you eventually outsell PS2’s 10 million in the UK?
Grimes: We don’t see eight million as the cap. Do I think 360 could be the benchmark for console performances going forward? Let’s hope so.
You both were part of the business when the first Xbox arrived. You’ve seen the arc of a new player becoming market leader.
Grimes: When I joined our gaming business was Flight Sim. So we have gone from that to being No.1 in the console space. I have memories of standing at conferences, and all the other guys looking at us wondering: ‘Why are they even here?’
But what got us to where we are today is not going to be what gets us through the next ten years. We have to make sure we focus on the core principles. We knew we had to do things differently to get to this market leading position. But we’ve also got to start from scratch when thinking about the next ten years. Driving that creativity, whether that’s around marketing, retail or new business models, is key.
How has your relationship with retail changed over the last year?
Grimes: What we are doing with retail has grown in terms of complexity. Retailers are becoming omni-channel. We are asking: How does the consumer shop? Where are they shopping? How are they shopping on their devices vs in-store? So things have had to change because of that. We’ve needed social media experts to help retailers work out how they get people from Twitter to come into store for an event we might have, for example. We can see that expanding and it’s about sharing expertise.
"Whatever gets announced on February 20th, the majority
of consumers in the UK won’t know. They’ll still want
to buy the devices out there. So in terms of noise
our job will be to ensure that the consumers that
are going into stores, going online, still see
and experience Xbox,rather than get lost in the industry
chatter. Whatever is announced is important from an
industry perspective, but we must remember who is
buying right now."
Xbox Regional Director Jonathan Grimes
Looking at the first half of the year we’ve only got Gears of War in terms of first party titles. What else is coming?
Eagle: We’ve got a great line-up. We have Gears of War, Dead Space 3, the new Tomb Raider. There’s BioShock Infinite, and of course GTA V coming in September. So there’s a good pipeline of great games. Don’t forget that we have had amazing success with some of our Xbox Live Arcade titles, like Minecraft. There are lots of games around the platform and at E3 we will see more games.
Harvey, you moved over to head up the UK marketing team late last year. Have you made any significant changes?
Eagle: I am very lucky in that I have inherited a very talented team. I’d call out the Halo 4 marketing campaign of some really noteworthy marketing. The repurposing of Liechtenstein to deliver a Halo brand experience was a first. Flying a 50ft LED symbol down the Thames and across Tower Bridge was also noteworthy. So there are already great things we are doing in marketing before I joined the team. My role is to continue to create an environment where we can come up with big, bold, challenging ideas.
You called out the Halo campaign there. How have you been supporting it post-launch?
Grimes: We plan our marketing in short, medium and long-term strategies. And one thing that Harvey is able to influence is that long-term activity: How can we make sure Halo stays at the top of everyone’s radar? And that’s what we want to do with all of our titles. It’s not just launch and leave.
Eagle: Halo is a great example because it is more than just a disc. We had the Forward Unto Dawn movie that was available before the game. Then you had the product come out, and since then we have had the Spartan Ops releases. And that again refreshes content. It’s a very rich universe and that creates fantastic marketing opportunities before and after launch.
Your Kinect titles didn’t perform as well. Why do you think that was?
Eagle: Kinect remains a fundamental component of what we are trying to do with Xbox. Voice integration on FIFA 13 and Mass Effect 3 are the best examples of how we are using Kinect within games. But Kinect is more than just a device for games. It is a great for accessing content on the Xbox, using voice search.
But it must be frustrating when a great title like Sesame Street TV doesn’t make the charts?
Eagle: Two-way TV is a new area and sometimes these things take time to come to fruition. When you see a kid transformed into the TV, and learning to count and spell, it’s a pretty magic experience. New things takes time to be adopted.
Grimes: The important thing is that the usage of Kinect is still strong. Worldwide we are seeing a third of the searches for content are now via voice using Kinect. Our testing shows it is four times faster to get to your content when you do it via voice search. And as people are starting to use it for that, then they move onto titles like Sesame Street TV.
Eagle: The growth we have seen in entertainment useage is amazing. It’s more than doubled year-over-year. And in some months we have seen the amount of time spent by people on entertainment apps on Xbox exceed multiplayer gameplay. That’s a real tipping point.
Is that a result of more entertainment apps or fewer video games do you think?
Eagle: In terms of the games we’ve made and the number of games third parties made, at retail and on Xbox Live Arcade, it is still an incredibly rich ecosystem. Online multiplayer usage is growing, entertainment is growing. It’s just entertainment is growing faster now and has become a significant way people are spending time on Xbox. People are spending 300m hours per month on Xbox entertainment apps.
You have a subscription model for Xbox hardware in the US. Could this come to the UK?
Grimes: The US is basically a test for this model. The markets are different though. In the UK you have financing models that don’t exist in other areas. We do have finance-based partners where consumers pay per week or per month. But we are always looking at different ways to purchase. There is still huge longevity in the console market. And there are people out there that have not been attracted to gaming. We have to come up with creative ways to attract them.
You must still have wriggle room on 360 hardware price, right?
Grimes: You have obviously seen a P&L I haven’t seen. We’re comfortable with the position and our market share. So there are no plans to address anything.
The market has changed. We changed it by introducing Xbox Live and being able to update Xbox 360. The console that you bought when we launch versus the one today is totally different. And this has enabled us to get the install base we have – an install base that wants to buy games. We need to be careful about wishing for constant ‘new’. We should look at how we can benefit from what is already out.
"We remain the No.1 console for a third year running.
If you look at Halo 4 and Forza Horizon we’ve
had some great performances on software as well.
It’s obviously been a tough market for a lot of people.
But to come out on track with where we expect our
volumes to be, we are really pleased."
Xbox Regional Director Jonathan Grimes
There will be a lot of attention on PlayStation next week. Is there anything Microsoft needs to do to ensure it has share of voice?
Eagle: All we know that there is an event planned on February 20th. So we can only wait and see what is announced. We are very happy with our offering at the moment. Our software market share in value was 55 per cent. So we are pretty happy.
Grimes: The reason why I love this industry is because there’s always new things happening. But we are also fantastic at creating stories that may or may not happen. The key thing for my team is to focus on who is buying today. Whatever gets announced on February 20th, the majority of consumers in the UK won’t know. They’ll still want to buy the devices out there. So in terms of noise our job will be to ensure that the consumers that are going into stores, going online, still see and experience Xbox, rather than get lost in the industry chatter. Whatever is announced is important from an industry perspective, but we must remember who is buying right now.
Are you planning to roll out more digital cards to more retailers?
Grimes: It’s interesting that lots of people see it as digital vs retail. We see it as two very much connected things. To bring the digital option into retail is key for us, and you will see more people driving that side of our business. It’s not a case of digital takes off, retail disappears. The consumer is just buying in different places. They might buy online one day and buy in-store the other. They may go onto Xbox Live and buy directly from us. It’s about ensuring we are where they want to shop.
What we need to make sure is that the buzz and excitement of gaming is still on the High Street and that people can physically interact with it. Our belief is that the consumer wants to interact, and they still want to pay in a physical store. But we are not the kingmakers here. The consumer ultimately will decide the best place to buy for them.
Despite the challenges, there is a sense of optimism in the trade right now. Is that something you’re feeling at Microsoft?
Grimes: We are excited. But then we haven’t been that much on a downer over the last 12 months anyway. We are very conscious that we have some partners that are having tough times. There are thousands of people who are unsure about what is going to happen.
But when I then think about how we are performing and where we are going, we are feeling good about the market. And particularly when we talk about titles like Gears of War. To have a franchise of that scale in a quarter that has traditionally been pretty quiet is fantastic.
We just need to make sure we are preparing ourselves for the future. I must make sure I have a team in place to drive the next ten year vision. One thing’s for sure, ten years’ time definitely won’t be as it is today.
It’s a tricky one. I don’t want to say the market is feeling better because unfortunately I think we’ve got ourselves into a bit of a spiral. We’ve had some great releases over Christmas, and people were picking out the negative parts of all of those; when in fact FIFA had its biggest year ever, Skylanders was a wonderful success. Those examples didn’t tend to hit the headlines.
Eagle: The traditional life cycle of the console is changing. We have been able to buck the trend pretty well. The market is behaving as we would have predicted. We’ve had great growth over the last four years. At some point that begins to tail off and that should be expected. It’s not a sign of hardship in the future.
I guess for Xbox it’s not all about the games sector anymore, is it?
Eagle: Xbox is the entertainment brand for Microsoft now. And whilst gaming will be a core fundamental of what we stand for, in order to grow the market we need to move beyond just gaming. And you are starting to see that happen now with Xbox Music and Xbox Video showing up on Windows 8. Xbox goes from being present on 8m devices to hundreds of millions of devices. The scale that that brings allows you to do different things and hopefully grow the market. Think of Xbox as the service, and we just happen to also make a console.