INTERVIEW: Yusuf Mehdi talks about the future of Xbox

After the Xbox E3 press briefing, MCV took the time to speak with the CMO of Mircosoft’s Interactive Entertainment Business, Yusuf Mehdi.

Mehdi came out of the Online Services Business, and has been in the new role working on Xbox for 7 months, and delivered a talk during the press conference on the new interconnected way forward for the console.

Where is all this connectivity aimed? Are Microsoft looking to draw in new consumers with these value-adds, or keep existing customers engaged with the console?

The short answer is both. On a global basis, what we see is that up to 56% of homes have a console, so the opportunity is twofold.

Firstly that’s a good number, but we’d like to have one in every home. More importantly, the existing consoles aren’t used all the time. They’re used for gaming and then they’re not, so we want to try and drive usage and provide more value so the consumer can have the box on all the time –that’swhere the entertainments comes in – to drive additional value.

Secondly, today, there’s usually one console (primarily in the living room), but there’s no reason you shouldn’t have another console with the other TVs in the house that make those experiences better. So being able to broaden out and provide more value with non-gaming activities really helps us enhance the experience and help the people who use Xbox use it better.

And then there’s also a lot of people who just don’t do gaming. They look at Xbox and say Well, I’m not really a gamer but I do love TV and I love sports” and I think that with some of the stuff we’ve shown today those people might say Hmm… might that actually be for me? Would I actually buy a console to have a better TV experience?” Maybe that’s something I’d start to think about now.

I think that will help bring new audiences to Xbox.

So then how does Xbox stack up as a competitor outside of gaming with other offers from the set-top box sector? Can it be competitive in that field, given the pricing?

The Xbox offers value you just don’t get with a lot of other devices. First of all, you get the power of Kinect to use voice and gesture and communicate with the TV in the most seamless of fashions – there’s no one else who does it in that way.

Secondly, you actually get full AAA gaming, which you can’t do with other devices because you need the power of a box like ours.

And thirdly there’s the value proposition attached to the various channels and services, which has become the social hub around which you communicate.

For those reasons, I think there’s a big difference. Pricing is an interesting question. This device [gestures to my iPad] is USD$629 or with a subscription USD$2000. Now, you can get the premium Xbox with Kinect for USD$399. One of the things we’re doing, which we’ve just started testing in the US is a subscription model ourselves. So for $99 you can get an Xbox with Kinect if you sign up for Xbox Live for 2 years (which is $15 a month). So that’s a very early test at this point (we’re only a few weeks in), but already the feedback has been quite positive, and if it is, we’re going to go broad with that offering.

How much further do you think we can push the console life cycle through service and application additions?

I’d point to today’s E3 briefing and say that it was the biggest release of new value that we’ve ever done on the box. This for sure will be the best lineup of games you’ve ever seen,ever. All of our major franchises are updating their games, as is EA and Activision.

Then second, you saw all of the new content experiences and we’re breaking new things like the Nike experience and then SmartGlass, so I think we’ve been able to drive a lot of value that will continue to go forward and we’ve been doing that for the last couple of years.

Regardless of whether we decide to do different things with our devices, you’ll continue to see the same level of innovation. I predict we’ll continue on this trend.

MCV Pacific has Part 2 of the Yusuf Mehdi interview from E3 2012.

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