The Untold Nearly Disastrous XBox Origin Story
One of the gaming industry’s greatest successes had a nightmarish start.
I had presided over the nightmarish Xbox launch event at E3, the gaming industry’s largest and most important convention. The disaster had centered on the simplest of components: the on/off button. In theory, you press the button, the device turns on, and when you press it again, it turns off. Nothing fancy, complicated, or difficult involved; at least that is how it was supposed to work.
I arrived for rehearsals the day before the event only to discover that we were not even ready for a walk-through. Somehow, we were so preoccupied with other tasks leading up to the event that we forgot we actually had to produce a show. Rather than having one person clearly in charge, we had a very committed collection of production, events, and PR people working very hard to try to pull everything together. I should have put a stop to the insanity, but I dove right in and tried to help with the writing of the script, the selection of demos and presenters, and the overall messaging for the day. After many hours and at least two outlines of an “order of show,” I went back to my hotel at 2 a.m. and began (again) to write my speech.
Upon arrival early the next morning, I realized that no magic fairy dust had descended on the venue overnight—we were still scrambling to make final decisions. Beyond the symbolic failure of the product to turn on, one of our demos from industry leader Electronic Arts consisted of a pirate ship continually running itself into the rocks—one of those iconic yet inauspicious metaphors that are funny in hindsight but demoralizing in the present.
Our problems, unbelievably, did not end at the presentation. Our booth at the convention center was equally reflective of the state of affairs across the team, and my presentation at a panel discussion with the heads of Sony and Nintendo was not my finest hour. Our messaging was incoherent, our keynote speech was disorganized, our demos did not work, and our most highly touted game, Halo, looked terrible and was no fun to play. Other than that, it was a great party.
To be fair to the team and myself, everyone worked tirelessly to get us through the show, and history would demonstrate that winning E3 had little impact on who ultimately won in the marketplace. Nevertheless, I left the convention later that week anxious and demoralized with serious doubts about my own leadership and decision-making skills.
Rumors of these problems circulated through the game community, and that traumatic May 16 launch presentation at E3 confirmed we were in real trouble. Our approach to the show mirrored how our organization functioned.
Not long after the “E3 debacle, Peter Moore flew up to Redmond to pay me a visit to discuss the status of the Xbox project. Peter was then President of Sega of America, one of the few Japanese game developers who had pledged to support the Xbox launch. In fact, Peter’s appearance on stage during our E3 presentation was by far the highlight of the event. His message to me that day was pretty simple. To paraphrase politely, he told me their research indicated we were dead in the water with consumers, losing traction with developers, and at risk of getting no shelf space for our products at retail. While this wasn’t exactly the pep talk I needed, it confirmed my own fears and suspicions.
The harsh reality was that our launch date was less than six months away, and I was not sure we were going to make it. I had to kick into high gear on all fronts. Professionally, I stepped up my game, determined to get the team to the finish line and establish a beachhead in the video game wars.
While I was finding my footing and establishing a foundation for leadership, the rest of the Xbox team picked up the ball and ran with it. In fact, the E3 conference fiasco served as a warning siren that mobilized everyone as no leader could have. Key individuals on the team stepped up and took charge of various groups, literally willing us to the finish line.
The hardware and manufacturing teams, despite some difficult technical hurdles and logistics challenges, somehow produced 1.3 million consoles, which we sold quickly, particularly in the US. The software team made it easier for developers to create great games on Xbox and enabled consumers to see and feel the raw power of the product. The Bungie team, whose signature game had struggled at E3, finished their development cycle with miraculous skill creating Halo: Combat Evolved, one of the industry’s enduring and most valuable franchises. And the sales and marketing teams built a distribution channel and brand from the ground up that proved Microsoft could sell products to consumers.
By March 2002, the Xbox team had pulled off what had seemed improbable to most in the industry only nine months earlier: Xbox was winning customers across North America, Europe, and the Asia Pacific region.
As I look back on it, I don’t think of the original Xbox in terms of success or failure. There was certainly plenty of both to go around. Instead, my net takeaway is that the business somehow survived a hellishly difficult incubation. That survival, that precarious perch on the edge of the marketplace, can be attributed to three achievements: the creation of the Halo franchise, the eventual success of the Xbox Live business, and the fostering of strong relationships with key publishing partners like Electronic Arts and Activision. Supporting these milestones was the company’s willingness to invest far beyond our original projections, and probably far beyond the actual competitive threat from Sony. And perhaps more important than all of those achievements were the effort and commitment of individuals dedicated to doing whatever it took to succeed.
The events of May 16th challenged me to accept that Xbox was in deep, deep trouble. We needed almost two years to transform the Xbox team and strategy, but on that day in May, I understood that serious action would be necessary to turn a fledgling start-up into a successful business. Indeed, the experience of reshaping the Xbox business was an essential element in developing a framework that I know can help us redefine our civic future.
Excerpted from Xbox Revisited: A Game Plan for Corporate and Civic Renewal by Robbie Bach. Copyright © 2015 by Brown Books Publishing Group. Reprinted by permission.