Interview: Microsoft's Davison On How Kinect Will Help Xbox Live Ramp Up

Much of the attention toward Microsoft's Kinect -- the company's Xbox 360 motion control device, releasing this week -- has centered quite naturally on its applications for motion-controlled gaming. But the company considers the device's potential to add interactivity and engagement to the home entertainment experience equally pivotal to its success. At a recent event, Xbox Live marketing senior director Craig Davison took Gamasutra on a tour of everything Kinect can do around home entertainment. This spanned Microsoft's plans to make the television and movie-viewing experience more social and more game-like, through navigating the Xbox Live environment with voice commands. In this in-depth interview, conducted alongside one featuring Microsoft's Phil Spencer, Davison also touches on some of Xbox Live's pricing decisions and update strategy, the company's deal with ESPN and more. Can you talk about some of your broader goals with Kinect? So quick history lesson on Xbox Live: It was launched in 2002 -- we’re celebrating our eighth birthday here in a couple weeks -- and in 2006 we launched Video Marketplace. So for the first time, we had videos and television shows back then. In 2008, we launched Netflix, and then in 2009, we basically launched a whole host of new apps, from Facebook to Twitter to Last.fm. And of course we brought Zune on as well, adding tens of thousands of movies -- and we brought in high definition movies as well and something called multibit streaming, which basically recalibrated streaming levels based on what your broadband capacity was. Now on Xbox Live we want to take entertainment to the next level. We basically want to create an integrated, gaming-like interactive experience with everything you do when you watch entertainment. So much more just passively sitting on the couch, just watching streamed movies. Now we want you to play little games incorporated into the experience, bring your friends through Live Party into the experience, and with the new stuff we’re launching, like ESPN and Zune Music, you’ll actually be able to do other things, like affiliate with a sports team or things like that. So when you say you want people to be able to play little games and interact with their entertainment, how exactly do you mean that? Imagine you can go into ESPN today, and instead of just watching a sports game, you can affiliate with a team. You can pick a side, and you can see across the 25 million members on Xbox Live how many of those members have actually chosen that team as well. Imagine you can bring in four or five of your closest friends when you’re watching a movie on Zune just like you can today, and you can bring that experience into ESPN as well. Now, you’re going to see probably just a fraction of the potential when we launch with ESPN in terms of what we can do . Same with the Zune as well -- and even with Last.fm. What was your driving philosophy behind doing that? What makes you think that people want to interact with their TV? Well, first and foremost, business intelligence. We can see what people are doing on Xbox Live and sort of take a pulse of what’s working, what’s not. We can play around with the way we pack people into different experiences. For instance, Sky, which is an entertainment offer in the UK on Xbox Live. I can do into that experience today, and we play around a little bit with how we pack people into Xbox Live Parties. We saw a 6x increase just by changing the way we notify you that your friend is watching a live Xbox Live sport -- “Would you like to join him? Yes or no?” -- as opposed to hoping you’re going to go discover that feature on your own. When we learn that kind of data, or BI, we basically can apply that to every other app within the service. So we’re hoping that we will continue to see that kind of feedback and data come in, and then we’ll recalibrate the apps based on usage. So that’s the basic philosophy. So are you guys looking to change the way that Xbox Live works as a reaction to the new audience that’s going to be coming in from Kinect -- as in, people who are maybe casual gamers who don’t have any experience with Xbox Live and might find the traditional interface a little bit daunting? Absolutely. It’s about removing barriers as simplistic as a remote control and creating an environment that’s far easier to get into. And we think that’s really the first hurdle. How do we get people into the experience? But that’s only part of it. The fundamental objective was to make all experiences fun. They’re sort of a like a dedication to a gaming ethic; which is, while there may not be some principles of gaming like a competitive element to it, there will be this element of fun. Even if it’s as simple as waving to the screen right now and just navigating the hub. We’ve seen people spend in our focus groups a lot of time just doing this. “Oh my gosh! This is so much fun! Look at this.” Imagine if you can change this every two to four weeks based on intelligence you’re getting back about how people are using it. Maybe they’re getting stuck on an area, and we can see they’re going into one area and immediately going back, we can then recalibrate to change it and optimize. So are you guys looking to implement changes on a much more regular basis? I know now you have the spring update, a fall update -- you have a lot of time between updates. So are you now looking to implement these changes on a more regular basis? Is it going to be something that users will see? Will they have to download an update every time, or is it going to be able to be done in the back-end? There are service updates happening all the time. Some of them are behind the scenes and some of them do require you to accept. We have been on this annual release schedule of just piling a lot of stuff in to an annual release, but I predict in the future we’re going to get much more agile. It’s going to be about updating these services. Like ESPN could update as frequently as every eight weeks. And we can launch new features, take them in, take them out at any point. So the answer to your question is yes. So you’re looking at them almost on a case-by-case basis. You’re looking at just ESPN, or just Last.fm, or just Netflix, rather than treating everything as one whole service. CD: That’s right. And going back to your previous question, too, it’s not just about making it easier to actually engage, but also much more fun and much more interactive. How do we keep the interaction going between the member and the experience that’s happening? And how can we make it more social? Now of course I think the magic of really being controller-free in a movie environment is being able to use your voice. So if you want, you can use your voice and just say “Xbox,” and then all of the commands you can use come up. “Pause.” So that’s voice, and you can also shortcut back to the Kinect hub as well using motion. So you can see, we’re trying to make it a little more fun, trying to make it a little more interactive. So all of the voice-activated stuff, you start that by saying “Xbox”? And is there always a menu that comes up to guide people as far as what their options are? That’s right... and you don’t have to repeat “Xbox” as long as that menu is up there. Now in addition to movies, of course, for us our U.S. users, there are going to me 11 million songs now available. So I can go into music now. And let’s say I’ve designated Katy Perry as one of my favorite types of music. It uses the scrobbling technology, of course, to find similar artists. Basic concept, but pretty cool. Same with TV and movies, and now with music, too. And, of course, completely integrated with Kinect. How about sports? So exclusive deal. 3,500 live sporting events annually. At any time you can come in and you can choose between live events and prerecorded events to replay. Is there any sort of window on that exclusivity? Maybe. [Laughs] ...It is a multi-year exclusive agreement though. Are these games anything that’s been on any of the ESPN channels? On ESPN3, yeah. Now they may not be broadcast in your market, and in that case it won’t be shown here. But you’ll always be able to check the scores and see highlights. And basically we’re talking all major sports that are available here. So a very rich offering. And of course, all of the interactivity of Kinect: voice and gesture. Free to Xbox Live Gold members. Now you’ve got one TV dedicated to live stuff. Is there only one live event going on at each time, or are there possibly multiple live events going on that you can choose from? It’s sort of up to ESPN. If at the time of day or the day of the week there are multiple live events going on, they have the freedom to play with these different screens to recalibrate and reflect what’s on ESPN3. ...It actually lets you go in and choose one of the teams to root for, and then shows you how many other people across Xbox Live are also rooting for that team or the opposition. So kind of a cool feature. The other thing we didn’t talk about was Video Kinect, which is our video chat solution. So you’ll be able to go in there at any time.... get to talk to your friends or family on your television -- or even anyone who’s on their laptop and has a Windows Live Messenger chat session going. So if Dad’s on the road and wants to check in with the kids, he fires up Messenger, little Johnny’s playing Kinect Sports, I can basically send him an invitation to have a video chat -- assuming there’s a camera on my laptop. Most of them have it. We can now have a chat. So it’s a pretty cool feature. Over phones as well? No phones yet, no. Just PC and TV. Usually from anywhere in the house you are at the time, you can still use voice. You don’t necessarily have to go stand right in front of the camera. It can hear you -- unless of course you’ve got 100 other people talking in your house and you have ceilings that are this high. [Laughs] Could we talk a little bit about current Live sers, how long they’re playing for, and then how you expect that to shift once Kinect comes out? So we’re in the neighborhood of 25 million right now, on the far side of 25 million. In terms of engagement stats, we don’t really release a lot of specifics, but I can tell you this: Over the past year, we’ve seen our usage for entertainment apps nearly double -- and that’s across the board, all of Zune, Netflix, all of that. And we’re seeing more of our first-time users go directly into an entertainment experience and spend significant amounts of time there. We’re also seeing some pretty interesting trends around Party. We’re seeing more people use Party Mode in an entertainment app instead of historically where it’s been most utilized: within a gaming app as well. So all trends are pointing to the fact that people want to consume entertainment through this game console, through the Xbox 360. What I think will be most interesting to us now is how much are they going to interact with the experience based on the new technology we’re deploying. We want to basically change the ways, as you know, that you’ll be interacting with all of it. Will it stick? We’re pretty confident it will. If the beta data that we’re seeing coming back is any indication. And then of course we’d love to calibrate and standardize as much as we can around the features that are really popping, no matter what it is. If it’s Sky in the UK, great, we’ll use it there. If it’s Canal Plus, Netflix, we’d like a consistent experience wherever we can. Do you guys see any sort of trends to people maybe ditching cable altogether now that they’ve got ESPN, they’ve got Netflix, they’ve got Zune. Is that anything that you guys have done research on or that you can talk about at all? Yeah. We haven’t done any research on that. And we hear a lot of people talking about that. I think I read in the New York Times about three weeks ago, it’s completely unfounded. They have not seen a cancellation shift in terms of cable versus IPTV I guess you’re asking about. It was an interesting article because I think the exact quote from someone was, “I still want my True Blood.” So it’s really about content. I think until any content provider through an IPTV connection is somehow providing an amount of content that goes above and beyond what’s normally available, that’s going to be the draw. As we think, though, here at Microsoft, it’s not enough to just be a content provider. Everyone’s going to be doing that. We don’t want to be a parity player here. We want to change the way you interact with it. So we see it as a complimentary relationship. Have you guys seen any pushback from cable companies or anything like that? It’s an odd position that you guys are in, because those same cable companies very often provide the Internet connection that Live depends on in order for people to get their services. I mean, I saw that ESPN is powered by Comcast.... Do you have a fairly good relationship with cable companies? Have there been any conflicts? No, there haven’t been any conflicts. It’s been more about, “Wow, we love that you are increasing the consumption and choices consumers have when they’re using us, when they’re experiencing entertainment.” We’re about all entertainment, from games to... classical? Historical? Traditional entertainment. So they really do see it as another way of engaging more with their customer and providing them with other options. No, the meetings have been more about, “How can we get involved? How can we help you?” With this dashboard update, you guys are also increasing the yearly subscription fee to $60. When you compare that to services like the PlayStation Network, which has all of their core online services free, how do you guys justify that significant... At this point, it’s the cost of a full retail game. What do you feel justifies that price? Back in 2002, we launched at 49 bucks, which works out to about $4.17 a month, and we’ve held steady for that entire time. Now what we’ve always been very passionate about is that quality needs to be there, but more importantly, the consistency. So if I’m playing Halo: Reach, Gears of War, Call of Duty, the consistency of the service and the experience needs to be there regardless of what that entertainment application is. So that has been critical. As you can imagine, the costs associated with maintaining a service at that level and making sure all of those features are consistent, we’re hitting that quality bar, we’re adding the customer service infrastructure necessary, we’re accommodating all of the same social features and functionality too, there’s a cost. Infrastructure costs, of course. And we’re continuing to bring more and more content. Now in 2002, it was strictly multiplayer gaming. Now we get those Call of Duty map packs before anybody else does. We’ve got Gears and Halo, of course, as exclusives. We continue to get exclusives on the service as well. And we’ve gone from 400,000 members in our first year to 25 million. So during that time, we’ve definitely got to fund it, and we want to add more and more and more. ESPN is a great example. No extra charge for Xbox Live Gold members. But we want to continue to bring that content in. We also want to continue to innovate on all dimensions, whether it’s social, entertainment, or gaming. So there you go.