Inside Microsoft’s strategy for the Xbox One X reveal

Microsoft unveiled its Xbox One X video game console on Sunday ahead of the Electronic Entertainment Expo (E3). The console debuts worldwide on November 7 for $499.

You can use the same peripherals for the game console as those for the Xbox One and Xbox One S. And it will be able to play original Xbox console games. Microsoft showed off games such as Electronic Arts’ Anthem, 4A’s Metro Exodus, and State of Decay 2. But it didn’t show any Gears of War or Halo titles.

Microsoft’s team went over every detail of the press event for months. And we got a chance to ask one of the company’s leaders why it made certain choices as it prepares for yet another round of the console wars.

I caught up on Monday with Mike Nichols, chief marketing officer at Microsoft’s Xbox, in an interview at the company’s showcase at Galen Center in Los Angeles.

Here’s an edited transcript of our interview.

GamesBeat: I was curious what your thoughts are on the marketing side, how this compared to your strategy for the Xbox One introduction. You have a certain amount of time. What do you say about this new console?

Mike Nichols: How many of these have you seen from us? All of them? 16 or so? [laughs] We decided this time to focus on two things this year. One was the introduction of the console. The second was—we didn’t want to show a lot of games everybody knows. We decided to show a more eclectic collection of different types of games. We wanted to show a lot of them.

When we were in all the rehearsals, we were thinking, “Well, we’re always around 90 minutes. Do we want to do that again?” But there weren’t any games we wanted to pull.

They’re very valuable. They have a role. I’m personally a fan of a lot of those big popular game franchises. But we ended up focusing elsewhere.

GamesBeat: What’s enough to get people to buy the box? There weren’t as many existing franchises that you could have talked about. You could have shown Halo for 30 seconds, something like that, or Gears of War.

Nichols: We focused mostly on things shipping in the next 12 months, so everyone had a sense of those. We’re definitely working on stuff for Halo, as you might imagine. We’re working on stuff for Gears of War. We have a whole bunch of things up our sleeves, but they’re a bit further out. It was a matter of timing. We think it’s okay to give some of the franchises time to breathe.

Giving people something a bit unexpected—everybody expected we would talk about Project Scorpio, and we did. Every time we come into the briefing, it’s expected that we’ll tell you about Halo, Gears, this, that. It becomes a little rote.

GamesBeat: You would have lost the time for all these smaller games, too.

Nichols: Again, even then, everybody knows Halo 5 is on Xbox One. Everybody knows Gears of War 4 is on Xbox One. It was more like, let’s show some other stuff we think is interesting.

GamesBeat: I remember some more technical things you guys got into. Did you want to get all of that out of the way before you talked about games the machine can play?

Nichols: I felt like it was important to frame things up for everyone, so the show is easy to follow. There was so much anticipation about the hardware announcement in particular. We wanted to come out and say, “Here’s the hardware announcement. The rest of this is about games that are playable across all the different members of the Xbox One family.” The original, the S, and the X.

Frankly, there’s so much engineering that’s gone into the thing. We’re proud of that. That engineering will result in far better experiences. The visual ID itself—I’m biased, but I think it’s beautiful. But the real magic of it is on the inside, and the experience that enables. That’s where we ended up focusing. Let’s talk a bit about the innards and the design decisions we made, and then let’s show what this thing can do up on the big 4K LED screen. It seems like people liked both elements of the presentation, at least based on the early read. Hearing a bit about the hardware decisions and then spending the next 90-plus minutes on games.

GamesBeat: What about VR? Was that decided in some way, whether you wanted to talk about VR or not?

Nichols: Our focus as a company on VR is far more on Windows than it is on Xbox One. We have some headsets launching that we’re very proud of, coming later this year for Windows. It’s called Windows Mixed Reality. We have all the Studios teams working on several titles for those headsets. We’re working with third parties on content for those headsets. But our primary focus is on Windows and PC for mixed reality, for lots of reasons. We decided to focus this show far more on Xbox One and the introduction of this particular console.

GamesBeat: Would you go so far as to say there won’t be VR on the consoles, or are you going to talk about VR later?

Nichols: It’s a mix of those. Neither one of those fits perfectly. The focus is on Windows, and we’ve chosen not to announce anything more about console-based VR right now. We see the opportunity as far larger on PC, as a company. The customer experience will be better. If this thing was in our family room and you’re trying to move around and hitting your shins on things, it wouldn’t be so good. If there are cords, getting caught up on that wouldn’t be so good. The experience on PC is potentially better.

GamesBeat: I suppose the only minus in that is there’s one less part of the sales pitch for the new console.

Nichols: Our argument is that the gaming experience is the number one thing bringing people to the console. We have good options for mixed reality as a company. Most people do have a PC. These mixed reality headsets will start around $299. There are some very good deals there. But that’s not our primary focus on console. One of the other guys, it’s a far larger bet on console. Our bet is on PC instead.

GamesBeat: And PC is basically on equal footing at this point. It’s getting the same games, with Xbox Play Anywhere.

Nichols: We decided to make all the Microsoft Studios games available on Windows 10 and Xbox One, just so that you have the choice as a gamer. We talked about that a lot last year, this vision of trying to re-orient everything. We wanted to go from, “We exist to sell you this box” more toward, “Hey, listen, 50 percent of gamers play on multiple devices. It’s goofy that we don’t make some of this content available on other devices, especially when we’re a PC company too.” It just wasn’t the right orientation. We decided to do that last year, and the results over the last year in terms of sales have been positive. We intend to continue on that path.

GamesBeat: There wasn’t much mention of the cloud on Xbox. Last time around there was more emphasis. It seems like that only gets better with time, though. Cloud computing is cheaper and AI is better.

Nichols: Oh, for sure. We didn’t talk a lot about the Xbox Live service specifically in the briefing yesterday. We’ve made tons of updates on it the last couple of years, though. We’re really happy with the performance and uptime improvements we’ve seen, and it was already industry-leading. We’ve had this service for 15 years and it’s something we’ve always tried to prioritize. The service quality has gotten a lot better.

There are lots of ways our games are enhanced based on cloud processing. Yesterday, when we talked about Crackdown 3, we were just talking about the campaign mode. The multiplayer mode is going to use the power of multiple Xbox Ones in the cloud, working on your behalf to create this massive building destruction and things like that.

GamesBeat: Like the big battle mode in Halo.

Nichols: Right. With TitanFall we had AI that was enhanced in games via the cloud. We continue to offer that to game developers.

GamesBeat: The name itself, Xbox One X—some people were still expecting Scorpio. How did you decide on that?

Nichols: We liked the name Scorpio too. That was the project name, and the name of the chip, the Scorpio engine. Really it came down to two simple things. One, we knew it was part of a product line. It was going to be “Xbox One something,” to keep it easy for people. You walk into a retail outlet, you see a disc that says “Xbox One” and you know it works on anything called Xbox One.

Second, this console was in many ways inspired by the original Xbox. The whole notion of bringing a new level of power and performance to console gaming. That line, “there is no greater power than X,” which Phil shared yesterday, one of the original marketing lines from the original Xbox—those things combined. We said, “Okay, we have the Xbox One S, and the Xbox One something. What connotes power for us better than ‘X’?” That’s how we got there.

GamesBeat: Between the Xbox One S at $250 and the Xbox One X at $500 is a pretty large gap. How do you think about pricing?

Nichols: For those people who want to get into the ecosystem, we want to offer you an amazing product, great value. That’s the Xbox One S. It’s on special right now for $249. Not only is it a great game console, it’s a 4K blu-ray player. A stand-alone 4K blu-ray player costs that much or more, and here you get a game console with it. It’s a great deal. It plays all the games. It has Live and all the rest.

At the other end of the spectrum, we built the specs for the console we really wanted, and then the price came out of that. We didn’t start by building a console for a specific price point. We wanted to build a console that would be powerful enough to enable true 4K gaming if we could. That’s what led to the pricing. From this perspective—until Xbox One X launches, if you want this kind of power and performance, you’re talking $1,000-plus. Bringing that to everyone at $500 is something we’re really proud of.

We think those options, having an entry-level price point—we also have different storage options. As a gamer, we’re going to give you choices, and you can decide what you want to buy. One of the nice things here that we’re trying to do, if you’re an original Xbox One owner or an Xbox One S owner and you have this library of games, great. If you decide to upgrade your hardware at some point, fantastic. That’s an option. All the games will look and perform better. The same library, same accessories, you can continue to play the same things, but it’ll get better and better if you decide to upgrade. That’s the thinking.

GamesBeat: As far as the size of the box, smaller means less material and less expense, but I’m sure cooling gets more difficult. How did you decide on the form factor?

Nichols: Power and performance create some interesting engineering challenges. One of them is obviously cooling. That’s where we took a liquid-cooled vapor chamber, which is the kind of thing you typically see in servers and high-end gaming PCs, and decided to bring that to a console for the first time.

Meanwhile, the team took on a goal of, “Hey, we can find a way to make this even smaller than the Xbox One S.” It wasn’t an explicit mandate or anything like that. But our design team felt like they could do it. It’s amazing. These guys are magicians. They were able to get that done, and there’s no separate power brick or anything like that. It’s pretty amazing, just how much power fits in that package.

GamesBeat: If there’s a system-selling game, based on all the screen time in the conference—I don’t know if it’s Forza or Metro or something else.

Nichols: I think it’s Forza. At launch, that’s the one that stands out to me the most. It’s going to be 4K, 60 frames per second, it’s fantastic. You’ll see it out here if you haven’t had a chance yet. It’s so much fun. I recommend doing it in the simulation rig with the moving car dynamics.

GamesBeat: Sea of Thieves looks like a lot of fun too.

Nichols: It’s so much fun. If you have any buddies here with you, grab them and do it at the same time, because it’s a really fun game to play together.