The Life and Death of the Original Xbox

It's March in 1999 and Sony is a year away from releasing its
recently announced PlayStation 2. From a technological standpoint, the
PS2 is a peerless powerhouse. Early demos showcase incredible 3D visuals
and beautiful animation. Sony talks about modem support and DVD
playback. This is the future of gaming, and we haven't seen anything
like it.


Meanwhile, four dudes at Microsoft's Redmond, WA fortress are working on
a future of their own. Kevin Bachus, Seamus Blackley, Otto Berkes, and
Ted Hase want to create the company's first gaming console. Looking
ahead, they see more for video games than higher polygon counts. Their
idea would facilitate creative growth, not just fancier visuals. They
pitch their idea straight to Bill Gates. Unless Microsoft can do
something to differentiate its product from the rest, outdo its
competitors, and contribute to the industry in a meaningful way, Gates
isn't sure it's a good idea.


He hears 'em out.

He changes his mind.



The Xbox would grow to become synonymous with gaming and cement Microsoft as a key player in the industry.




For the following year, the newly formed console team, joined by
Microsoft Game Studios head honcho Ed Fries, talked to developers about
what they wanted to do with console gaming. Existing hardware holding
back big ideas was a running theme. The conclusion Microsoft walked away
with was this: If consoles stifled creativity, games would only see
major breakthroughs on the ever-evolving and far more flexible PC. That
had to change, and the solution was obvious. Microsoft would build a
badass gaming rig and put it in our living rooms.


So what would the guts of its "DirectX Box" -- quickly abbreviated to
just Xbox -- look like? Microsoft would run it on its own operating
system, of course, using the Windows 2000 kernel. The Xbox would also
use (and derive its name from) DirectX 8, a suite of special software
systems programmers used to talk to the internal hardware. This way,
studios familiar with PC game development (BioWare, Lionhead, and Red
Storm, for instance) could understand the architecture without much
fuss. Ideally, the exciting opportunities of a new platform would also
be easy to work with. This is a luxury many new and complex consoles
aren't afforded. With the Xbox foundation in place, the remaining
hardware specifications became a matter of would make Microsoft's
machine-dreams come true.


After meeting with many suitors, Microsoft struck a deal with Nvidia,
whose audio and graphics components would work alongside an Intel
Pentium III core processor. At 733 MHz, the 32-bit CPU had more than
double the PlayStation 2's processing power and worked with twice the
RAM (64MB rather than the PS2's 32). Add an 8GB hard-disk drive to this
impressive set of tech specs and you'd have what's easily the most
powerful and able home console conceived. It had all the necessary parts
to support its grand ambitions while enabling a stronger visual output
than its competitors. The Xbox was born -- now to tell the world about
it.


Bill Gates took the stage at the Game Developers Conference in 2000 to
formally announce the Xbox. He detailed the future of console gaming
with the Xbox leading the charge. At the time, online gaming on consoles
was both unsuccessful and relatively unknown. The Dreamcast
experimented with a modem adapter, but broadband support out of the box,
a priority for the Xbox from day one, was unheard of. Downloading
additional game content and demos was another foreign concept for
console gamers. Storing this media, as well as music ripped from CDs, on
an internal hard drive was also new. This was a console, we'd play it
on our couch, and we'd use controllers -- but it sure sounded like a
personal computer in terms of what it was capable of.


The original Xbox blurred the line between console and PC.




It was important to Microsoft that these PC features and standards not
overshadow the importance of bringing a brand-new console to our
attention. The Xbox design had to look as unlike a PC as possible. After
all, Microsoft was a consumer company in addition to a hardware and
software corporation now. The prototype model shown at GDC in 2000 was a
chrome cube carved into a literal X. It was a dramatic departure from a
computer case, that's for sure. Silly though it may have been, it made a
clear point: Microsoft's Xbox isn't just another gaming system. Things
would be different.


Shortly after GDC, Microsoft cemented its commitment to the Xbox with
its $30 million purchase of Bungie Studios. Its Halo: Combat Evolved
transformed from a Mac/PC third-person shooter to an Xbox-exclusive FPS.
Halo would take advantage of the Xbox's expanded hardware to present an
action game unlike any we'd seen before. The world would be massive in a
way that wasn't possible on other systems. Bungie overhauled the game's
engine to better suit its new platform, and it became the platform's
poster child. The allure of the Xbox was stronger each day leading up to
its 2001 launch.


It was hard not to notice the Xbox, really. With a $500M marketing
budget, Microsoft wasn't pulling any punches with its new device. Demo
kiosks, TV spots, and print ads made up the bulk of Microsoft's
marketing materials. 165 companies had been tinkering with some 2,250
development kits, and the future of the Xbox looked bright in their
hands. In addition to new IPs like Project Gotham Racing and Halo,
Tecmo, Sega, and Capcom showed Japanese support for the platform with
exclusives of their own. Munch's Odyssey and Malice demoed well at the
2001 Consumer Electronics Show as well, where Gates unveiled the final
Xbox model we'd see in fall that year. By E3, we had a release date, a
$299 price-point, and a vague understanding that online gaming would
come after what became a monumental launch for Microsoft.


November 15, 2001 marked the company's first console release, and Halo,
its premier first-party title, shattered software sales records. By the
New Year, the Xbox had sold out nearly everywhere and 1.5 million of the
big, black crates found their way into North American homes. Halo
continued to crush the competition, it was moving full steam ahead. By
April it had cracked one million copies sold, and gained a greater than
50% attach rate.

(Fun fact: Halo sold 5M units by 2005, which was gigantic. How times
change -- in 2011, Call of Duty: Modern Warfare 3 sold 6.5M in its first
24 hours.)


With the Xbox exploding, 2002 looked like a hell of a year. The system
launched in Europe and Japan, and excitement swelled for Splinter Cell,
MechAssault, and The Elder Scrolls: Morrowind. Microsoft made big waves
when it purchased Rare, whose Banjo Kazooie and Goldeneye games were
arguably the pinnacle of Nintendo 64 gaming, for an astonishing $375M.
Oh, and a little sequel called Halo 2 was on the horizon. The industry
was buzzing because of Xbox, and it still hadn't even done what it was
truly meant to do -- we were still only seeing developers scratch the
surface of what great-looking games could really do, and the upcoming
online service had only hinted at its potential. Xbox Live was about to
knock the industry on its ass.


Xbox LIVE was a huge milestone for digital gaming.




This particular launch wasn't exactly extravagant. At the tail end of
August 2002, Microsoft began its Xbox Live beta test. This whole "online
gaming" thing was so unfamiliar and unproven on consoles it had to be
put through its paces prior to going public. Of more than 100,000
applicants, a lucky 10,000 gained 60 days of early access. Even then,
the limited invitations rolled out in small groups over the course of
those couple months. It had to be done delicately.


Beta testers paid $49.99 for the Xbox Live Starter Kit we'd all see in
November. Along with a headset and a year subscription, which began once
Live went live, users received an online-only demo of the RC car racer,
Re-Volt Live. The Dreamcast port didn't end up on the Xbox after the
test cycle. Weeks later, some time in October, participants also
received MotoGP and Whacked! demos. These also wound up packed in with
the first wave of Starter Kits.

Things looked good by November 15, the Xbox's first birthday, and
Microsoft launched Xbox Live to the masses. In its first week, 150,000
enthusiastic gamers took the plunge and signed up for Xbox Live. 200,000
additional players joined them four months later. Everyone could send
messages and create a unified friends list, which linked to their
Gamertag ID. People were interacting with other human beings from their
living room for the first time, making friends, and experiencing
multiplayer on a new scale. This was a community, not just a bunch of
customers. Oh, and gamers finally had an Xbox controller they could use
effectively. The Japanese "S" model, a smaller, decidedly Dual
Shock-esque version of the game pad, replaced the clumsy, gigantic
"Duke" model permanently.


"Duke" was big, clumsy, and eventually replaced, but some of its design choices remain to this day.




Over its lifetime, Microsoft's Xbox, despite its success, had some
powerful lows. Bachus left the Xbox team in 2001 (before the thing had
even launched) and Blackley bailed the following year. In 2003, EA opted
against enabling its games for Xbox Live. The mammoth
developer/publisher wasn't keen on the business practice of a
subscription-based online service, so it stuck with Sony. The
PlayStation 2 would be the only place gamers could play Madden online.
This was a harsh blow to Microsoft, but the two companies sorted out
their differences. They reached an agreement in 2004 that brought EA
support to the Xbox online space. This good news came shortly after Ed
Fries, who was responsible for the Bungie and Rare buyouts, left
Microsoft. The Xbox needed a pick-me-up something fierce.


In July 2004, Microsoft hit a huge milestone: Xbox Live had one million
users, 200 pieces of downloadable content, and more than 100
online-enabled titles. An unprecedented digital distribution service
called Xbox Live Arcade was on track for winter as well, and with Halo
2's advertising campaign kicking into full force, the Xbox looked like
it was ready to rock once again.


Halo 2 was an event. The time leading up to the game's release saw the
exposure and marketing storm typically reserved for, well, the launch of
a brand new console. Bungie's sequel had print ads, posters plastered
on public transportation, TV commercials, 7-11 slurpee cups got the
public's blood pumping, while a viral marketing campaign -- the infamous
I Love Bees
-- excited online enthusiasts. It was money and time well, spent,
apparently. On November 9, 2004, Halo 2 generated $125M in sales, based
on nearly 2.5M copies sold, more than half of which were pre-orders. It
destroyed the record its predecessor set. Equally impressive are the
other properties it outdid -- Harry Potter, Spider-Man, and The Matrix
fell beneath Master Chief's big green boots. Halo 2 was the biggest
entertainment launch in history, and it became what Microsoft rightfully
referred to as "a cultural phenomenon."


Halo 2's I Love Bees campaign was an early example of successful viral marketing in the gaming industry.




Here's the thing about the Xbox up to this point: It wasn't making any
money. It haemorrhaged cash so badly and for so long that it didn't turn
its first profitable quarter until the back end of 2004. From the
start, the Xbox cost more to make than it did to sell, which is what
makes this so shocking: six months after launch Microsoft dropped the
price by $100 to get more gamers on board with Xbox. It had to rely on
software sales to make bank.


Also, the Xbox was failing in Japan. Not just tanking, either -- it had
died almost instantly. The console's gigantic size, which goes against
the country's small-and-sleek design mentality, is a prime suspect for
its miserable 450,000 sales. Most likely, though, it's the lack of
Japanese developer support, and few games Japanese gamers actually
wanted to play, that killed the brand in Japan. The early dev support
from the east didn't last, and American developers dominated the Xbox
releases. The appeal wasn't there.


With an Xbox successor on its mind behind the scenes for some time,
Microsoft wasn't focusing on its floundering console. When Xbox
manufacturing ceased in 2005, after Nvidia stopped bothering to press
more GPUs, Microsoft was revving up to release the Xbox 360. It made
sense to press on. The Xbox sold respectably well in bursts, but in the
end only 24 million pieces of hardware (16M of which belonged to North
America) moved in its five years. That's half the 50M-units-sold success
Microsoft expected. At the same time, Sony had sold 106 million PS2s.
All told, Microsoft lost an astounding $4 billion -- yeah, with a B --
on the Xbox. That's a lot of money to just leave behind, especially
when the Xbox had so many obvious strengths. It just wasn't able to
capitalize on them like a newer machine could.


In November 2005, just four years after the Xbox hit retail, Microsoft
unloaded the Xbox 360. This time, it would release ahead of Nintendo's
and Sony's newest consoles. Microsoft was the only name on our minds as
we moved into the next generation, giving the successor the early
adopter monopoly. While Microsoft left its failed first attempt behind,
the original Xbox maintained an impressive amount of developer support.
Halo 2, of course, grew into the biggest game on the platform, both in
terms of players and sales. It earned more than 8M sales, and Bungie
released downloadable Halo 2 maps around the time Xbox Live had six
million members. EA, ironically, supported the platform the longest. The
last original Xbox release, Madden 09, landed in August, 2008.





Although developers migrated their attention to the new Xbox, and many
studios shut down individual game servers over the years,
Counter-Strike, Star Wars: Battlefront, and Halo 2 still had an
impressive, active user-base for years after the 360 came around. The
original Xbox had a heartbeat until April 14, 2010. This day marks the
death of Xbox Live support.


It also marks the moment where we were forced to let go of something
that changed a lot of lives, and turned the industry upside down. The
Xbox was ahead of its time, and Microsoft paid the price for it. While
it failed financially, it was a worthwhile sacrifice for both Microsoft
and the gaming industry. The Xbox had so many important ideas early on
that they've since become the modern standard. This thing changed what
we expect from games. It represented progress and forward-thinking, and
it demanded innovation from its competitors to keep up. This is a
philosophy that carried over to the Xbox 360, and is responsible for
many wonderful things we adore about the industry today.


Thanks for entertaining the idea, Bill.