How times have changed. Only ten years ago, Microsoft was a relative newcomer to the gaming division. Despite dominating the home computer market since DOOM was finally ported to Windows in 1995, for a number of years there was a noticeable lack of Microsoft productivity with regards to gaming in general, and more specifically, the console market itself. Let's face it, besides Flight Simulator and Age Of Empires, how many established IPs did they really have? For this reason, many people, critics and consumers alike, doomed the console to fail before it had even hit the market. Although, in retrospect, such criticisms seem both groundless and unsubstantiated, in 2001 it was a different story.
Whereas Nintendo and Sega had extensive experience in the arcade industry and Sony were an opposing figure within the electronics industry, Microsoft was an outsider in both departments. As Joseph Lampell accurately observes in The business of culture: strategic perspectives on entertainment and media, initially the Xbox "seemed a strange fit with Microsoft's portfolio and competencies, which had historically focused almost exclusively on packaged and licensed computer software." Nevertheless, this didn't stop the computer giant from taking its best shot. With an originally proposed budget of $500 million, the operating system maestro showed right from the get go that it meant business, and nowhere was this more efficacious than with its original mission statement:
With an opening pitch as bold and provocative as this, Ed Fries and J Allard not only rectified, but ultimately vindicated their foray into the home console market. This wasn't, as many suspected, a coup d'état by a global computing goliath to crush, monopolise and bend the business to its will. Instead, it was not only unapologetic, but remarkably humble. Putting games at the forefront by acquiring such prolific developers as Bungie, Ensemble Studios and Rareware, who were assigned to develop exclusively for them, only strengthened their case.
In spite of such a strong entrance to a notoriously difficult market to gain ground in, Xbox sales were, to put it lightly, unexemplary. Whilst the console sold in excess of 24 million units, compared with the runaway success of the PS2 with over 153 million units and an estimated 1.52 billion games sold, it really puts it in perspective. To add insult to injury, as Business Week reported in issue 3760, Microsoft lost between $100 and $125 on every console sold during this period. In fact, during the entire lifespan of the original Xbox, it only had one quarter within which it ran at a profit, which was, rather unpredictably, Q4 2004; the same quarter, which avid gamers will be quick to point out, that Halo 2 was released in.
With such a dismal financial performance, it must have been overwhelming perplexing for Microsoft to continue running at a loss, but as Chris Lewis, Microsoft's Vice President of Interactive Entertainment in Europe puts it in a recent interview with Edge; "we were in [it] for the long term... it was a marathon, not a sprint." Such a sentiment projects both a remarkable sense of foresight and an amplified understanding not only of the market itself but the designated target demographic as well.
Credit where credit is due. Despite their role as the foremost authority on all things unscrupulous and their discernable responsibility as the world's most recognised malevolent conglomeration, their approach to the home console industry was something of a mitigation. Everything that was expected of them was either downplayed or extinguished. Rather than use arguably the most established brand in the world, they chose to forge a different path, instead concentrating on setting the system up on its own accord. Rather than Bill Gates himself personally taking the stabilisers from the wheels of the Xbox, instead the system was allowed some breathing space and, as a result, it managed to gain momentum from its own achievements.
I know what you're thinking. Wasn't the original Xbox on the verge of being taken off shelves due to a lack of sales? You'd be right, and yes, Microsoft waved an unspecified amount of cash in front of retailers to keep them on board but this is hardly unexpected. Bear in mind that just over six months previously, one of the biggest hardware manufacturers of the past two decades had just ceased operating as a hardware pioneer. On top of this, at this point in time there was somewhat of a level of distrust for Western manufacturers. After all, the big hitters had been Eastern orientated since the video game crash of 1983, and to add to this, Microsoft had a shady history involving monopolistic business practices and anti-competitive strategies.
Part fact, part generalisation, this undercurrent of doubt superseded almost every area of competitors business strategies from this point onwards. This was particularly exemplified during Sega's auction of exclusivity for their most lucrative IPs. Already concerned with Microsoft's recent studio acquisitions, those in the hardware industry's internal Doomsday Clock's drew closer and closer to midnight, as the seemingly unstoppable Microsoft continued to gain footing in all the right places.
Shenmue, Panzer Dragoon, OutRun, Jet Set Radio and House Of The Dead are just a small number of established brands which were originally exclusive to the first Xbox. What's most interesting about these titles is that they're not exactly obvious choices. Most of which are generally considered to be cult masterpieces but none of them scream system seller. Shenmue, especially, was a commercial disaster. While it reportedly had a $70 million budget, Yu Suzuki dispelled this embellishment at the Game Developers Conference in 2011, setting the record straight that the actuality of its development budget was closer to $47 million. Even so, the game was almost destined to fail from the outset due to the fact that it would have had to be purchased twice by every Dreamcast owner for Sega to achieve a profit. With this information readily at their disposal, its surprising, considering the amount of money they were losing at this point, that Microsoft would back such an unreliable candidate.
The answer, perhaps, can be found by rewinding to their original mission statement, and distinguishably, a certain line within it: "gamers are loyal to the gamers - not the hardware." Out of context, this may sound contradictory, but let's not forget that the Xbox already had its 'killer app' with Halo, so picking up the rights to cult fan favourites may have not made the most financial sense, but it still got a percentage of the 'hardcore' on board. Even this early on, Microsoft demonstrated on a multitude of levels an understanding not often associated with console start-up companies, which was solidified through some of their more prophetic proclamations.
One such declaration was, when speaking of the original Xbox, that "it's the only console designed from the ground up to be perfect for broadband online gaming. And that is the future of gaming." No matter how against Microsoft's corporate policies you may be, its difficult to deny just how unmatched their online infrastructure is. We're at a point where Xbox Live is head and shoulders above the competition on every level, and, let's face it, online will be a contributing factor in how successful the next generation systems are going to be. According to 'insider sources', Nintendo have finally decided that they don't have the experience or relevant qualifications to run and maintain an effective online foundation and have instead been selling themselves to the highest bidder. Valve have shown a keen interest, but it's EA, with their Origin digital distribution platform who are "aggressively" pursuing it.
Microsoft have said in the past that they've no interest in launching a system until the 360's ten year lifecycle has came to a conclusion, however, what must be pointed out is that the '720' can still launch at any time between 2012-2014 whilst still adhering to their original ideology. In most scenarios, when a new system launches, the previous system is still supported by a limited number of developers. For instance, even in 2011, there are still games being released for the PS2. Granted, these are few and far between, but the fact that the system hasn't been completely abandoned yet demonstrates that Microsoft can still stick to their original claim while launching a new system within the same window.
According to one source, who apparently has knowledge of Microsoft's plans within its Entertainment and Devices Division, the successor to the 360 has been in development since 2006, while other sources have also went on record to state that the system has been in the planning phase since as far back as the year the 360 launched - 2005. To add fuel to the fire, Microsoft have advertised new job vacancies including a Graphics Hardware Architect and a Performance Engineer, both directly associated with the Xbox Console Architecture Group, whose roles revolve around being “responsible for defining and delivering next generation console architectures from conception through implementation." With the Wii U launch just around the corner and Sony keeping their cards close to their chest, you'd have to be pretty naive to think Microsoft don't have a trick or two up their proverbial sleeves. According to an anonymous Develop source, “Kinect will keep the 360 going for a couple of years, but Microsoft knows that if it slows down now it will face trouble.”
Such concerns unquestionably factor into how unremitting the rumours are involving developers and exactly what type of architecture they do or do not have in their possession, depending on who you ask. According to the Insider column of Xbox World, a number of "Microsoft-friendly developers are hard at work prepping next-gen games," including Volition, THQ, who are already in the planning stages for a next-gen Saints Row 4, Lionhead and Turn 10, who are working on launch titles, Rareware, who are prototyping a 'mature' title and Epic, who are supposedly attempting to launch Gears Of War 4 on the system during the launch period.
Develop's “senior, trusted, well-placed” source has also placed EA in the firing line, claiming that they've had development kits since as far back as Q2 2011, and perhaps even further. Naturally, EA have denied all accusations, with corporate spokesman Jeff Brown telling Industry Gamers, “this story is a total fabrication – 100 percent not true.” Nonetheless, despite such stringent denials, the source has remained unfazed, insisting that the publisher “has rudimentary Xbox console technology on desks.”
Develop's “senior, trusted, well-placed” source has also placed EA in the firing line, claiming that they've had development kits since as far back as Q2 2011, and perhaps even further. Naturally, EA have denied all accusations, with corporate spokesman Jeff Brown telling Industry Gamers, “this story is a total fabrication – 100 percent not true.” Nonetheless, despite such stringent denials, the source has remained unfazed, insisting that the publisher “has rudimentary Xbox console technology on desks.”
What exactly is 'rudimentary technology' though? “Quite often when new consoles come around they’re packaged into a PC shell, but actually what’s inside is an entirely new console,” the Develop source elaborates. For example, the archetypal Xbox 360 development kits were based on Dual Core G5 PowerPC Mac technology, which contained an ATIX800 CPU, whereas the PS3 development kits were based around a PC setup with two GeForce 6800 Ultras running in SLI.
Another significant developer directly interlinked with the 720 is Crytek, who are rumoured to be running DirectX 11 as a basis for next-generation development. VideoGamer.com have claimed to be in contact with a high-ranking Crytek source, who has stated that TimeSplitters 4 is in development and is scheduled to launch with the machine. Keen gamers will recall that the PlayStation 2 launched with the original TimeSplitters, which should lend credence to this admission. Development duties have been assigned to Crytek UK, formerly known as Free Radical, the developers behind the first three titles of the franchise. Most intriguingly, the game has been built from the ground up with CryEngine 3 and has allegedly already been shown in private video form at this year's E3.
Another significant developer directly interlinked with the 720 is Crytek, who are rumoured to be running DirectX 11 as a basis for next-generation development. VideoGamer.com have claimed to be in contact with a high-ranking Crytek source, who has stated that TimeSplitters 4 is in development and is scheduled to launch with the machine. Keen gamers will recall that the PlayStation 2 launched with the original TimeSplitters, which should lend credence to this admission. Development duties have been assigned to Crytek UK, formerly known as Free Radical, the developers behind the first three titles of the franchise. Most intriguingly, the game has been built from the ground up with CryEngine 3 and has allegedly already been shown in private video form at this year's E3.
The same source claims that the visuals on display within TimeSplitters 4 are a noticeable improvement over this generation's graphical capabilities, with Directx 11 tessellation effects purportedly giving visuals a huge boost. Because, according to the source, this information is coming directly from Crytek, who have been setting the graphics benchmark since the launch of Far Cry in 2004, gamers should stand to attention. Supposedly, the studio believes that both the game and the engine itself will be seen as the cornerstone of next-gen development, and reportedly, tessellation, multithreaded rendering, and compute shaders are the three headlining features for DirectX 11.
The previously mentioned Develop source has also elaborated that they believe that the next Unreal Engine will land sooner than the estimated 2014 date conveyed by Epic Games studio founder Tim Sweeney in September. On a slightly unrelated note, Sweeney has went on record to insist that "AI has always been the real battleground." In a recent interview with GamesIndustry.biz, he commented that "in general the industry expects that graphics will not be a strong feature any more... Obviously, graphics are better for marketing purposes because you can show things. AI you can't show."
He continues; “the other area is simulation of human aspects of the game experience, simulation of gameplay characters, artificial intelligence, character dialogue and all of these other things which aren’t really problems of brute force computing. They require increasingly sophisticated algorithms and simulation of human intelligence." Judging by the leaked specifications of the 720, even though they may not be 100% correct, if they're even close to what has been suggested - a hex-code CPU with 2gb on board DDR3 ram and a graphics chip provided by AMD - then Microsoft's new system should be more than capable of handling any and all AI needs.
Acording to Xboxygen, a team going by the name of Loop are handling software development, whilst a team by the name of Infinity are working on the console itself. Of course, such information comes from a source 'very close' to the company, however, they did put forward a date for the system launch - the end of 2012 - although the source admitted that this wasn't set in stone. Right now, two different events are being bounced around as the official announcement conference; CES and E3. Naturally, E3 seems like the obvious choice, considering it is widely touted as the gaming equivalent of the Oscars, in terms of importance, but CES is an equally likely candidate.
Founded in 1967, in spite of its lack of consumer notability, it has traditionally served as a vehicle of demonstration for a number of new products and product formats. Some of the more significant announcements revolving around the latter include CD, Blu-Ray, HDTV, VCR and DVD. From a gaming viewpoint, other consequential divulgences include the unveiling of the NES, Tetris, the C64 and the original Xbox. While the source has admitted that the public should not expect a "huge announcement" with software, they added that there should be "some information on the new console, and some of its capabilities."
In terms of the consoles capabilities, EEDAR analyst Jesse Divnich believes that the era of digital downloads is still blossoming and, as a result, consumers won't be forced into the digital market by hardware manufacturers, despite the profitability of the format. "The digital transition will be just that, a transition," he told Industry Gamers, continuing that "the digital transition will ultimately be at the choice of the consumer and Microsoft and Sony will continue to support physical media until the mass market has reached the tipping point of acceptance on digital."
Divnich then confirmed that in spite of the popularity of digital download titles, their sales account for a mere 10% of console software revenue, which means that, in terms of production, "it would be inefficient for either manufacturer to accelerate [it] to 100% through a cloud or digital only environment." He continues by observing that, in the online subdivision, "Microsoft is already the market leader and it would be detrimental to their current success if they hit the reset button and forced consumers into an experience they may not be ready for."
He believes the 720 will be a "true hybrid console, supporting both physical and digital media with the long-term hopes that they can provide enough incentive and value to accelerate that transition," but when will this hybrid launch? Speaking with Kotaku, various confidential sources claim that the aforementioned 2012 date is a product of misinformation. They believe that Microsoft will release a different, Kinect-upgraded 360 SKU as opposed to the 720. Supposedly, they're “wrestling with whether to be profitable on day one,” or launch a new console at a loss as per industry standard.
Jesse Divinich agrees: "the Xbox 360 has incredible momentum and it would baffle me as to why they would make a new hardware announcement at E3 and announce its launch by the end of 2012." David Cole of DFC Intelligence concurs, stating that a 2012-2013 release date is unlikely, but he doesn't rule out the possibility of a hardware tease, confirming "the issue is the ongoing competition and the need to ensure consumers that you have something cool in the pipeline." The specific reasoning for this lack of definitive confirmation is unclear, but veteran Wedbush Morgan analyst Michael Pachter believes that the economy is a contributing factor: “I don’t think either Sony or Microsoft are interested in a new console till they can advance the technology, and they certainly don’t want to launch at a $600 price point."
Given exactly how successful Sony's high end, big budget PlayStation 3 campaign has been, he raises a valid point, though don't rule out an earlier-than-expected launch window. The 2005 release of the Xbox 360 took the world by surprise, and according to certain sources, Microsoft feels 'pressured' into an early release due to Nintendo's 2012 release window of Project Café. In all likelihood, the 720 will launch within the next two years. History has shown that the last console out the door usually fares the worst for a variety of reasons. Any later than 2013-14 and Microsoft risk not only losing potential customers, but also part of their established userbase. This generation has already surprassed virtually every generation that has came before it in terms of lastability, therefore whether or not details of 'next-gen' systems start trickling out is irrelevant, because at this stage of the game, they're guaranteed. Add to this that the hardware used to power this generation is woefully out of date and its practically certified that we'll be hearing rumblings sometime in the near future.
