There was a time when video game consoles relied entirely on first-party games, but those days are long gone. Early systems in the first wave of consoles, such as the Atari VCS, Mattel’s Intellivision, and Coleco’s ColecoVision relied primarily on titles created in-house. It wasn’t until some Atari developers rebelled and formed Activision to create products for the VCS that the industry saw original third-party games for console systems. Even in the next generation of consoles, like the Nintendo Entertainment System, Sega’s Master System, and Turbografx—a collaboration between Hudson Soft and NEC—many of the most important titles were still first-party.
By the time Xbox was being developed, third party titles were an essential part of any console’s strategy. Where once console makers very jealously defended their console titles and put up walls against third-party titles, in the late 1990s the entire outlook had changed, and now it was the more the merrier. As John O’Rourke puts it, “The hardware in many ways was nothing without the games.”
First-party titles definitely provided important benefits. All profits went to the console maker. They helped strengthen the brand. They were completely under the control of the manufacturer. They also had some down sides. For instance, developing triple-A titles was expensive, and it got more and more expensive year by year. It was also difficult to create enough titles to feed the hungry appetites of gamers, who now numbered in the millions when only a few years before, the reliable game audience had been estimated at about 800,000, with only major hits reaching larger audiences.
In any case, the people behind Xbox understood the need to attract third-party developers and gain their support for the new system. After all, DOS and Windows had relied almost entirely on third-party developers, and these developers had been extensively supported and recruited by the Developer Relations Group. But games for DOS and Windows had never represented the operating system’s core business model, whereas for a console, obviously games were what it was all about, and a new group of developers was needed. The job of gaining their support wasn’t going to be a cakewalk.
Don Coyner remembers the skepticism that many people felt when they found out that Microsoft was going to try to challenge the big console makers, especially Sony and Nintendo. “They would say, ‘Is there room? I mean, you guys are really going to come in and take on Sony and Nintendo? What the hell do you guys know about this stuff? You guys make Office and SQL Server.’”
Coyner says that a big part of the skepticism was essentially a challenge to Microsoft’s resolve. How serious were they? “And that’s where the credibility of, ‘Here’s what’s going to be our brand story; here’s how we’re going to market this thing. It’s going to be about the games; it’s not about the hardware. It’s not a technology story, even though that was a powerful underpinning—it’s a powerful system to go after the hardcore gamers…’”
Establishing credibility was one issue. Making deals was another, and there were a lot of discussions about what kind of deal Microsoft was offering. “Those were some hard discussions, particularly with EA. People were playing hardball, for sure, because they knew we needed them desperately if we were going to succeed, and so they kind of had the upper hand.”
Jennifer Booth had been part of the marketing team that launched the original PlayStation, and she was recruited by Microsoft originally to join the hardware division’s marketing team as a planner with Don Coyner, who was doing marketing.
Early in the Xbox project, Booth and Coyner were working in Hardware under Rick Thompson, but with previous console experience—Coyner from Nintendo and Booth from Sony—Booth says that they were both viewed as possible assets by the Xbox team. “Somehow it came to their attention that we both had backgrounds in the console business,” she says, “so Seamus and Kevin took us over and showed us their plan. I think it was a marketing plan, like, ‘Here’s what we’re going to do with third party,’ etc. etc. So they just kept coming over and we kept giving them documents. Like I remember giving them some game data because they wanted sales data. So we were acting as advisors. We were kind of doing this at night. Once we got approval from Gates, then Don and I came over full time on it. I think it was a couple of months going back and forth and kind of moonlighting and helping them.”
It was actually quite logical that several key members of the Xbox marketing team—Beth Featherstone, Don Coyner, and Jennifer Booth—came out of the Hardware division. After all, the Hardware division was the only unit at Microsoft that had successfully marketed a product to the gamer audience. Moreover, Xbox was fundamentally a piece of hardware that would be designed and built by the hardware division and marketed to the same audience that they had successfully engaged with SideWinder. Logical or not, Rick Thompson eventually had to put his foot down, telling Bachus, “Ok listen. You cannot continue to poach people from our group.”
Head Nods
Both Coyner and Booth played roles, albeit mostly silent ones, in the ultimate decision to go forward with Xbox as a console. Booth remembers going to two of the “Bill” meetings that occurred prior to the decision to go with the console. “There were two different plans put forth to him. Should we do the Kevin/Seamus plan or should we do the DirectX plan? Kevin/Seamus were wanting a more typical console style business. I think it was at a breakfast… They <the DirectX team> were promoting that we do something a little bit different, more along the lines of what we had done with Windows … more of a Windows model. So they put Don and me in the back so they could say, look, we’ve got people who have actually done this before. We were there for kind of a head nod. Like in one of the meetings they were saying, ‘You don’t need to launch with certain titles. You don’t need to launch with sports. Sony didn’t.’ It was typical of the bluster around the table, and we had to say, ‘Well actually, they did.’ So that was our role.”
Booth saw one of the advantages Microsoft had with third-party developers was that many of them had unsatisfactory relationships with Sony and/or Nintendo. One thing that Microsoft promised (and delivered) was good development tools. “Many people found working with Sony’s development tools frustrating and difficult. Since Xbox was based around Windows technology, it promised to be easier to work with. And with the incredible support they were offered by the Xbox Advanced Technology Group, third-party goodwill grew over time. Once they got a developer on board they encouraged the third-party developers to help them with Xbox marketing simply by talking about Xbox.”
As Booth points out, third-party developers complained about was how they were treated by Sony and Nintendo. In Sony’s case, there was a great disparity in the kinds of deals they offered. Some people got far more generous deals than others, such as how much the made per unit sold. Developers didn’t like the perception of the haves and the have nots. In Nintendo’s case, they often treated third-party developers with a degree of contempt, the message being that they were fortunate to have the opportunity to publish on the platform Nintendo had built. They were also very picky and selective and often created barriers and challenges to getting published, but offered what seemed like poor per-unit payments.
Microsoft adopted a goal of consistency. Their deals were flat. Everybody got the same deal, although there were some variable marketing incentives—money offered specifically for the purpose of promoting their Xbox games. According to Kevin Bachus, some of the bigger publishers hated this egalitarian approach, especially the Japanese publishers who were used to getting preferential treatment, from Sony especially. But the toughest nut was Electronic Arts.
EA was the big cheese in the industry at the time. One of the Xbox team dubbed them “Snow White” with the rest of the game companies being the Seven Dwarfs. CEO Larry Probst had expressed some early skepticism about Microsoft’s entry into the console market, and he drove a hard bargain when it came time to support Xbox. According to Bachus, EA negotiated a far more complex deal that read more like a partnership agreement. Although some people have said that there were stipulations preventing Microsoft from competing with their sports franchises, Ed Fries says, “This is completely false (and would probably be illegal). It makes no sense because we launched a competing football game at launch and many other sports games after that.” Later, when negotiating over support for Xbox Live, they had more concerns, but in the end EA and Microsoft did come to terms on a deal with stipulations specific to EA.
A Good Story
In part, it was because the media loves a good horserace, and with Sega fading, Microsoft’s entry into the race made a good story. And, well… it was Microsoft, after all. Booth says, “I think the story in and of itself that Microsoft was actually getting in the console business was so big with many journalists that the story mostly wrote itself. It was so interesting to them that we were doing something new and getting into the consumer business in such a big way, that we got a lot… a lot of interest.”
Beth Featherstone also saw the press as their ally—for the most part, anyway. “It was a really interesting dynamic, and I think a lot of the journalists didn’t strictly like Sony either because they weren’t any nicer to the press than they were to third party developers. So they really wanted us to do well.” She credits J Allard with some of their success with the media. “J was a great spokesperson to have out there on the platform side. They were convinced that we got it, that we weren’t just out there being Microsoft, you know… late to the game and we’re going to suck all the air in the room out because we have the most money. We couldn’t do that with Xbox. We had to put people out there like J and convince the gaming press that we meant business and that could do it, and that we understood the mentality of the console gamer.” She also pointed out how the press loved a “three-horse race” and wanted them to succeed, if only to make things more interesting and to have more to write about. “That made things a little bit easier,” she says, “but working on all of that was very stressful.”
Third-Party Japan
Japan was the home to many of the top console developers in the world, and Microsoft wanted to sign them up for Xbox, all the while knowing that it would be no easy task. However, there were potential openings.
Resident Evil
Kevin Bachus was out there recruiting in November 2000, and he remembers meeting with Resident Evil creator Shinji Mikami from Capcom. “We heard that Mikami-san was trying to decide what he was going to do with Resident Evil 4. He hated Playstation 2. He thought it was very difficult to develop for. He was going to move it to Gamecube… or to Xbox.”
Mikami met with Bachus and a member of Microsoft’s Japan division, and told them that he’s impressed with the tech, but he needs to have something to tell his team…to tell them why he choose Xbox over one of the Japanese console options. Of course, the conversation is in Japanese, so Bachus isn’t sure what they’re saying, but from what he can tell, the conversation isn’t going well. “I say, ‘Well? What’s he talking about?’” Somehow Bachus’ message didn’t get through and Mikami left the meeting.
Afterward, his translator told him that Mikami wanted to know how Microsoft viewed the game industry. “He says games are entertainment. Nintendo says that games are toys. And I said, games are are art. Games are art!! We’ve always said we want to elevate games to a higher art form, we want to allow creators to focus on the art of game making rather that having to deal with the complexity of the hardware. And he goes, ‘Oh. That would have been great!’”
Bachus tried to go through somebody else at Capcom, but it was too late. Mikami had already committed to Nintendo. “So that was why we lost Resident Evil,” says Bachus.
Tecmo Story
Not everything was as frustrating as the Resident Evil story. With Tecmo, Bachus had developed a good relationship, and the game everybody wanted was Dead or Alive. “I went in and said, screw Dead or Alive, I hear that you’re making a new version of Ninja Gaiden. I want Ninja Gaiden to be exclusive to Xbox. They loved that. It was like everybody was coming in and begging for the beautiful daughter rather than the younger daughter, who was going to be even more beautiful later. So like that we got on really really well with Itagaki-san. He and Seamus got along really well, they went to hostess bars together and hung out. In fact, Seamus wanted to suggest that he do a Ninja Gaiden beach volley ball game, which he later actually did do.”
In the end, Dead or Alive 3 ended up being an Xbox launch title while Ninja Gaiden, which was not ready at the time, was published later.
Namco
Bachus and his group met with Konami, Capcom, Namco, and Sega on the same trip, and they were hearing stories about how a representative from Microsoft Japan had been approaching companies. For instance, with Namco this guy would come in and say “I want Tekken. I want this. I want that.” So when Bachus paid a visit to Namco and met with executive director Youichi Haraguchi, they had this conversation:
“Well Namco has been in the business for a while.”
“Yeah.”
“We’ve been pretty successful.”
“Yeah, you’re like one of the top.”
“Well, why is it that your guy keeps coming in saying I want Tekken, I want this, I want that and we thought you’d want to be partners with us. Your sales people would be asking our sales people for advice, your marketing people would be asking our marketing people for advice. Instead you basically make demands. You need to tell your people that they don’t work for you, that they work for me. You just pay their salary.”
Bachus says it was ironic that this was what he always said. “It’s almost word for word what I had told the people that work for me in the US and Europe. I said look, if you’re an account manager working on Xbox, you actually work for your publishers. Right? It’s your job to understand what they need and to advocate for them and and and basically be their voice on the inside.”
So he was getting a lesson from Haraguchi, and it was time to act on it. “To hear this guy at Namco saying this… We made a change, like the next day. We brought in somebody new to replace the previous guy who had the really difficult conversation with Mikami and was going around throwing all these demands around.” He says that the new guy, Hiyashi, worked out great. He had the right attitude.
Even though working with the Japanese developers was difficult for any number of reasons, in the end their efforts paid off and, even though they lost Resident Evil, they ended up signing third-party deals with all of the companies they wanted, with the exception of Square Soft who remained with Sony.