Xbox Series X Is the First Video Game Console Born in a Pandemic
(Bloomberg) -- The debut of a video game console is a carefully choreographed event. It matches state-of-the-art electronics with complex software and big-budget games. It takes years of development and billions of dollars in collective investments, all building to a single deadline. The Xbox Series X was the fourth go-around for Microsoft Corp., and the company had a plan to improve upon the lackluster performance of its last console.
Then on Jan. 20, the first confirmed U.S. case of the coronavirus was reported in a suburb of Seattle. Over the next six weeks, the area surrounding Microsoft’s headquarters became the country’s first hotspot. After the virus claimed some of the first lives in a nearby nursing home, Microsoft closed its doors to most employees on March 4. “Everyone has a plan until a global pandemic punches you in the face,” said Jerret West, the marketing chief for Microsoft’s Xbox.
At first, Microsoft worried about whether manufacturers, many of which are in Asia where the virus originated, would be able to deliver hardware on time. But China soon contained the spread, and the supply chain issues proved to be less severe than anticipated. The biggest problems for Microsoft were at home.
The games planned for the Xbox Series X couldn’t be developed on the kinds of laptops people have lying around the house. So Microsoft and its game development partners went to work on a Plan B. They shifted to cloud computing tools and bulked up their network infrastructure to enable workers to remotely access more powerful machines located in dark offices. It still wasn’t enough for some Microsoft engineers, who took turns ransacking the office and piling heavy equipment into their cars, one executive recounted. For one star employee, Microsoft explored running a fiber-optic cable underground to his home in the woods.
After a chaotic final year of development, Microsoft releases on Tuesday a pair of new game consoles, the Xbox Series S and X. The products arrive on deadline but not quite according to plan. Microsoft delayed the most-anticipated game, Halo Infinite, after a tepid reaction from fans to an early demonstration. That leaves the new Xbox without a single major exclusive game this year. The turmoil didn’t end at launch day. Microsoft’s online gaming services suffered an hour-long outage Tuesday.
The rival console, Sony Corp.’s PlayStation 5, debuts Thursday with a stronger game lineup and momentum from its predecessor. That will make it difficult for Microsoft to catch up, but analysts said the new Xbox is compelling enough to chip away at Sony’s lead from the last generation of consoles, which began in 2013. The PlayStation 5 is expected to sell 4.6 million units this year, compared with 3.2 million for the Xbox Series S and X, according to market research firm Omdia. Microsoft has said it expects to sell every Xbox it ships this year.
In Japan, where Sony is based, the outbreak was far less severe, and lockdowns were minimal. The virus isn’t solely to blame for the discrepancies between the two products, but it had an impact. And the consequences for Microsoft’s games will linger into next year and maybe longer, said Phil Spencer, head of the Xbox division. But Spencer is optimistic that Microsoft can reverse the fortunes of its previous console, the Xbox One. “I feel so much better about our readiness for this launch than I did Xbox One,” he said in a video interview from his home office. “And we did this in the middle of a pandemic.”
Microsoft released the original Xbox in 2001, along with its hit game Halo. That began the modern console wars between Microsoft and Sony. (Nintendo Co. was typically off doing its own thing.) With each new console, the two companies trade places in the U.S. The PlayStation 2 outsold the Xbox. The Xbox 360 outsold the PlayStation 3. The PlayStation 4 outdid the Xbox One.
The next console is an opportunity to learn from past mistakes, and Microsoft knew what it needed to do this time. With the Xbox One, it misjudged the market by charging more for gimmicky motion controls and focusing on television content and entertainment features, alienating gamers who felt they were no longer central to the vision. When Spencer took over the business in 2014, he cut prices and refocused on games.
The new Xbox is designed to capture the full spectrum of consumers. For $500, the Series X caters to diehards with the most powerful game system ever made. For $300, the Series S offers access to a slightly watered-down version of the latest games at a price competitive with the old systems.
Microsoft, as it does for any major new product, had contingency plans for a lot of scenarios in case things went wrong. No one planned for a pandemic. The conditions especially imperiled the game development process. Artists, sound designers and programmers each rely on specialized equipment at the office. Development kits, which include early versions of the new consoles, are given under contracts that often stipulate they cannot leave the office.
One team at Xbox offered a temporary fix. Microsoft had built an app for creating and testing games over the web as part of its streaming service xCloud. Microsoft repurposed the tool so that developers could access high-end hardware in the office from their home computers. The xCloud team made the app capable of displaying higher resolutions, and it can reproduce audio in surround sound. Nearly 60 studios, including some of Microsoft’s own and the Activision Blizzard Inc. team behind the new Call of Duty, used the tool to develop and test their games. Microsoft also used it to fix bugs with the hardware. “It enabled us to ship our console on time,” said Daniel Kennett, principal software engineering manager for xCloud.
Meanwhile, Microsoft looked for ways to simulate the office environment. For example, the xCloud tool lets employees connect to each other’s machines to collaborate on changes or new art. Then someone can share their creation through Microsoft Teams with a group of coworkers over a video conference. “That restored a level of normalcy,” Kennett said. “Being stuck at home and not being able to walk around the floor and see where stuff’s at is brutal.”
Electronic Arts Inc., maker of the FIFA and Madden franchises, vastly expanded its technical capacity to allow 2,700 engineers to work remotely, said Marija Radulovic-Nastic, the senior vice president of development technology and services at EA. But isolation has taken a toll, she said: “Game development is a creative endeavor, and the ability to feel and experience that creative energy through video conference is something that, although not impossible, is definitely harder.”
Amid a cascade of intense deadlines, Alan Hartman needed to figure out how to distribute tacos to his team. Hartman runs Turn 10 Studios, the Microsoft-owned division that makes the car-racing simulation Forza Motorsport. The project is meant to take full advantage of the Xbox Series X’s horsepower to deliver an experience virtually indistinguishable from a scene on Top Gear.
Hartman’s group assembled in late April to produce a video that would introduce the new Forza game to the world. In an annual crunch-time ritual known within the group as Battle Week, they left an audio chatroom in Microsoft Teams running all day. In normal times, Hartman might have rewarded the labor with a party at the office. Employees had to settle for home deliveries arranged by the marketing staff, consisting of oversized buckets of multi-flavored popcorn, Champagne and taco-making kits.
By May, it was clear to Hartman they weren’t getting back into the office anytime soon. He issued instructions to staff: “Everybody just go in and grab whatever you need,” he said. “I had people literally piling hundreds of pounds of equipment into the trunks and backseats of their cars.” The company offered to splurge on office chairs or sometimes on more elaborate home setups. “For one of my best graphics engineers, I was asking what it would cost to trench a data cable to his house because he lives out in the woods. I kind of said, ‘Do whatever works best, and just send me the bill,’” he said. They managed to secure him a less-costly 5G wireless connection.
“I had people literally piling hundreds of pounds of equipment into the trunks and backseats of their cars.”
Over the past few months, engineers on the racing game have been using the xCloud app, as well as another tool developed by Microsoft to run early prototypes of the next Forza on the old Xbox One systems they had at home.
Microsoft hasn’t disclosed a release date for Forza Motorsport, and the pandemic isn’t helping. “It’s like molasses in the gears; it just slows everything down,” Hartman said. “The one place no one wants to compromise is in the quality of what we’re doing. In some places, it means we’re going to add resources; we’re going to find an outsource partner to come in and take over a feature that otherwise might drop from the game; or we’re just going to take more time.”
The new Halo game appeared to suffer a similar fate. Microsoft said in August it was delaying the game until next year and that the pandemic was largely to blame. It replaced the head of the project last month. “Having Halo and an Xbox console launch at the same time was something that was going to be a cool moment for us,” said Spencer, the Xbox chief. “I will miss that.”
As is typical for a console launch, the Xbox will be hard to find this holiday season. “I feel good about our supply,” Spencer said. “Would I take more? Definitely.” The new timing for Halo Infinite could work in Microsoft’s favor, Spencer said, if it can help sell more consoles when supply catches up with demand.
In the meantime, the new Xbox is poised to benefit from the pandemic video game boom of 2020. It gives people something else to occupy themselves with during quarantine. As for Spencer, his days will probably look like they did at any other time this year. “I would get challenged by my 50-foot commute from my bowl of cereal in the kitchen to the office,” he said. “That was my day.”
(Updates with Xbox Live outage in the fifth paragraph.)
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.
