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Yahoo Finance Presents: Former Microsoft Chief Xbox Officer Robbie Bach

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On this episode of Yahoo Finance Presents, Former Microsoft Chief Xbox Officer Robbie Bach sat down with Yahoo Finance’s Daniel Howley to discuss the 20th anniversary of the original Xbox console launch, as well as to discuss Bach’s new fiction book “The Wilkes Insurrection.” Bach also discusses the challenges of the Xbox development process, the successor Xbox 360 console, and what it was like working with Bill Gates and Steve Balmer.

Video Transcript

[MUSIC PLAYING]

DAN HOWLEY: This is "Yahoo Finance's Presents." I'm Dan Howley. And we're here with Robbie Bach, the former head of Microsoft's Xbox. He actually helped launch the Xbox as well as its preceding console, the Xbox 360.

We're coming up on the 20th anniversary of the original launch of the Xbox, Robbie. And I kind of just want to dive in and discuss what that's been like. So I guess just off the top, the fact that it's 20 years since the brand actually launched, how does that make you feel as the person who was really kind of spearheading this?

ROBBIE BACH: Well Dan, thanks for having me on. Look, 20 years, I mean, on the one hand, it of course, makes me feel old, right? I'm going to turn 60 this year. So you sort of say, wow, I started when I was 40. Now I'm 60.

But I think as I reflect back on it, the big implication for me is how far we've come technologically. It's easy to forget, when Xbox launched, the big controversy was, wow, they're betting on broadband. I wonder if that will work. Just think about that. Think about what's happened on social media.

Xbox Live, oh they're going to bet on people being able to talk to each other over the internet. Those were big bets at the time. And now we see where it's brought us technologically. We now have metaverses in games. It's just a whole new world. And it's all happened so quickly.

DAN HOWLEY: I guess when you look at the original Xbox, it was obviously coming out at a time when Sony was really kind of riding high after the original Playstation. Nintendo still a force at that point. Obviously, both of those are still major players now. But Microsoft was coming up you know as a newcomer. What was it like having to go up against those huge, huge names in gaming and having to establish a new console and something that hasn't been done, really, since?

ROBBIE BACH: Well, it was scary, crazy, topsy-turvy. It's like any startup. The one advantage we had over most startups was we were super well-funded. So we can make a few mistakes that cost us money. But you couldn't make mistakes that cost you market share or reputation or brand building capability.

And so we really had to focus on getting it right. And that led to just crazy amounts of work. We had 18 months we were working 18 hour days. And it disrupted our personal lives, created all kinds of challenges. But the team was really passionate. And there were some amazing individuals. And somehow it came together with "Halo" at the launch. I mean, that's just that's sort of the way the story plays out.

DAN HOWLEY: Yeah. I mean, obviously, that's something that myself and I think anybody else-- our producer Justin-- coming off playing games, really, "Halo" was the jumping off point for a lot of people. I still remember playing the original "Halo" in my friend's bedroom when he got the Xbox and hearing the original "Halo" music and thinking, what is this? And then just going from there.

The original Xbox was a tough sell for a lot of people. Sony did really well with the PlayStation 2. Xbox underperformed the PlayStation 2. But then the 360 came out. And that outsold the PlayStation 3 which went with an insanely high price. Microsoft managed to undercut it. And the rest is history, I guess.

Was there ever a point though, before the 360 launched, that the idea of a follow-up console was still up in the air?

ROBBIE BACH: Well, that's actually a really good question. Bill Gates, Steve Ballmer, they were deeply committed. Let's just say it that way. And so the idea of the old quote, failure is not an option, there was a bit of that mentality in the company around these types of things, especially a big initiative like Xbox.

But certainly in those early days, even before we launched, we weren't even sure we were going to get to the launch date. I mean, there was real uncertainty about whether the console was going to survive just to see the light of day. So in those early days, yeah, I think there was some uncertainty.

And I think in most companies, the guy that loses-- the original Xbox lost somewhere between $5 and $7 billion depending on how you do the cost accounting. The guy who loses $5 or $7 billion doesn't survive, nor does the project.

But because we had good market share, Microsoft, pretty early on, said we a next generation. And Bill and Steve challenged us to do it right. And the team really got organized on the strategy. And 360 was just an amazing product. It was an eight-year console lifecycle. That's unheard of. It was just the right product at the right time.

DAN HOWLEY: It launched, really kicked off Xbox Live. And that really revolutionized online gaming, especially for console users. It was on there for PC. I had been playing. I remember doing LAN parties with my friends with "Counterstrike" on PC prior. But the Xbox Live really kicked off, I think, and kind of democratized online gaming because PCs were so expensive, and consoles were less expensive.

And it really said, this is the future. And I think, thinking back about how important that was and how Sony had to catch up with that, Nintendo's still catching up with that-- they still haven't gotten it quite right. And Microsoft managed to do that right with Xbox Live. What was that kind of process like in getting that out there and being able to have so many people jump on and really experience that right away?

ROBBIE BACH: Well, when people say why did Xbox succeed, I always say two things, "Halo" and Xbox Live. And without those two things, I think the console probably doesn't survive and the brand doesn't get built.

And Xbox Live was something that, from the very beginning, we made a bet. We put an ethernet port in the box. We said this is going to be an online console. And we also made a bet that it wasn't going to be like the PC was, which was online gaming sort of the Wild, Wild West. You had to know IP addresses and find friends. And there was no consistency, voice sometimes but mostly not.

We made a really disciplined effort to say, this is going to be the Disney World of online gaming. And it's going to be very structured, very consistent. You're going to find your friends. And you're going to be able to have fun.

And right out of the gate, we said, whoa, this is way more important than even we thought. And two or three years in when the Xbox 360 shipped, we already had millions of people playing on Xbox Live. We said, this is way ahead of forecast. This is the future of what we're doing. And in fact, today, I think if you look at the Xbox business, Xbox Live and its subscriptions and progeny are the heart of what makes Xbox go today.

DAN HOWLEY: Yeah. I mean, if you look at Xbox Live, Xbox Game Pass, which we've talked about ad infinitum about how ridiculous of a good deal that is, just being able to get more than 100 games, play them at your leisure for next to nothing a month.

ROBBIE BACH: Well, Dan, think about it this way. Xbox Live was a subscription service before other people thought subscription services worked. You had your cell phone subscription, OK, fine. You had your cable subscription. But beyond that, the idea of a $49 subscription just didn't exist.

And think about how that has changed the way you experience gaming and the way others experience gaming. I mean, the whole idea that we're moving away from disks, the whole idea that people are just going to be able to download games and play them, that you have a full portfolio to play with, that all was supplied by that original idea that the team had back in 2001, 2002 to have a subscription service.

DAN HOWLEY: I want to get to two more questions about the Xbox. And then I want to talk about "The Wilkes Insurrection." But when you were talking about the original Xbox, did you have to run that by Bill Gates and Steve Ballmer? What was that like? And two, are you still an Xbox gamer now?

ROBBIE BACH: [LAUGHS]

So Bill and Steve were involved in all of the original decisions. And there were some epic meetings. Bill met with a group of technical people. There were actually two or three competing groups inside the company. He selected one plan to go forward.

He then gave it to a team that worked for me. That team did some exploration. We had a big meeting. The project got approved. And then Bill and Steve sort of realized what they approved and what we're going to do. And they weren't sure they liked it. That led to a meeting called the Valentine's Day massacre, which was just this really 3 and 1/2 hour, very difficult meeting with them.

And at the end of that meeting, they said, OK, we're going to trust you guys to do this right. It's counter to the way Microsoft does things. This isn't Windows. It's something new. And we're going to trust you guys to get it done. And they were incredible supporters afterwards.

But I met with Bill every six or seven weeks. I met with Steve regularly. He was my direct manager. They were very involved in the process.

Now, as to whether I'm a gamer, I've never been a gamer. That's the crazy thing. The only time the team let me demo Xbox is when they were trying to poke fun at me. So if you see the gamertag XBachs, which is X-B-A-C-H-S, that's my son not me. I am old Xbox. And you probably won't see me playing video games.

I love the business. I thought the business was incredibly cool. I love the creativity of the gaming. I just wasn't very good at playing. I didn't grow up playing. And my son loves it.

DAN HOWLEY: I just want to throw it out there, I have my Series X--

ROBBIE BACH: Oh, there you go.

DAN HOWLEY: Like so. Throw that out there.

ROBBIE BACH: I like it.

DAN HOWLEY: I'm very spoiled because I have all the current gen consoles, much to the chagrin of everybody else online who's trying to get them.

So I want to talk about the book, "The Wilkes Insurrection." This is a fiction book. Obviously, you've written books before. I guess, what's the inspiration for this? And what was the process of going into fiction like this?

ROBBIE BACH: Well, I think the inspiration goes all the way back to Xbox. "Halo," what was "Halo" about? It was telling a story. And video games themselves are storytelling. And I learned that storytelling and that creativity during my time on Xbox.

And I wrote a non-fiction book in 2015, which is a business and civic strategy book called "Xbox Revisited." And I said, I love writing. I want to write again, but I want to write fiction. I want to tell a story. I want to create something.

And so I started with a bunch of characters. I wrote about 100 pages just about the characters and then from that, shaped the plot. And I love thrillers. So naturally, it had to be a thriller plot. And "The Wilkes Insurrection" is a dark web, intrigue, anarchist thriller. And it has some amazing characters in it, both good and bad. And I think it's come together really well.

DAN HOWLEY: I guess, what can we expect overall from the story?

ROBBIE BACH: Well, I think the thing-- I tell people, I think there's three things I hope when you read the book. First is, I think you want to turn the page fast. It's got to be a great thriller. So I hope people just are like, oh, I'm into it. I'm into it. I'm into it. I'm into it. You've got to keep going.

That's the way the book's written. That's the way it's designed. Second thing is I hope you fall in love with the characters. It is a character-driven story. Major Tamika Smith is my main character. She's amazing and intensely human, with all the faults and failings that come with that.

So I hope you fall in love with the characters. And then at the end of the story, I hope you step back and say, wow, that was a great story. I loved the characters. And I learned a little bit about where we are as a country too because it is a contemporary thriller. It's about what's going on in the country. It's about an anarchist who tries to rip the country apart. And we're going through some of that on our own.

And so it's very much in the here and now. And I hope people walk away both having had fun reading it and having learned something.

DAN HOWLEY: All right, Robbie, thank you so much for joining us. Robbie Bach, he is the former head of Xbox, helped get the Xbox off the ground, 20-year anniversary, and the author of "The Wilkes Insurrection." Robbie, thank you so much.

ROBBIE BACH: Thanks, Dan, for having me.