01:09:35 · Ben Thompson, John Coogan
[01:09:35] S8: And I was actually sympathetic to that. I worked at Microsoft from from 2011, 2013 when Microsoft was in the dumps. And, you know, they were still had a great business, but their stock had been, like, $40 for, like, a decade. And and the one thing the employees has, like, well, least we have Xbox, all the cool kids over there. Like, it was such a important thing to corporate culture to have Xbox. Mhmm. Even though this was a totally failed division in terms of achieving corporate goals and also was sort of self immolating because it was trying to achieve corporate goals that it was not going to achieve. [01:10:09] S1: Yeah. What do you think the naming scheme says about that project? I always found it very odd that they went from Xbox to Xbox three sixty. That sounds like the third. It's actually the second. Then Xbox one is the third, but it's one. And then now they're on series x, which feels like the tenth, but it's the fourth. And then they have a bunch of subnames. It feels like they just didn't they never leaned into just like Xbox two, Xbox three, Xbox four. [01:10:37] S8: Yeah. Well, you're ask I mean, maybe it shows I worked at Microsoft. You're asking the wrong guy about naming things, I think. But yeah. Total mess. They called it the three sixty because it was coming out the same generation as the PlayStation three. [01:10:47] S1: And they wanted [01:10:48] S8: to jump wanted to well, they wanted to be on the same level. Like, we both answered them a three and [01:10:52] S1: a name. Yeah.
01:10:52 · John Coogan, Ben Thompson, Vincent Weisser
[01:10:52] S1: a name. Yeah. [01:10:53] S8: So what's interesting about the PlayStation three is the PlayStation three was Sony's big misstep in terms of the whole PlayStation era. What they they had this crazy processor called the cell processor that had all these capabilities, and they had up to that point, consoles were differentiated by hardware. Mhmm. And so Sony famously helped one of the reasons they beat Nintendo was they had discs so they could have much larger, like, media and things along those lines. And whereas Nintendo was sticking with cartridges. And there was, like, other like, they were much more favorable to third party developers. Just in general, they they they had sort of taken over in PlayStation one and two. PlayStation three comes along. They produce this oh, they wanted to get Blu ray off. [01:11:36] S1: Blu ray. [01:11:37] S8: That's another example of consoles getting screwed up by trying to attempt to other corporate priorities. They it worked. Yeah. [01:11:45] S1: Well, didn't they win? And and didn't Xbox go with HD DVD and they lost? [01:11:49] S8: They did. But at the end of the day, what happened was the PlayStation three was way too expensive. I think it ran super hot if I remember. [01:11:56] S3: Yeah. And
01:11:57 · Ben Thompson
[01:11:57] S8: all these extra capabilities were not used. Mhmm. And the reason they weren't used is that was the first HD generation. Mhmm. And you had this shift to three d games and high definition graphics. And what happened was it used to be games differentiate themselves by how well they wrote the game. Like, how did it perform on your Super Nintendo, on your Nintendo? Now we move to a world of actually all the actual game was offloaded to engines, game engines. Like, you know, it had one. Unreal obviously, these were epic. Got super big with the the Unreal Engine. And so you no longer did that. What a game company did was actually design the game and then asset creation. And asset creation at HD was way more difficult, way more expensive than it was for for standard definition TVs. And so the economic imperative for developers came, we can't just be on PlayStation. We need to be on everything. And so that was the ultimate generation, and almost every game was made to run everywhere. Run on PS three, run on Xbox three sixty, and run on the PC. And that was also the Xbox three sixty's best best generation. Yeah. That was the one they're most competitive on because they had all the games, because all developers were making them sort of run everywhere. Sure. They had a very simple to develop for architecture. The three sixty was very PC like, even more so than the one sort of previously. And that was their best generation. And then they come back the the next generation shoving Kinect down people's throats. We're gonna own the TV. And meanwhile, Sony learned their lesson. They're like, okay. We can't differentiate on hardware. We need to create sort of generic hardware that is easy to develop for, and the way we will differentiate is through exclusives. Mhmm. They bought a bunch of small studios in contrast, like, buying Activision.
01:13:40 · John Coogan, Rodrigo Liang, Ben Thompson, Vincent Weisser, Jordi Hays
[01:13:40] S1: Yeah. [01:13:40] S4: Because we [01:13:40] S8: can get to a [01:13:41] S1: little bit. Yeah. Yeah. [01:13:41] S8: They bought a bunch of small studios and pushed all those studios to developing killer games for the upcoming PS four. And so you got things like like the Spider Man, like Yep. That was a huge game. [01:13:53] S1: Naughty Dog, Last of Us, [01:13:55] S8: that type of stuff. Exactly. [01:13:56] S3: Yep. [01:13:56] S8: I mean and so the PS four was an unbelievable generation. [01:14:00] S3: Yep. [01:14:00] S8: And in in a lot of the reasons unbelievable was because it had these exclusive games Mhmm. And they just crushed Microsoft. Because for all the cross platform games, the Call of Duties, the Madden's, things like that, those are always ran everywhere. And so what you do is you limit the economic potential of your studios because you're only building for your platform, and you make it back by all the licensing fees you get off the EAs of the world and the Activision's of the world because 80% of gamers are on your console, not on the other guy's console. Mhmm. And so they just wiped out Microsoft in that generation, and that really just continued to the PS five. And this is where we sort of get to the the the Game Pass disaster. [01:14:42] S1: Okay. Yes. So, yeah, I wanna yeah. Let's just jump forward to that. [01:14:47] S0: How is the disaster? [01:14:48] S8: I didn't wanna ramble too long. Was gonna give you a chance
01:14:48 · Ben Thompson, Jordi Hays, John Coogan
[01:14:48] S8: I didn't wanna ramble too long. Was gonna give you a chance [01:14:50] S0: to jump Let's go. We love it. I have other bunch questions not related to gaming, but I I like I I love this experience. [01:14:58] S8: The the console history is fascinating. It's really interesting how sort of because it tracks technological change to such a large extent, and it totally shifted sort of strategies. So [01:15:07] S0: And, yeah, I think you can draw I think you can draw a lot of real parallels even just model releases over the last couple years how, you know, certain decisions around one model sets you back a certain numb you know, they're they're iterating a lot faster. Yeah. But I'm I'm seeing parallel. [01:15:22] S8: Yeah. The the sort of develop of the yeah. It's interesting. You can always just sort of draw draw draw lessons. So you get to Microsoft at this point again, I think I wrote at the time, oh, wait. Time to give up. Like, I wrote multiple times of the years. They should give up on Xbox. And at this point, Microsoft stops being [01:15:41] S1: an option after they bought Activision just to make Call of Duty a console exclusive or would that have been an f FTC problem? [01:15:48] S8: Well, we we we'll get to that because [01:15:50] S1: that's
01:15:50 · John Coogan, Ben Thompson, Jordi Hays
[01:15:50] S1: that's [01:15:50] S8: part of the story. Yeah. So Microsoft decides, okay, what we we're gonna actually try a new business model. It's true Xbox sort of selling a console Mhmm. Selling, you know, licensing it. We kinda do that, but we're actually moving to being a services company. The stock's doing much better now. You know, like, we have Azure, all the all these things. What we need to do and the way we compete with Sony is we need to have the exact opposite of the Sony strategy, and we need to lean into services, lean into subscriptions. We're gonna do Xbox Game Pass. Yeah. And the idea of Xbox Game Pass is instead of buying every individual game for $60, $70, $80 gaming pricing, by the way, really has stayed suppressed probably far longer than it should have been, particularly for the AAA games, but we already got to that with Rockstar. Mhmm. So they're they're they're like, you pay one price per month, and you get access to all the games and game pass. Well, of course, no publisher wants to partake in this. Mhmm. Because they make all their money upfront by selling games to their biggest fans. You you know, it's kinda like the movie model. You make a bunch of money upfront. And yet, in the long [01:16:59] S0: looking at, like, at at what happened to the music industry as an example of saying, like, yeah, it's cool to make your product more accessible. You get, you know, more listeners by bundling the streaming.