Xbox vs Playstation - The Biggest Cannon in the World | 1

Hey, business wars fans, have you heard? Audible subscribers can listen to new episodes of business wars early and ad-free right now. Join Audible in the Audible app or by subscribing on Apple Podcasts. It's Valentine's Day and the year 2000 at Microsoft's headquarters in Redmond, Washington. Love is not in the air, but something that smells like fear is. Nine months ago, Microsoft chairman Bill Gates told his engineers to start work on Xbox. He worries that Sony is trying to use PlayStation to push Windows PCs out of the home, so Gates is playing both defense and offense here. He wants to stop Sony, but also use the Xbox as a first step toward putting Windows at the center of home entertainment. You see, Gates is already imagining a world where once Xbox gets into our living rooms, it doesn't just bring Windows with it, but it becomes the portal for a world where television supplies all kinds of entertainment, music, movies, and games. The question now is whether the Xbox team is actually delivered a plan that can push Sony back on its heels. Microsoft's top executives and the Xbox team are in a meeting room waiting for Gates. He's running late. The mood is tense. Suddenly, Gates storms into the room. He's wearing a pale purple shirt and holding a copy of the Xbox business plan. He slams the business plan onto the table and glairs at the Xbox team. This plan is a freaking insult to everything I've built. The Xbox team is taken aback by Gates' fury. Ed Frees, the boss of Microsoft Game Studios, tries to respond. "Okay, unless I'm not finished, I approved a games console that would take Windows into the living room and what do you come back with, a games console that doesn't run Windows. It won't do anything but run games. What the hell?" Frees tries to explain. The Xbox is a games machine bill. It only needs an operating system that runs games, not Microsoft Office. Next, CEO Steve Balmer takes a swing at the Xbox executives. He flips to the page in the Xbox business plan, sitting out the financial projections. "Look, nine months ago you said we'd lose a billion dollars launching this thing. That was bad enough. But now that you've actually looked at the costs in detail, and it would have been nice if you'd done that at the get-go, you're projecting losses of more than two billion dollars. All that money just to get a toe-hold in the games business?" Gates and Balmer rip into the team for hours. Executives phone their loved ones and tell them, "Valentine's night is cancelled." But then, Microsoft Senior Vice President Craig Mundy swings the conversation back to the PlayStation. "Bell, Steve, wait a minute. Here's how I see it. Sony wants PlayStation to replace Windows PCs as the future of digital entertainment in the home, right? Already, more Americans own PlayStation than PCs. We can't just ignore the PlayStation." Gates and Balmer pause. They both know the Xbox is the only planned Microsoft has for halting Sony's advance. And despite the hard time they're giving the Xbox team, it sounds like they do have a solid plan, even if they're going to be way over budget. Gates and Balmer confer for a moment, then Balmer turns to the Xbox team. "Alright, we're doing this. Whatever you need, you got it. Okay, go make this thing." The Xbox team will get to make their game console, but time is against them. Next month, Sony launches PlayStation 2 in Japan. By Christmas, it'll be available in America and Europe too. If Microsoft wants to stop Sony, it's got to launch the Xbox next year. Trouble is, Microsoft's got no hardware, no games, and no experience in consumer electronics. Microsoft's entering a multi-billion dollar raise, but the starting gun's already fired, and it hasn't even laced up its sneakers. Being a serious business owner takes hard work, patience, and a drive to keep moving forward. So it's important to find a serious business card that goes the extra mile. With the VentureX business card from Capital One, you earn unlimited double miles on every purchase, and with big purchasing power, you can spend more, and earn more. This is your sign to take your business to the next level. The Capital One VentureX business card. What's in your wallet? Terms apply. See CapitalOne.com for details. Alice, have you ever wondered why the Mini is so small? The Skirt or the Magnum? Well, I meant the iconic British car. Because in 1956, Britain's oil supply was suddenly cut off. Petrol rationing was brought in, and the car industry was scrambling around for a vehicle that hardly used any fuel. Enter the Mini. Interesting, but actually not technically British scandal series material. Well, the reason they had to save petrol is because the Prime Minister started a war and lied about why. Okay, scandal siren going off. I'm Matt Ford. And I'm Alice Levine. And our latest British scandal series involves a secret meeting in a French villa, a Prime Minister running on own Fettermeans. An Egyptian president that everyone fancied, the end of the British Empire, and at the heart of it, a canal. This is the story of the Suis plot. Follow British scandal wherever you get your podcasts, or listen early and ad-free, unaudible. From Wondry, I'm David Brown. And this is Business Wars. In our earlier series, Sony versus Nintendo, we watched Sony and Nintendo's reign as King of the Game Console business in the 1990s. One company's been watching with alarm as the PlayStation marches into millions of homes. In our new three-part series Xbox versus PlayStation, Microsoft tries to muscle in to the multi-billion dollar video game industry. Not just to compete, but to dominate it. This is Episode 1, the biggest cannon in the world. It's March 10, 2000. Bill Gates is at the Game Developers Conference in San Jose, California. The PlayStation 2 arrived in Japanese stores last week, and it's already sold out. To steal the spotlight from Sony, Microsoft is announcing its entering the console wars. Gates walks on stage, wearing a black leather jacket. Next to him is a concept Xbox made of shiny aluminum sculpted into a giant X. It's a totally impractical design that Microsoft has no intention of putting into production, but it briefly grabs attention. And for now, that's all Microsoft can do. After all, it's got new console or games to show. Gates has pulled up a chair to a table of high rollers in a major stakes game, and he's holding a pair of deuces. And that takes a special kind of hutspa. He speaks boldly. The Xbox is the future of console gaming, and we're announcing it here for a simple reason. We need you, game developers like you, to create amazing games for it. And with that plea, the game's industry knows he's holding the low cards. Microsoft doing video games, oh come on. Microsoft makes windows and Excel. Microsoft isn't fun. Microsoft isn't cool. Microsoft is work, not play. The smart money is on the PlayStation 2 crushing the Xbox. And Sony? Well, Sony's showing no mercy either. Sony is paying game publishers big bucks to make games just for the PlayStation 2. It's employed that starving the Xbox of the hottest games, games like Tomb Raider, Metal Gear Solid, and Grand Theft Auto 3. All that is piling the pressure on Freeze, the head of Microsoft Game Studios. It's his job to ensure that the Xbox launches with some killer games. Right in the middle of his frantic hunt for games, he gets a call that will change everything for the Xbox. At Freeze. Hey, at Speeder, Peter, Tampty from Bungie. Bungie is a game development studio that makes games for Apple Macintosh computers, but its last game shipped with a major bug. Every copy of the game was recalled, pushing Bungie to the brink of bankruptcy. Tampty's hoping Freeze can save the business. I'll just get right to the point. We're broke. And we need a buyer. Let me ask you something. Would Microsoft be interested? What are you working on at the moment? First person shooter. We're calling it. You fight an alien empire and these big open landscapes instead of fighting these tight restrictive corridors. There's computer controlled soldiers who fight alongside you. You've got aliens who work together to corner you and you can drive or fly any vehicle you see too. I think it's going to be really cool. As Tampty hangs on his response, Freeze thanks for a moment. Freeze needs games for the Xbox, but he's not so sure about Halo. First-person shooters are seen as desktop PC games. Games that depend on players using a mouse to look around the game world. They've rarely translated well onto the simpler controls of game consoles. But Freeze also knows Halo's a game that just might appeal to 16 to 24-year-old gamer guys. And that's just to Microsoft's targeting with the Xbox. Okay, we're interested. Let's talk. Microsoft pays $30 million for Bungie and earmarks Halo as the Xbox's flagship game. As one Xbox executive tells the Bungie team, Microsoft's got the biggest cannon in the world aimed right at Sony. Halo's the cannonball. It's May 2001 and the E3 video game Expo is underway in Los Angeles. Sony's PlayStation 2 is dominating the event, but both Nintendo and Microsoft are trying to steal the focus with new consoles set to launch by Christmas. Nintendo's new machine is the GameCube, a cute square box that'll be $100 cheaper than a PlayStation 2. But the GameCube's cheery looks, reinforced the perception that Nintendo makes kids games. Microsoft's having a hard time too. Visitors to the Xbox stand are shocked by the Xbox's huge controller. It's fatter than a stack of 10 EGO waffles and nearly three times bigger than the PlayStation 2's controller. One store buyer grapples with the controller as he prepares to try the playable demo of Halo that Microsoft's got on show. How the hell is anyone supposed to grip this thing for hours on end? It's like holding a dictionary. The buyer stretches out his thumb and hits the start button. Microsoft's been hyping Halo hard, but what appears on screen looks half finished and jagged. As aliens surge toward him on screen, the buyer pushes the control stick to dodge their plasma beams, but instead of flowing movement, the game stutters along. After a couple of minutes, the buyer hands back the controller to a staff member. If that's your flagship game, guys, you're in trouble. It's a prototype console, little run much better at launch. I promise. Yeah, right. For Microsoft, E3 is a flop. Halo's failed to impress, and the Xbox's obese controller is the joke of the show. Microsoft knows it's got to fix things and fast. Shortly after E3 frees, visits the Bungie team and turns up the heat. Halo's got to be better. We're relying on you to turn this around. Fast. The Halo team pulls all nighters for weeks on end to salvage the game. They got just three months to make Halo a game that can sell the Xbox. November 14, 2001, New York City. It's nearing midnight in Times Square, and excited games fans are lined up outside Toys or Us. When the clock strikes 12, the doors will open, and they will become the first people in the world to buy an Xbox. Microsoft staff are walking in the line handing out Krispy Kreme Donuts covered in radium green sprinkles, matching the Xbox logo. There's action across the street, too, in the wrestling theme WWE restaurant. There's an invite only Xbox launch party, and on the stage, our Bill Gates and Wrestling Superstar, The Rock. Dwayne Douglas Johnson as The Rock is a six foot four chiseled mountain of muscle dressed in a black suit and dark glasses. He prowls as he towers over the five foot ten software billionaire in a dweebish blue button-down shirt. The Rock hears you've come here to fight. Are you ready to fight Bill? Gates smiles and hams it up. Yes, I've come here to take you down. The pair grab their controllers off the top of the fat black Xbox console on the stage. The screen shows them facing off in the Xbox fighting game Dead or Alive 3. As the Ron screen fighters lunge unleashing kung fu kicks and karate chops, the audience makes its loyalties clear. Bill, Bill, Bill, Bill, Bill, Bill, Bill, Bill. The chance don't help. Gates only played the Xbox for the first time a couple of hours ago. The Rock humbles Gates fighter into the ground. A.O. winner! Defeated, Gates dusts himself off before heading to the exit. The crosses time square and reaches toys are us just as midnight strikes and the waiting gamers have finally led into the store. First in line is a 20 year old from New Jersey who's waited 12 hours. After the man pays, Gates hands him his Xbox. Congratulations! You've just become the world's first Xbox owner. Microsoft is hyping the console that man's just bought as the most powerful gaming machine ever made. And there's little reason to doubt the claim. The Xbox is advanced. Maybe too advanced. See, the Xbox contains a broadband modem, but most people are still accessing the internet by a dial-up. There's a hard drive inside every Xbox too, but gamers and game developers have no idea why it's there. All this tech comes at a price, but gamers won't be footing the bill. To stay competitive with the PlayStation 2, the Xbox sells for $300 even though it costs $420 to make. But Microsoft's not after profits, at least not yet. For now, Microsoft is only interested in grabbing market share and it's willing to take a big hit to get it. But it's not the expensive tech or Microsoft's $500 million marketing campaign that has gamers so excited about the Xbox. What's converted them to Microsoft's cause is Halo. Since the E3 gaming Expo flop, Bungie's transformed the game. Halo is now a must-have game with Hollywood production values. A game that's so good, millions will buy an Xbox just to play it. By Christmas, Microsoft is hurtling toward its goal of selling one and a half million Xboxes in America by the New Year. Sony's not worried though, it's already sold 20 million PlayStation 2's. Still, more than a million Xboxes in a few weeks, that's a great start. It's also enough to put the Xbox just ahead of Nintendo's GameCube. But the initial rush to buy the Xbox doesn't last. By Spring 2002, sales are slowing, dampened by a lack of new Xbox games to stoke gamer enthusiasm. The Xbox is also bombed in Japan and it's floundering in Europe. The PlayStation 2's lead is growing, not shrinking. But Microsoft's not done yet. It's got a plan, a secret weapon, that just might give Xbox a real shot at getting an edge over the competition. There are books that change how you see the world, and there are books that change how you see yourself. In a new podcast series, a great book with Barack Obama. President Obama sits down with a series of surprising and sharp guests to explore six books that have shaped his life and perspective on the world. From song of Solomon and the fire next time, to all the pretty horses and Gilead. The president is joined by guests like Tom Hanks and Tanahashi Coats to reflect on how these timeless stories shaped his thinking on everything from fatherhood to leadership and discover together what they tell us about the world we live in and the world we want to create. Audible subscribers can listen to all episodes of a great book with Barack Obama. Add free right now. Plus access each audiobook discussed in the series. Download the Audible app today. In the summer of 1881, U.S. Army Lieutenant Adolphus Greeley and 24 other men embarked on an ambitious scientific mission to the northernmost reaches of the Arctic. But despite several triumphs of discovery, the men would soon face tragedy. Hi, I'm Lindsey Graham, the host of the podcast American History Tellers. We take you to the events, times and people that shaped America and Americans. Our values, our struggles and our dreams. In our latest series, after Adolphus Greeley and his men arrive at their destination more than 1,000 miles above the Arctic Circle, they get to work collecting science. scientific data and exploring the frigid landscape. But when resupply ships fail to reach them, two summers in a row, they're forced to set out on a desperate search for rescue, and not all of them will make it home. Follow American History Tellers wherever you get your podcasts. Audible subscribers can binge all episodes of American History Tellers' Greeley Arctic Expedition, early and ad-free right now. (dramatic music) It's summer of the year 2000. The launch of the Xbox is more than a year away, but Jay Allard is already thinking about what happens after Microsoft's console arrives in stores. Allard is a big deal in Microsoft. He's the balding silver-tunged executive who convinced Bill Gates to embrace the internet in the first place. Now, he wants to use the Xbox to make gaming social. And that's why Allard's called a team of engineers to a meeting at Microsoft's Redmond headquarters. As the engineers take their seats, Allard bounds around the room, handing out copies of a science fiction novel from the early 90s called Snowcrash. I want you all to read this. This is about a guy who plays games online with other people every night. I want you to create a game like the one described in this book that lets multiple people play the game all at once. We're thinking about a service called Xbox Live. As the engineers peruse the book, they examine the futuristic city on the book's cover. Snowcrash opens in Los Angeles in the 21st century an unspecified number of years after a worldwide economic collapse. Los Angeles has broken away from the United States, which has relinquished most of its power to private organizations and entrepreneurs. Allard elaborates on his vision for Xbox Live. Console video games have become all about people playing alone. Now, I want Xbox to change that. And that's why we're putting a broadband modem inside the Xbox. With this, one of the engineers looks up. But hardly anyone has broadband. We're betting that that's gonna change rapidly in the next few years. Boyd Multerer is the head engineer of Xbox. He puts down his copy of Snowcrash and looks at Allard. You know what you're asking for is gonna need a lot of servers. You got that right. We're gonna need to build data centers across the world. This is gonna be really expensive. Allard takes Multerer's point and stride. Sure, but we'll offset the cost by charging people to use Xbox Live. You, let me get this straight, you want to charge people for online gaming? No one pays to play online, come on. Trust me, trust me, they will. And it'll give us money to invest in making the world's greatest online gaming service. Over the next months, Multerer's team plots an online gaming revolution. Xbox Live will offer more than high-speed online gaming. It will be a social network for gamers. Subscribers will be able to chat with each other as they play and even invite friends to play online too. Crucially, every Xbox Live subscriber will have a single online identity that'll work across every Xbox game. Until now, online gaming's been a fragmented world where players need a different login for every game. Xbox Live's gonna take the pain out of online play. But Microsoft isn't alone in planning to plug its game console into the internet because Sony is thinking the same thing. In early 2002, Sony launches a broadband modem for the PlayStation 2 that lets people play online. Sony's solution lacks the single online identity in social media features of Xbox Live, but it's got one big advantage. It's free to use. The question is, will Xbox Live's extra features entice gamers to pay $50 a year just to use it? Fast forward to November 2002, an Xbox Live is finally ready. This is the moment of truth. Is Microsoft's vision for online gaming enough to put a rocket under sales of the Xbox? - Hey, I'm Mackleon. - And I'm Kobe Jones. We're here at the Xbox Live launch party here in Hollywood and do this thing is going on. It is and it also happens to be the one year anniversary of Xbox. Xbox Live's offer proves enticing despite the price. Within two years, there are more than 750,000 Xbox Live subscribers and impressive number given how few people have broadband internet. But it's not enough to derail the PlayStation 2 success. By summer 2004, PlayStation's lead is insurmountable. Sony's sold more than 100 million PlayStation 2s, making it the biggest selling games console of all time. Microsoft has sold only 20 million Xboxes. It's barely ahead of Nintendo's GameCube. And grabbing that thin slice of the pie has cost Microsoft a lot and I popping $5 billion. But Microsoft is playing a long game. The Xbox has done well enough to give the team another shot at beating PlayStation. But the pressure's rising. Microsoft CEO Steve Balmer is losing patience with the enormous losses from the Xbox. The message from the top is clear. The next Xbox must do better or the axe could fall. In the next episode, Microsoft gets the jump on Sony. But just as victory is in the company's sights, Nintendo stages a surprise comeback that shocks the entire game industry. Be sure to follow Business Wars on Audible or wherever you get your podcasts. And Audible subscribers can listen to new episodes of Business Wars one week early and add free right now. All you have to do is join Audible in the Audible app or by subscribing on Apple podcasts. From wondering, this is Business Wars. You hope you enjoyed this episode. Quick note about the conversations that you've been hearing. We can't know exactly what was said, but this dialogue is based on our best research. I'm your host, David Brown. Tristan Donovan wrote this story. Karen Lowe is our senior producer and Emily Frost, our editor for this edition. Jenny Lauer is our producer. Sound designed by Bay Area Sound. Our executive producer is Marshall Louis. And we were created by Ernan Lopez for "Wondry." (upbeat music) - Wonderful. (upbeat music) - I'm Gemma Wheeling. And in the new season of The Spy Who, we tell the story of the original femme fatale, The Spy Who Was Matahari. A famous dancer turned World War One's secret agent, accused of seducing Allied officers to uncover their plans. But was she a temptress or a scapegoat for French failures? Follow The Spy Who Now, wherever you listen to podcasts. You can also listen to the full season of The Spy Who Was Matahari, early and at free, unaudible.