This year has been a milestone in Robbie Bach's career. Bach was a numbers guy before joining Microsoft 16 years ago, with an economics...
This year has been a milestone in Robbie Bach’s career. Bach was a numbers guy before joining Microsoft 16 years ago, with an economics degree and a job as a financial analyst at Morgan Stanley under his belt.
He worked at divisions across Microsoft before the company formed its Home and Entertainment division in 1998. He is best known for his leadership in making the original Xbox a solid contender, though not the leader, in the video-game console business.
This year, Microsoft recognized it had something big, or at least the potential for something big, on its hands with the Xbox. In September, it reorganized and cut its business units from seven to three, focusing on Windows, Office and Xbox.
Bach is heading the Xbox business group, known formally as the Microsoft Entertainment and Devices Division. He’s also leading the company’s efforts in digital music, an area into which Microsoft has made tentative but not game-changing moves.
Bach also oversees the company’s mobile-phone and cable-television businesses, which have gained steady footing recently after years of ups and downs.
Bach talked with The Seattle Times last week about the reorganization and the Xbox 360, which goes on sale Tuesday in North America.
The following are some excerpts from the conversation.
Microsoft is introducing a “marketplace” section in Xbox Live, the online gaming service playable on the Xbox 360. There will be 400 pieces of downloadable content in the marketplace at launch.
Some will be free, but others, such as pictures and smaller, arcade-type games, will cost money.
The company is unveiling a microtransaction-payment system where people can buy a block of “points” online or in stores and use them to purchase content.
A card worth 1,600 points sells for $20. It will take 400 points to buy a backgammon game, for example.
The microtransaction model has been successful in the cellphone market, Bach said, which made it easier to introduce to video-game partners for Xbox Live.
“It’s something new in the gaming space,” he said. “We’re going to have to find out what [buyers] are uncomfortable with and what they’re willing to pay for.”
The original Xbox failed to impress consumers in Japan, one of the world’s top gaming markets. As of June, Microsoft had shipped only 1.8 million Xbox consoles to all of Asia. The company doesn’t break out specific numbers for Japan.
Sony had shipped 21.7 million PlayStation 2 systems to Japan by the end of September.
Microsoft has worked hard to change its fortunes there with the Xbox 360. It has forged new relationships with Japanese video-game developers, opened a posh Xbox lounge in Tokyo and has beefed up advertising. Appealing to the Japanese consumer was a key factor in the console’s design.
“We want to be competitive in Japan,” Bach said. “I want Sony and Nintendo to have to work for their market share in Japan.”
The Xbox 360 is scheduled to launch Dec. 2 in Europe and Dec. 10 in Japan, an ambitious release schedule unprecedented in the industry. Microsoft’s success there won’t be immediately evident, Bach said.
“I don’t think you’ll know the story in Japan probably for 12 to 18 months,” he said.
On sales and shortages
Microsoft has targeted worldwide sales of 2.75 million to 3 million Xbox 360 consoles over the next three months. Through the end of June, the company expects to sell 4.5 million to 5.5 million units.
Two manufacturers, Flextronics and Wistron, made the original Xbox and are churning out units from plants in the Pearl River Delta region in southern China.
A third manufacturer, a new partner named Celestica, is expected to start next year in the same region.
“Is it going to be challenging to find Xbox 360s at holiday?” asked Bach. “Yes. There’s a lot of demand. I think it’s likely we’ll be challenged to meet that demand.”
Microsoft is expecting to sell out the console through the holidays. Volume traditionally slows in January and February, Bach said.
On the reorganization
Xbox is just one part of Microsoft’s Entertainment and Devices Division, Bach said. Other projects, such as the cable television and mobile work, will get equal visibility.
The reorganization “is a recognition that our ability to reach consumers with devices and software and services is increasing,” Bach said. His task, he added, is to enable the entertainment businesses at the company to grow and make a profit.
The division is much smaller than the Windows and Office groups. Still, it is becoming a presence in the entertainment field by recognizing that entertainment is a digital medium that needs tools and technology, Bach said.
“We are an entertainment company,” he said. “The company’s big enough now that there isn’t going to be one label that’s going to apply.”
On Bill and Steve
Chairman Bill Gates and Chief Executive Steve Ballmer didn’t have the most positive reaction to the new console’s name, Bach said.
“They said, ‘Oh, that’s interesting, hmm,’ ” Bach said. “Now, they say 360’s a great name. It’s one of those things where people’s reactions to those kinds of things, it takes time.”
They loved the console, however, Bach said.
“They looked at it and said, ‘Oh, wow, that’s interesting, that’s cool,’ ” he said. “Bill wanted to see the back of the box as much as he did the front of the box.”
These days, its design is one of the tech features Gates is most excited about, Bach added.
Kim Peterson: 206-464-2360 or email@example.com