Don Mattrick, Xbox 2013 should be a case study in Havard Business School

Up until Kinect becoming a major hit by 2011, XBox was all about the games and their online multiplayer service. Then in 2 years it suddenly shifted to:

Kinect, TV, Sports, Games and Apps.

Suddenly games were demoted to ‘1 of 5 things’ and that represented a sudden ecosystem failure that Sony ran away with.

It’s obvious in retrospect what a horrible strategy that was, not understanding the market and arrogantly shifting the ecosystem to something the vast majority of people did NOT want. What’s a case study is how a single peripheral device becoming a hit causes the entire enterprise to commit suicide.

Is it just arrogance? Remember at the time Steve Ballmer was still CEO and one might say that there was a culture of arrogance fueling major disasters at the time for Microsoft. Think aQuantive, Danger, Zune, Windows Phone, Surface RT $1 billion write-down, Windows 8 and so on.

It was cultural.

Don’t forget Terry Myerson and Phil Harrison.

I’m really talking about the old regime, pre Nadella, pre Spencer. Just a total clusterfrak of untalented egos.

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I believe I have to write a business case next year to finish my studies at UofT. I already know who I’m writing it on, and it’s not Mattrick but Phil. The one thing loved by business students more is not failure but recovery.

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Mattrick was out of touch with gamers. He would even describe himself as a business man and that’s why he was brought into Microsoft.

To frame all of the things he did, you have to remember he was brought in back in early 2007 as an advisor to Robbie Bach, who ran the Microsoft entertainment and devices division (EDD). This is the division that, over the years, had Xbox, Zune, Groove, Skype, Windows Phone, Kin, Microsoft TV, and eventually Surface. I’m sure I’m forgetting something.

To understand why all of those things were together, you have to go even farther back and recall that even the original Xbox was Bill Gates’ way of defending Windows from Playstation taking over the living room and a future marketplace for his OS. Microsoft was reactive to anything that threatened Windows.

In mid-2007, when Mattrick joined officially, Netflix streaming on-demand was just introduced. Digital TV was on the rise with broadband growing and smart TV devices (e.g., Roku) arriving. Nintendo Wii was killing it in sales with motion controls. Google bought Android in 2005 with it introduced to consumers in 2008. Apple had just returned to profitability while also introducing the iPhone and Apple TV in 2007, with the iPad coming in 2010.

None of those things needed Windows and they were growing quick!

Steve Ballmer, the CEO of Microsoft at the time, was trying to get Microsoft back in the spotlight and keep Windows, its cash cow at the time, relevant by trying to have Windows-based answers for these emerging consumer trends. With that big of a job, Bach and Mattrick had to think big and the core Xbox consumer base that the original Xbox crew established wasn’t growing fast enough, while things like Zune and Windows Phone weren’t working. Mattrick tried to take the one thing that was working and build on it and that’s why it lost its way.

I want to be clear, I’m not defending Mattrick. Never cared for him. I’m only trying to frame the job he had and why he was thinking TV TV TV, Kinect, NFL sports deals for tablets, and opening an original programming division under Xbox. It was a mess built on a reactive culture and a failing strategy to try to win back marketshare on rising trends instead of thinking about the next big innovations.

I’m glad Microsoft moved on from pivoting everything off of how it impacts the success of Windows and I’m also glad that it has come around on gaming as its own core pillar. I think the future of Xbox is very bright and I hope that after Nadella retires, whenever that is, that they stay on the same track and we never see a repeat of the Ballmer days.

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This is an amazing post!

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I don’t share the sentiment given here. How many of you know that Mattrick was the guy green lit the One S and the One X?

The main aspect of the underwhelming launch was that Xbox was part of Windows division and not its own or at least a direct report to CEO.

So requirements from Windows management diffused what Xbox should have been.

P.S. I think it is always important to see the whole situation. That said I also think Phil Spencer did a great job of revitalizing the Xbox staff and brand.

Edit: It is also known that the availability of faster DDR RAM was not estimated correctly hence the decision to use DDR3 instead of GDDR5 like the PS4 did. This was also not Mattricks fault, there a GM has to trust his engineers and their analysis. What you can blame Mattrick for is that he bundled the Kinect and did not offer it as an accessory. That would have meant at least parity in price which would had helped a little bit.

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Back then, I remember reading that more people were watching content via Netflix then playing games on the 360. I was one of them, the 360 (at the time) was one of the few devices out there with Netflix access, before Chromecast and Amazon Fire TV Sticks were out.

Also bear in mind that Kinect was very popular, and developers stated they would have given it more support it it was sold with the console.

IMO, that combo of metrics, Netflx usage + Kinect, drove a lot of key decisions for the Xbox One, a console focused on general entertainment which came with Kinect V2 as standard. Add on the desire to turn Xbox into a general entrainment brand within MS (anyone remember Xbox Entertainment Studios?) and yeah…that led to the reveal in 2013.

The rest is history.

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One of the problems with Microsoft then was (as another poster has pointed out) they chased tech trends but instead of adding or contributed to them they tried to build their own. The Xbox one was basically a smart TV/streaming stick/voice controlled device. As an idea it was very smart. Be the centre piece of the living room. But there is a reason why nobody else at the time had combined all that tech into something you plug into your TV and it was because the AV standards and compatibility were a minefield. The Xbox One didn’t work properly with 50Hz TV in EU. It didn’t work with many sound systems or sound bars and basically was a great idea but one that was impossible to execute. And in doing all that they over engineered a product and forgot about its core audience.

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A few thoughts…

The 360 Kinect ‘shift’ amounted to the most successful product launch for any electronic device in world history. It gave a huge spike to 360 sales that had never happened before in gaming history (instead of a single hump like usual 360 for two humps).

The X1 launch disaster was not due to Kinect or any real world policies MS had in place imho. I realize the narrative since then has sorta presented a role for Mattrick where he gets all the blame, but most of their actual policies were not what most ppl imagine they were. The used game thing, the TVTVTV thing, the cloud compute stuff, the Kinect stuff…ALL of that was coming from a well poisoned by CBOAT lying about various elements of their policies before MS had a chance to communicate what their real world policies were.

I’ll take of the more prominent elements one by one:

  1. Kinect required: MS did this initially because they wanted every single dev to know for sure that they could use Kinect to enhance their games via voice commands or motion tracking. They wanted hardcore games to implement Kinect in immersive ways that the competing consoles couldn’t. This got spun to suggest MS was spying on everyone for some nefarious purpose. At one point even “insiders” passed around patent images showing a game being forcibly paused and requiring the player to shout at the TV screen to engage with an ad before continuing. This turned out to be a Sony patent, but the damage was done. Memes sprang forth with that patent image or with 360-era Kinect gifs, but the actual intentions were never about spying or bringing anyone out of the immersion, quite the opposite.

  2. Used games: They always allowed used games on X1. There was never a time when they didn’t. They just wanted used games to traded in via their retail partners like GS, WM, etc. The purpose of this was to be able to move away from the disc housing the content since game content was getting much too big. If ya used the disc as a mere license, that lets you share that license online. CBOAT and others ran around GAF claiming that MS had disallowed all used games on the X1 out of some devious anti-consumer effort to bleed gamers of their cash. In reality, they wanted the licenses to not be tied tot he discs. Sony was doing the same thing btw, they just abandoned it last minute to dunk on X1. Sony had patented RFID tech that was going to count how many times a disc had been played in a console and monetize that. Also SUPER important to note that GaaS and superfluous multiplayer modes in SP games and MTX’s all sprang from the efforts of publishers wanting find ways to make $$$ off of gamers who otherwise would trade the games in to GS. GS would order huge allotments for launch day and then never order anything else from pubs thereafter, which was killing publisher’s bottom line. GS would just wait for customers to trade the game in and resell it for $55, pure profit, and give nothing to the pub/devs. Pubs realized that if ya kept ppl playing the game for 6-8 weeks after purchase, they are drastically less likely to trade it in, so they started forcing dev teams to include mechanisms to keep ppl playing longer and longer and padding out even the SP experiences with mindless fetch quests. Devs and pubs both complained to platform holders about this and both MS/Sony looked for ways to help them.

  3. Family Share feature: This was another dumb one that got inverted by CBOAT’s bullshit. The feature was legit AMAZING. With the licenses being digital and tied to your GT, the idea was to let gamers share their library of licenses with up to 10 other ppl, so there could grow networks of ppl sharing the burden of buying games and then letting their pals play it. This is already a great alternative to traditional ‘borrowing games’ since ppl don’t have to wait to access the game data. It was SUPER pro-consumer. But CBOAT claimed that this was actually a trick and the games played for more than an hour or two would force you to spend $$$ to play more. Even though MS’s stated policy said otherwise (explicitly), ppl online believed CBOAT. Turned out his info was (again) actually about a feature Sony was cooking up related to game demos.

  4. The Cloud: This is something that has aged well for MS and not so well for their critics. They envisioned precisely the kinda thing we see today in FlightSim, back in 2013 and were working towards making that kinda tech prominent. Their Crackdown tech demos were super impressive but not practical wrt game design. When the game designers changed how easily things could be destroyed, ppl assumed it was a tech limitation and trolled the whole idea of ‘the cloud’. This is due to ignorant gamers who knew nothing about cloud compute potential presuming that it could never enhance games in meaningful ways. Mark Cerny told them as much, and by then they were mentally primed to reinforce their cynicism wrt X1 and ppl wanted to frame billion dollar infrastructure investments by MS there as if they were reacting to PS4 having more TF’s, so that became the narrative.

  5. Power: PS4 was certainly more powerful than X1, but the narrative around resolution was straight up delusional. IGN had a video of CoD (iirc) running on both machines right before launch. It was a side by side comparison sorta deal. They looked identical because in reality, both were 720p (a day 1 patch on PS4 bumped ti to 1080p on PS4). But ppl online convinced themselves that the PS4 version was miles ahead due to much better resolution courtesy of the machine’s TF dominance. Resolution is an area with severely diminished returns, even at 900-1080p. It doesn’t notably affect game enjoyment and ppl tend to only even be aware of the difference only if there are side by side direct still shot comparisons from DF. There was a difference, but it was WAY overhyped.

  6. eSRAM: This was spun as some Kinect-driven decision somehow. It was supposedly only present to react to stuff Sony did, despite being a direct extension of how devs utilized embedded RAM on 360 to great effect. It was fine for 900p frame buffers, but too small for 1080p.

  7. Always Online: This was also never their real world policy. Their policy was that devs could force games to be always online in order to leverage cloud compute if they wanted to do that. This was not much different than multiplayer games even back then in 2013. For the console’s Family Share and game borrowing to work without risking rampant piracy, they needed a security check in (a few seconds, once a day if ya are playing games). It is quite literally not something a single gamer would ever once notice, since EVERYONE plays with their console online/connected as is. But we were hearing bogus narratives about ppl taking their Xbox to the fucking wilderness for camping and how they were being screwed somehow. Or how the this was some draconian measure to track your biometrics while ya play or something dystopian. The arguments were goofy.

  8. The Indie Dev ‘Parity Clause’: This never existed. It was a myth invented by CBOAT when some AAA games ran as good or better on X1 than PS4. Stuff like AC Unity where the better CPU in X1 helped it handled more npc’s. That somehow got spun to mean MS was forcing Ubisoft to gimp the PS4 version due to a marketing deal with Xbox. Indie devs (i.e. random gamers on forums who happened to also make games) bought into this myth about parity because there WAS a clause on 360 about best practices for porting stuff late to that system. For X1, MS nixed that guidance and instead sought to reach out to indie devs on a case by case basis. The idea there was to have the late-ported games get something extra for Xbox gamers since they waited. Stuff like extra content, free DLC, that kinda thing. But that was always optional. Lots of indie games released late on X1 without any of that and it was always allowed. The myth here actually lead many indie devs to avoid releasing on Xbox entirely, despite Phil asking indie teams to reach out to discuss how to best tap into the Xbox userbase.

This all isn’t to suggest there weren’t lots of mistakes. Letting the narrative spin wildly out of control in the first place killed their brand for a whole cycle. But the issue in most cases was a snowballing of bogus ‘insider’ fake news, misinformation spreading rampant on forums, and the gaming press going along with the enthusiast narratives instead of trying to actually inform ppl responsibly. Once the narrative was set in stone, nothing could be done to correct the claims. Even yrs later we still have Xbox enthusiasts parroting a lot of that narrative as if it was fact, when most of it wasn’t.

There WAS horrific messaging though. And not enough investment on the games side early on. That is true.

Mattrick’s biggest problem was not knowing how to respond to criticism. We have to go back to analyze Xbox’ strategy at the time, and @Sydle has summarized everything perfectly.

The problem was not TV or focusing on things other than games. I mean, how many of us would complain if Xbox did not have Netflix or Spotify? It is one of the biggest complains about the Switch, a console that is breaking records after records. Just scroll down your friends list and check how many of your friends are not playing games, but watching Disney+.

Plus, Smart TVs were not as popular in 2013 as they are today, specially on third-world countries. Many used their consoles to have access to apps that are today available on said Smart TVs. I know people who bought a PS3 just because it was a cheaper bluray player!

We want things other than games. Just like we get excited for new things after every iOS or Android update — we could not care less about calls or texting.

Microsoft showed games during the 2013 E3. Dead Rising 3, Quantum Break, Ryse, Halo 5, Killer Instinct… The problem is that during a games-focused conference Microsoft focused too much on those other things, which led to a lot of criticism. And Mattrick, a businessman above everything, did not know how to respond to said criticism.

Fast forward to 2020. Microsoft suffered a lot of criticism due to its messaging about next-gen. Cross generational games, a first conference focusing on indie games, etc. And look how Spencer (and the team!) handled things, turning things around in such a way that Sony is the one looking bad now!

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Phil Spencer rebooting Xbox to a powerhouse should be a Harvard case study.

This is a brand that was in the gutter and only had 8 studios just two years ago.

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Mattrick was also not socially great for messaging too. He was a game programmer and was pretty awkward a lot of the time tbh. Phil is relatable and engaging in ways that don’t seem fake.

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Also should be noted that most 3rd parties thought X1 was gonna dominate the gen due to their broader appeal of the entertainment box and the RAM superiority over PS4 (at the time PS4 had 4 GB of RAM iirc). So seasoned, informed industry vets felt MS was on the right track. It was the way info got surfaced (both real and fake) and taken out of that broader context that turns MS into villains. Mattrick being unrelatable as a personality didn’t help either since nobody took him at face value if he explained stuff.

I think a lot of people did understand aspects like kinect being required or the deal with used games, it’s just gamers didn’t like or agree with those stupid policies. People didn’t want to pay $100 more for kinect on a weaker console. Just like they didn’t want to go through the hassle of online DRM with used games. The online DRM was also not just on a game by game basis, the system would essentially become a doorstop if it wasn’t connected at least once every 24 hours. That’s why they promoted the 360 for people who didn’t have a reliable internet connection. Last there was no indie dev parity clause with quality but there was one for release. When questioned about it, they didn’t deny it and instead blew smoke up our asses with wanting the Xbox to be the premier system for their users, or some crap like that.

Their messaging, policies, and lack of planning was all absolute trash. They deserved the backlash and stomping in sales they received.

Also, whilst Xbox messed up and deserved lots of the bad press they had…there was also an element of people desperate because it was Microsoft to pile in…who remembers the giddy way the early game resolutions were leaked out and reported…it was celebrated in some quarters. And frankly we all know if Sony had done the same that wouldn’t have happened…

If Windows wasn’t the bloated mess and not incapable of being a solid mobile platform back in 2010 things would have been different. The problem is they never realized why iOS & Android were taking off.

I think they had many valid reasons for what they did.

Kinect was absolutely huge you’d see at every where and people were crazy about watching Netflix and other media on Xbox as well.

But while they had a good proposition I think many of the mistakes were done in the execution and messaging that made it trumble.

For example, right from the start if Xbone was as powerful or more than ps4, and if they have eaten the costs of the camera so there are no compromises in their vision compared to what ps4 proposed.

Same drm, as we see it now there’s a desire for people to convert their physical libraries into digital so that itself was not a bad idea, just poorly presented too.

But as Phil always points out, the difference is not that they had nefarious goals before, it’s just that they didn’t put the user at the center of the decisions. So those decisions were made in a way that made the customers feel bad and forced upon.

Xbox was moved into the Windows division after Mattrick left. Nadella’s first order of business in 2014 was unifying Microsoft under his cloud-first, mobile-first strategy. He re-organized Microsoft around three pillars: Windows, Office 365, and Azure, with Xbox moved under Windows in 2014 and Spencer named Head of Xbox. That didn’t change until Sep 2017, when Spencer was named EVP of Gaming, no longer reporting to Terry Myerson, EVP of Windows.

Mattrick was the head of the division leading up to Xbox One’s launch, he is responsible for its ups and downs as its leader as he set the strategy and direction. Instead of investing in core gamers, he was chasing mass appeal with TV, sports, Kinect, and mobile as focus areas.

If the OG XBox One had been a super sleek device it might have had some impact. But being that VCR, it was DOA.