Power On: The Story of Xbox

Video games are one of the most powerful mediums ever created.

This merger of imagination and technology

has introduced a fundamental evolution in human interaction.

Damnit!

And now represents a culture

of 2.4 billion gamers connected worldwide.

Yes! Move!

But just 20 years ago, the console

that kicked off the era of online gaming in the living room...

Oh my God!

Almost didn't exist.

Do you ever want to make hardware?

No, that's one thing that we decided not to do.

The idea that Microsoft could ever create a game console

- was seen as a bit of a joke. - Microsoft?

They wear khakis and they're boring and they're Office and they're Windows.

You might as well call it Nerd Box, right?

I can't imagine how it could be better.

A new console was seen as a risky bet.

There it is.

At a company not accustomed to losing.

You're proposing taking money away from Windows

in order to fund some game system?

That is an insane business to get into.

It was fear, uncertainty, and doubt.

We're gonna make it, aren't we sir?

This is the story of how a passionate group of gamers

forever changed the course of a corporate titan.

They saw the future.

Broadband internet to the television set.

Like, you can do that?

And then Bill says, "We should do this, we should let these guys do this."

And the journey to get that controller into our hands.

This thing is gonna be the most badass thing you can imagine.

Fire at will!

Think about the way you could tell stories with that.

No matter where you are in the world,

we can all be part of one bigger community.

We need this, this is like the hotline for us.

We take it for granted now, but back then this was like science fiction.

We weren't sure how we were gonna do it.

Xbox, watch tv.

Oh God.

Oh, hell no, Microsoft!

Gamers are not gonna be tolerant of any level of at all.

The risk here was enormous.

You're always just one catastrophic bug away from not making it.

I remember thinking, "Hey, maybe we're in over our heads."

There's a new contender in the video game wars.

Xbox is going to be the future.

Truly the future of video games.

Xbox. Taking over the living room.

Limitless, connected digital entertainment.

You guys never understood.

The company is going to face fierce competition.

Sniper! Nooo!

It's a ticking time bomb.

It makes me very nervous to actually play this for you.

Xbox, getting a major overhaul.

A bold vision for the future of gaming.

It's the Xboooooooooooox!

Hello. I'm Bill Gates. Chairman of Microsoft.

In this video, you're going to see the future.

Microsoft first came up with the Windows concept back in 1983.

I'm going to show you real quickly a couple highlights from the product.

The graphics interface is an integral part of this new generation,

that take PCs much further than they've gone before.

When I came to Microsoft in 1987, the average age was 27, and I was 27.

We were an amazing young company

with an amazing young founder in Bill Gates.

He knew business better than anybody out there,

and he also knew technology.

He was able to synthesize things that nobody else in the industry could.

It was incredibly fast moving.

It was the kind of place where people didn't hold back.

For someone who just wanted to really let loose and grow

and learn, it was an amazing place.

Bill Gates and the team back then were the disruptors,

which was exciting and palpable.

We just thought of ourselves, kinda like rebels, kinda, you know,

where, where the big companies like IBM were these huge companies,

but we were this little rebel group of hackers,

you know, doing this cool work.

I'm very optimistic about where we're going.

But that really changed in '95.

Windows '95 has taken over computer stores.

They were on line in the middle of the night,

personal computer users packed into stores dying to get their hands on one.

When Windows '95 launched it was like

a coming-out party for the whole company.

Microsoft made a thing that everybody in the world wanted.

It was like air to me, it just was. It existed and you needed it.

Today's world, you can't make it without a computer.

It has thousands of programs that some of us may need.

I can run three or four applications at the same time.

Windows '95 is so easy, even a talk show host can figure it out.

Oh!

By the late '90s,

Windows was dropping a billion dollars to the bottom line every month.

...3!2!1!

No running!

It was the most profitable business

in the history of the human race.

I don't think there's ever been anything remotely like it

unless you count the Spaniards going to the New World

and like, literally hollowing out a mountain made of silver.

Microsoft, which has a business relationship with NBC,

is the most powerful engine in the new age of computers,

a giant cash machine,

and it strongly disagrees with the government.

In the late '90s we were sort of the bad guys, the Death Star.

The perception of Microsoft, I think generally, was not great.

They were in the middle of the Justice Department monopoly issues.

We were the big gorilla in the room on most subjects.

And so people viewed us as sort of the big, bad tech company.

By 1999, 90 percent of computers worldwide

used the Microsoft Windows operating system.

They were untouchable,

without comparison, or viable rival.

We'd been successful in the operating system world,

built a huge PC business,

built Microsoft Office into this big business,

we were the tech behemoth.

Windows overtook that industry and transformed the world,

but during that period, disruption was coming from all sides.

For decades, Sony had been a Japanese electronics giant

with a history of producing personal and home entertainment hardware.

And then, in 1994,

Sony struck gold with the PlayStation...

a gaming console with unparalleled success.

The launch of PlayStation really

thrust gaming into popular culture in a big way.

And Sony saw an opportunity for gaming to be even bigger and touch entertainment.

What Sony discovered was a console

was really a Trojan Horse to the living room.

And once that device got into the living room,

it could be a multimedia entertainment device.

Sony was putting different things into the home.

They're putting a hard disk here in like a DVR,

they're putting memory here, they're putting a processor here.

And if they could connect all those things together,

it would be a computer.

A potentially existential threat to Microsoft.

Without further ado, let me introduce to you,

the next generation of PlayStation technology.

Even before Sony launched PlayStation 2,

they were just creating this perception of inevitability.

PlayStation 2 was the next big thing,

and anything in its way was going to get crushed.

Finish him!

They said our new PlayStation is so powerful

that it's gonna replace the PC.

Sony was showing a slide at trade shows

and to our customers of a future home

that was full of PlayStations and didn't have any PCs in it.

Which was like shooting cannonballs over Microsoft headquarters.

It was an incredibly arrogant thing for them to do,

but it was pointed, too, I mean, that was a very serious threat.

In the '90s, Microsoft was a paranoid place,

and when somebody said Sony's gonna put a PC in the living room,

that got everybody's attention.

And if Sony was at the point of locking down the living room,

what was Microsoft going to do?

One possible answer was brewing not from the top executive ranks,

but from deep within the Microsoft corporate structure.

Four renegades on the DirectX software team,

who were working on tech to help developers

create games for Windows, and who were united by a fervent belief

that games were the future.

I was leading the DirectX development team with one of my colleagues

on the marketing side of DirectX, Ted Hase.

You know the question that we were starting to ask is,

"Where was all this graphics technology headed?"

Windows had won the desktop operating-system wars,

so we were starting to ask where there could be threats

or opportunities in the future.

We quickly narrowed down to games

and an all-encompassing entertainment platform for the living room

as being an opportunity for us.

Otto had carefully built a career at Microsoft,

and he had already taken a risk,

because Otto could have been an important programmer

in a legitimate Microsoft group like Windows or Office.

Instead, he chose to be in this DirectX group,

because he was passionate about graphics.

Ted and I both had folks on our teams

we felt could bring some additional brainpower to the conversation,

including Seamus Blackley...

How do you describe Seamus? He's a, he's just a piece of work.

One of the most brilliant people I've ever met.

Besides being a physicist and a really amazing mathematician,

Seamus really embodied the heart of what it meant to be a game developer.

When I saw arcade games when I was little,

when I saw Computer Space ,

my first idea was not, "I wanna play this game for hours."

My idea was, "How can I make my own thing?"

One of Ted's employees was Kevin Bachus,

who had a financial and market analysis background.

Kevin's like a Vulcan in the best possible way.

His interface to the world is entirely intellectual.