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Phil Harrison on Xbox One: "digital is an unstoppable force"

Kinect 2.0, Steam Box, Oculus Rift and more with Microsoft's big Phil.

Phil Harrison, Corporate Vice President, Microsoft EMEA.

On the third floor of a building that fits snugly into the heart of London's West End is Soho Productions, the self-confessed "biggest Microsoft Studio you never knew existed".

Founded in 2008, Soho Productions' mission to "change all that you understand about television" resulted in the creation of the Sky player for Xbox 360. It's now working on similar, secret projects for Xbox One.

On the fifth floor is Lift London, the recently-opened Microsoft Studio focused on creating new free-to-play IP for tablets, mobiles and, of course, Xbox.

Lift London was set up by Phil Harrison, the former Sony and Atari executive hired by Microsoft last year to help grow Xbox 360 - and now Xbox One - in Europe, and it's here that Harrison works. His office is white and airy, his desk tidy save for a strewn newspaper pullout reprint of Pop Chart Lab's "The Evolution of Video Game Controllers" poster (it turns out Harrison, who started his video game adventure back in the late 80s, worked on many of these devices), and a couple of sofas that face each other. I sit in one. Harrison, cross-legged, sits in the other.

It's been a turbulent few months for Microsoft and Harrison, who must have wondered more than once what he got himself in for after his double pre-owned themed encounter with Tom at the Redmond Xbox One reveal event in May. Since then, Sony gave Microsoft's controversial digital-heavy policies for its next-gen console a kicking at E3 in June, Microsoft ditched many of those digital-heavily policies for its next-gen console in a dramatic U-turn, and we saw the announcement of ID@Xbox, Microsoft's indie self-publishing initiative that, depending on who you talk to, has either been in the works for years or frantically put together over the last few months to counter Sony's indie love-in.

Now, to coincide with Harrison's just-completed Eurogamer Expo 2013 developer session and with the Xbox One less than two months from release, it's time to talk about the present: the launch, the threat from Valve and its Steam Box, disruptive Virtual Reality headsets and the "unstoppable force" that is the digital revolution.

I'd like to start with Xbox One stock levels. Those who have pre-ordered expect to get their console at launch. But will someone who hasn't pre-ordered be able to walk into a shop on launch day and buy an Xbox One?

Phil Harrison: We hope so. There are a few weeks to go between now and launch. Pre-orders have been unprecedented. It will mean Xbox One by far and away the largest launch we've ever done on a global basis and on a UK basis. And we work carefully with our retail partners to make sure we have as much capacity and inventory as possible.

Inevitably, there will be situations where demand outstrips supply. But we work hard to minimise the impact of that.

Are we looking at a sold out situation for Christmas?

Phil Harrison: It's hard to predict, but the demand is very high. We will do everything we can to get as much inventory into our retail partners, because we want to sell them. There's no desire on our part to lose a sale or hold back inventory.

You mentioned pre-orders being unprecedented compared to previous console generations, but some observers claim consoles are doomed. Some suggest the next-gen will be the last. What are Microsoft's expectations for sales of Xbox One versus previous generations? Do you expect the market to grow significantly here?

Phil Harrison: We have this expression internally where we talk about gen six, gen seven and gen eight. Xbox One is a gen eight console. Gen seven, if you include Xbox 360 and the other Sony and Nintendo consoles, is by far and away the biggest generation the console industry has ever seen. Gen seven was substantially, materially bigger than gen six - in some markets two or three times as big.

So, the trajectory - and I'm a bit long in the tooth so I know these numbers back from 1990 all the way to the present day - is that every generation has been bigger than its previous generation. So the macro economic of the game industry is incredibly strong.

You're seeing a lot of growth in console but you're also seeing a lot of growth in gaming fullstop, whether it's on mobile phones, tablets or consoles and a number of new entrants. So the games market overall is in an incredibly strong position.

Look at Grand Theft Auto 5. That's the perfect proof point. You've got a computer game generating over $1 billion of revenue in its first three days. It's the biggest entertainment launch in any medium of all time. And it's on console.

That belief is based on the trajectory of console generation sales, but is there anything about the consoles themselves that will drive further growth?

Phil Harrison: Yes, absolutely. And the very purposeful choices we've made with Xbox One we think will help accelerate that growth. Yes, we want to be the best place to play games, and we also want to give more people in the household the opportunity to play and interact with the device connected to the biggest screen in the living room. So, adding non-game features, adding entertainment features, whether it's live television, whether it's Blu-ray playback, whether it's all the social and digital connectivity, we think gives more people in the household a reason to use Xbox One and discover games as a result. That's going to help the growth.

One of the subtle benefits of Kinect in every Xbox One is identity. It means when you go to your Xbox One, it recognises you and presents you with your choices of games, what you've previously been playing, what your preferences are for your TV shows, what your preferences are for music and film. Whereas somebody else in your house, your wife or partner or whoever, would have their choices presented to them when they log-on, with their identity.

It means Xbox One is very personalised and very customised for your entertainment choices, and we think that reduces friction and increases enjoyment of the console.

That makes sense, but you know better than anyone that those early adopters who buy consoles at launch are, typically, core gamers. What is it about the Xbox One that will convince those people specifically to buy a console at launch?

Phil Harrison: It's all about the games. It's about having the strongest lineup of franchises that players love and also some new experiences we think they will love that perhaps they haven't yet played.

Of the 23 games we have coming out for Xbox One in the launch window, I was looking at this the other day and I think there are 10 billion dollar IPs in that launch lineup. It might be 11, but it's definitely 10.

When you say billion dollar IPs what do you mean exactly?

Phil Harrison: A game like Call of Duty. A game like FIFA. A game like Forza. A game that has cumulatively sold over a billion dollars in its history.

These are powerhouse franchises, household names, games players want to play, and games players have a rich history of playing with their friends, which is very important on Xbox Live. No console in history has ever launched with a lineup of IPs that are that powerful. That's great for Xbox One.

But, there are also some new games people haven't had the chance to play before, which will be showing up uniquely on the console, like Ryse, which just looks amazing and has beautiful graphics.

Also, somebody who's buying into an Xbox One at launch is not only judging the launch lineup, but they're also thinking about what's coming around the corner. And it's games like Titanfall that will be hugely motivational for players to buy into the Xbox One. We know they have a choice, but it's the games that ultimately what cements that choice.

"Of the 23 games we have coming out for Xbox One in the launch window, I was looking at this the other day and I think there are 10 billion dollar IPs in that launch lineup. It might be 11, but it's definitely 10."

Microsoft's Phil Harrison

You've touched on some of the TV features of Xbox One. Microsoft has made much of this, but with a focus on American Football. Will you offer similar experience for football?

Phil Harrison: Xbox One has HDMI in as well as HDMI out. HDMI out is, obviously, what connects the console to your TV or receiver. HDMI in is what can take the live television feed from the device you already have in your home for television. It could be your satelite box. It could be your cable box. It could be a Freesat or Freeview box. And you can then bring that feed into the Xbox One dash, and then make TV fullscreen, instantly snap between software, switch between applications - games to TV - and those features will be available day one for consumers everywhere.

What I meant was, will we see the interactivity layered on top of the NFL we've seen in the US with football, perhaps Sky Sports?

Phil Harrison: The short answer is we have nothing to announce. The long answer is, two floors below you is a large team of people who are working on some really interesting things.

We learnt this week that Xbox Upload Studio will work with Xbox Live at launch, but won't work with YouTube and social networks into next year. Can you give us some insight into how that will work in Europe specifically?

Phil Harrison: Upload is a global platform feature. Wherever you live you will be able to enjoy content made by your friends or made by others on the network. It's one of the most exciting features for user-generated content on Xbox One. We want to create the next generation of game broadcasters, and we think people will become stars from this as a result.

It's another great example of why having Kinect in every box is powerful, because we're putting an HD camera into the living room, and you can then use that camera to then enrich and augment your upload creations. We're creating a pretty powerful video editing took, which allows you to edit and personalise and customise the content.

For now, that is going to be just inside the Xbox Live network, but we do have plans to broaden the reach of that onto your social feeds in the future.

"Irrespective of size or way you bring the title to market, connecting games with gamers, and gamers connecting with games is the challenge of creating and publishing on any platform."

In my conversations with indie developers who are interested in getting their games onto next-gen consoles, I hear over and over again about a potential issue of discoverability of their games on the various digital store fronts. I know Microsoft is doing away with Xbox Live Arcade and Xbox Live Indie Games for a more all-encompassing store where all games are treated equally. But how will you deal with this discoverability issue when an indie developer self-publishes a game on Xbox One in the same week Microsoft publishes a new Halo game?

Phil Harrison: You're right, it is the number one challenge in fact any developer faces. It's not a uniquely independent developer challenge. Irrespective of size or way you bring the title to market, connecting games with gamers, and gamers connecting with games is the challenge of creating and publishing on any platform.

But we have designed some very specific features into Xbox One to solve this problem. We mentioned Upload. Upload allows you to see what your friends are playing in video form, be able to watch a video clip of somebody's upload game DVR footage and go, 'that looks cool, I want to play that', and there's a button that will take them straight to the store if they don't already own the game, and they will be able to download that game there and then.

In the future, we will also be able to tag video clips with unique downloaded content. So, if you are seeing a video stream which incorporates some DLC you had not previously seen or not already got for your game, you'll be able to get that as well. That's a future feature, but it's still a very powerful one. So Upload I think is going to dramatically increase virality of games on the platfrom. That's number one.

Number two is, the store has been redesigned to have a number of algorithms behind it that will promote games automatically. So what your friends are playing, what's trending and hot in your area, your region, your country. Fundamentally, what are your friends playing? Those are the things that are going to influence your purchase decision.

Then we will also add on top of that our own spotlight for the games we think are exciting, different, uniquely taking advantage of our platform, funny, great, whatever the reason. We have the opportunity to promote a particular game. We can add on top of that this additional spotlight feature.

All of which is built into the system, so every game gets the benefit of that. Everyone is first among equals.

I'd like to talk about SteamOS and the Steam Box, which undoubtedly impacts your business as it specifically targets the living room - the same space Xbox One targets. What's your take on what Valve is doing there? Is Steam Box a threat to Xbox?

Phil Harrison: The announcement was only made last night so I'm still studying all the facts Valve has released. But Valve is a very impressive company, and obviously we're going to be watching what they do with great interest.

But it actually goes back to an earlier question. I think the death of the video game console was prematurely announced. Clearly there is a lot of excitement around gaming in the living room on the biggest screen in the house, often times connected to a great sound system and creating that real intensely high quality game experience with a very powerful CPU and a very powerful GPU.

Our point of view, clearly, is that Xbox One is the best incarnation of that, but competition is good!

"Valve is a very impressive company, and obviously we're going to be watching what they do with great interest."

The thing that strikes me about Steam Box is that it reflects Microsoft's initial vision for Xbox One, as it was revealed in May and again at E3. It has a very heavy digital focus, game sharing digitally - and Family Sharing was part of Xbox One before it was removed. The difference of course is that the Xbox One comes with a disc drive and Steam Box doesn't. If the Xbox One hadn't had a disc drive, might you have avoided the negative reaction to it?

Phil Harrison: We've given players a choice, and we think that choice is really important. We've given players a choice to purchase and enjoy games on the format that is most convenient to them. If you purchase games on disc there are certain advantages and benefits that gamers are used to and comfortable with, based on previous generations, and we will continue that on Xbox One. If you purchase games digitally, there are a bunch of additional benefits that come with that, particularly around your content showing up wherever you are, rather than being linked to that particular console or that particular disc. We think that choice is great.

I'm glad we made those changes because it allows the most people possible to enjoy our console wherever they live and whatever the access they have to whatever kind of connectivity they have. That is the right approach.

I'm not going to speculate on what other companies may or may not be doing.

Do you envisage a situation in the future where a version of Xbox One without a disc drive might be released? Is that something Microsoft would consider as part of bringing back some of those initial policies?

Phil Harrison: Well, I'm not going to make any speculation on future hardware, but the general trend of the world is to be more digital and less physical. That is in our opinion an unstoppable force. Depending on where you live on the planet, that transition has already happened. Some parts of South East Asia, Korea for example, don't have a physical disc or media-based games industry anymore. It's all digital.

In other parts of the world, clearly, infrastructure lags behind. William Gibson, the science fiction author, has one of my favourite quotes. He says: 'The future is already here, it's just unevenly distributed.'

I bet that ran through your mind more than once over the last few months.

Phil Harrison: Possibly! The world is clearly moving into a connected, digital world in all devices in all functions, and Microsoft is clearly at the leading edge of many of those innovations and many of those investments, whether it's our Azure cloud business, or the investments we're making in Surface or phone or other technologies.

One disruptive technology that's emerged among the development community is virtual reality headset gaming. Oculus Rift is exciting many, but some doubt its mass market appeal. As someone in the business of making mass market gaming products, what's your take?

Phil Harrison: It's a really interesting discussion. Whether it's headsets or other consoles from other companies or other devices, being successful at scale requires more than just a cool piece of hardware. It requires a software support strategy to have first and third-party software. It requires a business model. It requires distribution. It requires a massive supply chain to build the thing and distribute it around the world, all of which takes significant financial resources.

I love some of these platform innovations that are coming along, and I'm always excited about them, but I don't know that every single one of them can be an at scale, global consumer product, a mass market consumer product, the kind of thing everybody on the street will know about, because of the factors I just listed.

This is why our industry is so exciting. It's this nexus of hardware, entertainment and technology all within this one space. That's why games is such an incredibly fun industry to be in, because there's always something new coming along. It keeps it fresh.

"We put USB 3.0 ports on Xbox One to facilitate high bandwidth connection with peripheral devices, so technically you could imagine a wide variety of devices being attached to Xbox One."

Is Microsoft open to facilitating compatibility with Oculus Rift for Xbox One? It's basically a USB connection, and we know developers can make it work with their games.

Phil Harrison: There are many business and technical reasons that would have to be overcome, so I'm not going to talk specifically about any brand or partner. But we've put USB 3.0 ports on Xbox One to facilitate high bandwidth connection with peripheral devices, so technically you could imagine a wide variety of devices being attached to Xbox One. What those actually are and when they show up is a different discussion.

Let's talk about Kinect. Xbox One would be significantly cheaper to buy if there was a version that didn't come with Kinect. And in the context of the announcement you made about Kinect not having to be plugged in to the console to work, that seems like a natural extension. Will you release Xbox One without Kinect in the future?

Phil Harrison: The platform of Xbox One is a combination of many things. It's a box with CPU, GPU, memory and a hard-drive. It's a game controller. It's a Kinect sensor. It's Xbox Live. And it's the cloud. All of which inter-operate and work together.

You're absolutely right, you can utilise Xbox One with Kinect unplugged in those scenarios where you want to take Xbox One to a room where it's not convenient to have Kinect plugged in. We fully support that. But we believe the most exciting and valuable use cases of Xbox One are where Kinect is part of the experience.

Walking into your room and saying, 'Xbox on,' and for it to hear your voice, switch on your machine, recognise it's you and present your entertainment choices to you, and to be able to then recognise other people in the room and present their entertainment choices to them, is a great value, which is made possible by Kinect.

Being able to use your voice to do sophisticated conversational navigation of entertainment and search on the Xbox One is valuable. Being able to say, 'show me movies starring Angelina Jolie and Brad Pitt', using your voice to have rich and deep interrogation of Bing search and the entertainment that's on either the Xbox Music or video store or other app stores that will be on Xbox One, that's powerful when you use your voice rather than having to type.

Being able to have HD quality Skype calls with your friends from the living room - that's only possible when you have a Kinect connected to Xbox One. And that's before we start talking about any of the game scenarios.

"We should be really proud of what Kinect has done for motion gaming on Xbox 360, but we also recognise there were limitations to that technology."

But Kinect on Xbox 360 didn't work out as well as many had hoped. Why should we believe it will this time around?

Phil Harrison: We should be really proud of what Kinect has done for motion gaming on Xbox 360, but we also recognise there were limitations to that technology. There was not the level of fidelity in the signal we have on Xbox One. We now have incredible precision on Xbox One. We now measure in millimetres and nanoseconds. What this means is a vastly improved way of tracking your body movement in a much more subtle way. On Xbox 360 it was quite big movements, maybe waving your arms around in a big way. Now on Xbox One, much more subtle. Seated, as well as standing. Being able to enjoy a movement-based games but also continue to be sitting down is important.

And also being able to augment gameplay with subtle gestures. So the primary input device might be your game controller, but you might be able to augment the experience by touching your eye to bring up a HUD. It's creating the notion of additional buttons or functions on the controller just by a subtle body movement.

Being able to pass the controller around the room and then for the settings to pass to the correct player, because of Kinect skeletal tracking. Six players being able to be tracked simultaneously. We show this in Kinect Sports Rivals, being able to create a champion based on your body and face likeness, and create a virtual champion avatar of you and use it in the game.

These are all examples that are only possible using Kinect. So I really like the fact that as a developer every Xbox One I target has this functionality, so I can create experiences and game design features that scale to 100 per cent of the audience rather than a subset of the audience.

One of the issues with the original Kinect was you couldn't guarantee developers all Xbox 360 owners had it.

Phil Harrison: Correct. It was because Kinect came somewhat later in the lifecycle of Xbox 360 that was inevitable.

Was that the motivation behind bundling it with every Xbox One?

Phil Harrison: As a developer I want to be able to create game design features and invest development time and effort in the features that are going to hit 100 per cent of the audience. I think that's good.