In July, Don Mattrick came off an 18-month sabbatical to take the helm at Microsoft games. To say things were a bit rocky for the Xbox 360 makers would be an understatement.
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As the rest of the games industry was gearing up for E3, the company put out a public mea culpa about its Xbox 360 hardware failures. To pay for the extended warranties on the consoles, Microsoft announced that it would take a $1 billion hit against quarterly earnings. Before the month was out, Peter Moore, the head of Microsoft games, would resign to take the top spot at EA Sports.
But as Microsoft heads into the holiday season, Mattrick says he feels that the company has rebounded just fine from the summer’s bit of bad press – and is poised to trump the competition this holiday season.
“On a price-per-value basis, I think we win…relative to Sony and Nintendo,” he says. “Of course, I’m biased, given the role that I’m in, but if I really think about it using my consumer instincts and the experience that I’ve had, this is the best blend of performance, price, online and games – by far.”
Few game industry executives have the length of experience that Mattrick has. The “self-proclaimed math nerd” and Vancouver, B.C. native developed his first game, “Evolution,” at age 17. The game was a top 10 hit, and funded his company, Distinctive Software, which would become EA Canada in 1991. He spent the majority of his career at Electronic Arts, most recently as the president of its worldwide studios.
I spoke with Mattrick before the Thanksgiving holiday about his decision to jump back into the fray at Microsoft, about what the company has on deck beyond “Halo 3” and why he thinks “Grand Theft Auto IV” could be next year’s big hit for Xbox 360.
So, from heading up EA’s global studios to a company that makes hardware and software both. Did you have any ramping up to do, looking at hardware for the first time?
That’s a good question … obviously having 23 years of industry experience helps a lot. At my tenure at EA, we had an opportunity to work intimately with the people inside of Microsoft, Sony and Nintendo. The people inside of Microsoft, we had a very high opinion of, and I had a high opinion of in terms of their commitment to growth and excellence in the long term.
But software was your comfort zone. Is that fair to say?
Software was a core competency but again, during my tenure inside of EA, we went from 300 people to 8,200. So at different points in my career I had to do just about everything, including take the garbage out and clean up the facility. So it was a good base for any business, and to be honest, being in a leadership role is a natural place that I enjoy.
Of course, you came to Microsoft in a permanent role just as the company was coming clean about the Xbox 360 hardware failures and announcing that it would take a $1 billion hit against quarterly earnings to pay for extended warranties … that was definitely a rocky period.
It’s always challenging when you try to innovate and create a new product and it doesn’t go exactly as planned. What I found impressive was the straightforward way that Microsoft dealt with it. They acknowledged the challenge, they came up with a warranty program [that] is superior inside of the industry and drove that through retail … in a very thoughtful and direct way. It showed commitment, it showed responsibility and it showed dedication to the category.
Some would say Microsoft waited a bit too long to acknowledge it publicly, however.
Again, when you acknowledge something, I think what people are looking for a complete answer. I think it’s easy to speculate on well, gee didn’t they know? The challenges weren’t just a single thing that you could easily put your finger on, there were a few things that were interdependent … All those pieces needed to be together before you could have a complete communication with people.
Do you feel that the company has recovered from that and the hit against earnings?
Absolutely. I think the team’s done a fabulous job.
Microsoft saw a jump in hardware sales in September and October … largely due to “Halo 3.” Was the increase about what you expected?
Yes, we’re tracking against our plans. “Halo” is an important component. I think there were other factors that drove the success. I think we’re getting to the point of critical mass in terms of the number of hits. I think we have the highest rated content ever to exist on a gaming system.
Such as?
If you look at our quality ratings, there [are] more 85-plus rated games on Xbox 360, by a long shot, when you compare it with PlayStation 3 and Wii.
The “Halo” franchise has arguably been the crown jewel on the Xbox [platform.] I don’t think there’s any dispute there.
Absolutely. But I don’t think we’d be enjoying the success we have if we just had “Halo.” We have “Halo” and an amazing lineup of content both from our first-party and our third-party lineup of partners. There’s 50 great games on Xbox 360, and “Halo’s” the pinnacle. I do agree with that. But what’s causing the critical mass … inside of our business is the fact that there’s “Halo” and 49 other really high-rated games.
Tracking ahead to exclusives for next year, what does Microsoft have on tap?
There’s a collection of exclusive and third-party hits, and we’re going to have a similar year to what we’ve enjoyed in 2007... We’re excited about “Grand Theft Auto [IV],” not only because it’s a great title, but there’s multi-play and downloadable content that consumers will only be able to get on 360. That’s a huge win. Arguably that title has the potential to be the “Halo” equivalent in calendar year 2008 in terms of number-one title revenue unit.
Sony is predicting that its tech for the PlayStation 3 will have the same lifecycle as the PS2 – roughly a decade. Do you think the 360 will have a similar shelf life, and moreover, do you want it to?
I think it definitely has the potential to have a similar shelf life. When I think about Microsoft, I think about an organization that has spent eight years inside of this category. Getting the original Xbox to market was a challenge, the company did that and achieved the goals that it set out but really hadn’t built the critical mass and muscle as it thought about the challenge of running an Xbox program and a 360 program at the same time.
So the company made a choice and said, “OK, we’re transitioning, we’re now going to be building Xbox 360 and continuing to scale the organization.” We’re at a point now where we’re eight years in, and there’s more resources, more third-party support, more retail support and more consumer support. And it’s very probable that this will be a longer life cycle.
I would argue, and I said the same thing to [Sony’s] Jack Tretton, that the success of the Wii, which is undeniable, and the DS, which is also undeniable, would lead me to believe that the mainstream consumer doesn’t care so much about high quality graphics. They just want fun gameplay.
We need to have fun games and I think we do. Again, our industry is getting to be a broad global industry. Nintendo traditionally, if you look at their company, they’ve done very well having fun games aimed at youth … we’re trying to build fun games targeted at youth and teenagers and adults. It’s a broader vision.
Xbox Live has been a phenomenal success…but the title lineup consists mostly of classic arcade game ports and few original IPs. Is that something that you plan to change, or do those arcade-y games that work for this forum?
First off, I think it’s incredibly hard to create a community that touches 8 million-plus. I wouldn’t want to move past that. In terms of the content and what we hope to do in the future … we want to continue to build that out in all fronts.
Games for Windows Live is quite a bit behind where Xbox Live is. Why is that?
We’re going through the natural learning curve of growing our products and offerings … Is it where our program is on 360? Definitely not. Do we aspire to get to a similar level of success in the future? We do.
While we’re on the topic, has Microsoft made the sort of progress with (Games for Windows) that it was promising? Seems like games are still slow to come to the PC, and not many are yet taking advantage of DX10 and Vista.
I think there are some samples of success. Would we like to have more? Yes we would. We’re working with our third-party partners to get more support. We have a good level of support already but we’d like to have a high degree of support and as many titles on Games for Windows that we can get to.
Short term and long term, what are your plans for growing the business, expanding things you’ve done particularly well, improving things that have been neglected?
I think we’ve got great fundamentals, and we’re going to continue to drive against those fundamentals to over-deliver value and satisfaction to consumers. [We have] the best and broadest lineup of hits, the best hardware, the best live service, and as we continue to expand that live service between the 360 and the PC … That’s the business that we’re in. I’m really pleased with how we’ve assembled the component parts for this holiday season and what it means in terms of our ability to grow in scale as we look into 2008.