"Microsoft was afraid Sony was going to own the living room" - Xbox 360 boss Peter Moore sheds new light on its fierce battle with PlayStation and the origins of the modern console war
Part 1 of our big Xbox 360 interview.
Peter Moore is one executive who can probably claim to have done it all. Having recently fulfilled a lifelong dream of being CEO of Liverpool Football Club, this Liverpudlian businessman also spent decades working in video games, leading EA, helping Sega launch the Dreamcast and, of course, making a real contender of Microsoft's gaming business with the launch of Xbox 360. Whenever the Xbox 360 made a move, Moore was the person on stage announcing it, literally rolling up his sleeves to display Halo and Grand Theft Auto tattoos, taking the fight to Sony and PlayStation.
Nearly two decades later, he's back to recollect - in conjunction with the launch of his autobiographical book, Game Changer - his Xbox 360 days, talking us through the birth of the console wars and taking us behind closed doors at Microsoft, as it hatched a plan for what would become an iconic games machine.
I've separated this conversation into two parts because it's long. This first part details the birth of Xbox 360, and the second part, which will be published tomorrow, discusses the console's reveal and launch, the question of where Xbox is today, the games, and the nastier side of stoking the console wars.
Eurogamer: Thanks for joining me, Peter. Look at all those awards on your shelf behind you.
Peter Moore: Oh, yeah. I've got a lot more where those come from. It's a little bit of my football and video game life and everything else.
And I see, perhaps most importantly, three Xbox 360s.
Peter Moore: Those are legacy of the old days that I've carried with me, that were 'special make-up' as we call them. Madden, Halo, another Madden one.
Do they work?
Peter Moore: Oh yeah - there's no red rings of death here.
[Eurogamer laughs]
Peter Moore: They're special. This is a Madden 20-year anniversary, and then this is signed by the Bungie team. And then this is Drew Brees, which means nothing to you, but he was the quarterback of the New Orleans Saints. So we would do these special make-up consoles because the design of the console was conducive to doing interesting things and limited edition-type things. So I have carried these around wherever I've lived around the world for 18 years, and they're still special to me.
So take us back a little bit. We're jumping back in time to 2003 and you're about to join Xbox. When does this plan begin? What's the deal, who starts it, what happens?
Peter Moore: So in late-2002, at the back-end of my Sega career, it was difficult, because as you know, the Dreamcast got off to a tremendous start and really blazed the trail for online gaming - the first online console. But in the teeth of the launch of PlayStation 2, and everything Sony could do financially that Sega couldn't do, it became very difficult. And we were very much focused initially on dial-up, albeit the Dreamcast did get a broadband adapter, if you recall. But we were in the eye of the storm of the PlayStation 2 launch, so unfortunately, we had to get out of the hardware business and move to be a third-party software business. Really long story really short: this was not a very easy and smooth transition for a company that built its business on hardware in the arcades, and obviously the Genesis [Mega Drive] and the Sega Saturn and, of course, the Dreamcast. So it was traumatic. It was difficult.
And during that transition, my job as president of Sega America was to start to move the company, build relationships with our former foes, and start to figure out how we could be - which they are, still to this day - an effective, powerful, maybe profitable, third-party publisher. And one of those companies that came a little bit to our rescue, to help us - who enjoyed having Sega in the industry - was Microsoft. So my to-be boss, Robbie Bach, I already had a good relationship with. You may recall that the Dreamcast was built on a Windows CE operating system, so that kind of Microsoft-Sega relationship was already there.
"I get a call to pop up to Seattle, very quietly - I'm still a Sega employee - and meet with Steve Ballmer"
If we go into January of 2003, I get a call to pop up to Seattle, very quietly - I'm still a Sega employee - and meet with Steve Ballmer, and have lunch with Steve and talk about the industry. And I did, and pretty quickly, they asked me to join and so I bid a tearful farewell to Sega and to the Bay Area, and moved with my family up to Seattle, and quickly got immersed into the Microsoft Borg - the master machine that was Microsoft - and started work on this thing codenamed Xenon.
How much did you know about Microsoft's gaming plans when you were secretly talking to Steve Ballmer - did you know there was a new Xbox in development?
Peter Moore: Well the industry is a leaky ship. The original Xbox was still being sold. It was a kind of 'shot across the bow' type console - not a fully fledged 'let's get in, let's get after it' [machine], because it wasn't suited to where the future was going. But again, long story short, Microsoft needed to get into the living room. Microsoft, and in particular Bill [Gates], who I had the privilege of spending quality time with, was afraid that Sony was going to own the living room. It seems a little daft now but in those days televisions, Blu-ray players coming down the pike, music players... Sony was firmly entrenched as an entertainment company and entertainment hub in the living room. And what Bill and the Microsoft core executive team were afraid of was that Microsoft would simply be relegated to the desktop and to the office and be seen as a productivity company.
It felt like there was a broader play that the internet was going to bring tens, if not hundreds of millions, of people together, and that, in tandem with the hardware, was what became Xbox Live. That was a very important part of the strategy, which was not only to create hardware and games, but also to create, on the back of faster broadband speeds, bigger memories - Moore's Law kicking in; all of that stuff during that early 2000s - it's very clear that gaming, overall, was going to be the tip of the spear of how people come together. This is well before social networks. You can look back on those days and Xbox Live, in particular, brought people together on a global basis, well before the Facebooks and the Twitters and the Instagrams and the Twitches of this world. So that was going to be our goal.
We needed to build a complete platform, not just a piece of hardware, and that excited me. And I was brought in; I was a little different, because they needed "people like me".
What does that mean, people like you?
Peter Moore: That means that I'm not... Look, I'm not a self-described nerd. And Microsoft was very much a company that was seen as guys with pocket protectors and thick glasses, so we needed to bring in different people that could stand on stage and throw punches at Sony and be a little bit more aggressive in a different way, and had experience of taking on the PlayStation, which I did, obviously, during my Sega days. So I was not the stereotypical quintessential Microsoft employee. I was brought in to create strategy, lead on stage from the front, be a little irreverent, maybe get a tattoo or two-
"Microsoft was very much a company that was seen as guys with pocket protectors and thick glasses"
[Eurogamer laughs]
Peter Moore: This was a different time for the industry, and this was the industry coming of age, and this was an industry fully embracing the internet, and we wanted to be front and centre with that. And we felt that with our technical knowhow and our software knowhow, that all of a sudden we could be in an advantageous position versus Sony and Nintendo, and whomever else wanted to get in there. And of course we'd been at the forefront of PC gaming for a long, long time. We cut our teeth on the PC. So all of this was coming together; but it was coming together, it wasn't together. I was brought in to be part of a very talented team and, like I say, to start throwing punches.
Those punches: we talk about this fight between Sony and Microsoft a lot, and the sense of rivalry between the companies. But what's it actually like on the inside? Is it a palpable thing? Was there a fierce sense of rivalry there?
Peter Moore: I come from the sneaker wars, as we call it here in America, of Reebok versus Nike where you go head to head because market share is critical. There's only 100 percent market share and so the fight you have is to win hearts and minds. And it's a battlefield. There's no two ways about it. And this became the console wars, where we, Microsoft, were coming from a position of newcomer and nerdy and not an entertainment brand, and we needed to build a separate brand called Xbox that would not only make hardware but software and services. And it was also at a time when SaaS, software as a service, all of a sudden was something that we were looking at in gaming where we felt that we could not only sell you a game and come back the next year and sell you another game, but create a 365-day-a-year experience and relationship with you. And that was something that Microsoft knew how to do well.
It was my job to be part of a very talented team. We had our own campus well away from the main Microsoft campus, and we set about building not only hardware but first-party games; building relationships with third parties; peripherals. All of the things you need to do. But perhaps most importantly Xbox Live, which was going to be the way that we would bring this community together. I think it was the precursor to any of the current social networks where all of a sudden, it's no longer boys in their bedrooms, it's no longer you with your mate playing co-op, or even LAN parties in college campuses. This was going to be you and millions of people around the world all coming together, congregating around a singular game that you all loved, and you either cooperated or you competed. That was the dream. And I'm proud to sit here 18 years later and say we were at the forefront of that and rocked PlayStation with the PlayStation Network - we rocked them a little bit.
We were confident enough with the quality of the experience we were going to charge for it when our competitors were free, and that's always a challenge: how do you compete with free? Well, you do it with quality, and the Xbox Live played into the skillsets and expertise of Microsoft in back-end infrastructure. And look, it was never easy, but being able to connect millions of people - what the company was already doing - using the internet as that platform. I can look back, as can anybody on that team during that time 22 years ago, that we had a dream, we had a North Star, we had a strategy, and we put it into play. We executed. And I think we succeeded.
How much of the Xbox 360 plan was already in place when you joined Microsoft versus how much was left to do?
Peter Moore: The initial strategy was in place. When I arrived, we were still selling the old Xbox, and in the end, we had to put that to bed because it was just haemorrhaging cash. You're still losing money selling hardware and your attach rate of software was insufficient to justify it. It also allowed us to focus. And there was a time during that period, let's call it, I think, 2004, where we were kind of out of the business. We had sunsetted the original Xbox, we were yet to launch the console soon to be called Xbox 360, so there was a ton to be done. We needed to build the interface for Xbox Live and we needed to start to build ourselves as an entertainment brand, rather than just Microsoft's version of a video game console. Xbox had to stand alone.
"There's only 100 percent market share and so the fight you have is to win hearts and minds. And it's a battlefield"
We certainly needed the resources of Microsoft but the goal was to build this standalone brand. Not be ashamed of being part of Microsoft but if you look at the packaging, and you look at our marketing and everything we were doing during that time: sure, if you looked hard, "Microsoft" was there, but it was really building a brand that would be sustainable for decades to come. And as we sit here today, in 2025, we did.
How much of the Xbox 360 form-factor and the mechanical machine was made? Was that already set in place?
Peter Moore: Not really. One of the things that was key is that we needed to build something that was more than just a piece of hardware you popped a disc in and played games on. Gamers would be critical at the time, and maybe still, but we were building an entertainment hub. There are no two ways about it. So the industrial design needed to shriek of sleek and it needed to be in the living room. A sleek entertainment device rather than hardcore gaming console.
And look, gamers didn't like the fact that everything we did was not only- yes it was playing games but you could play movies and listen to music and Xbox Live Arcade and obviously Xbox Live. And it truly became something that mom would allow in the living room. That was an interesting little bit of a strategy we had: what can we create that looks good next to the television? That could compete with the industrial design of what I think we knew was coming with the PlayStation 3 - that could compete with Sony on industrial design? And that's what you've got. You got this concave faceplate, also having a detachable faceplate that you could replace and put something either customised or personalised, which gamers loved. And it was just coming into this world of personalisation. So all of that came into play. It needed to be sleek. It needed to be vertical and horizontal, interestingly, and it also needed to be not out of place next to any other consumer electronics device in the living room, next to the television.
I'm probably biased because I'm fond of the machine but I do think it's one of the nicest-looking consoles we've had. Famously, the 360 also released well before the PS3 - how important was it to be first to market?
Peter Moore: It was really important. We felt that we needed to get ahead. I had done some rudimentary math in my head and looked back at the history of console sales, and said first to 10 million wins. And by that, I meant the first [console] that gets an installed base of 10 million. You've got this flywheel effect - what was known then as the network effect - of your mate in the school yard's got one, you better get one. They're playing a game like Halo and you're not, because you don't have an Xbox 360. So you create this network effect that all of a sudden you're out of place and you're on the outside if you're not coming to school, or going to class in college the next day, or even coming to work, and saying what a night we had playing Halo, or whatever game it happened to be.
That was going to be key, getting out there first, installing a base, proving to at that time retail that we could deliver, and deliver in quantity, and continue to deliver. And it also allowed us to do a lot of exploratory work and AB testing and understanding what we needed to build in Xbox Live, which became, if you will, that Trojan horse that we needed to get people in there. All of that was important so we could get it out in November, knowing that PlayStation were going to push it out before the end of their fiscal year for a lot of financial reasons. And we also felt we needed to be price competitive, and we clearly were. So yeah, I think it was really important to get it out first - get going, get momentum, and aim for that 10 million installed base that I felt that would give us an amazing advantage over whatever Sony could do to catch up.
Like many people, I've never been inside a console-maker in the lead-up to a new machine's launch, so what's that moment like on the inside? Every day, the clock is ticking, and if you delay at all, you eat into that head start. What's the atmosphere like?
Peter Moore: Well, the atmosphere I would describe as both electric and tense, in that the pressure's on, you're making a multi-billion dollar bet, and you're the challenger brand, you know? For me that was always great, because you can do things as a challenger - you can be irreverent, you can do things differently. I loved being the challenger brand at Sega. Even at Reebok, I liked being the challenger brand.
"The pressure's on, you're making a multi-billion dollar bet, and you're the challenger brand"
Did it feel similar to making Xbox 360 at Microsoft as it did to making Dreamcast at Sega?
Peter Moore: No. No. The one thing that was really motivating, relieving, and scintillatingly... We owned our own decisions [at Xbox]. At Sega, I was a subsidiary of a Japanese company in Tokyo, but at Microsoft, it was us. There was only one person to point to and that was us. There was Bill and Steve and the board of directors, and the executive team trusted us to take the resources that they were providing and to deploy them well. That was the huge difference. We didn't have to wait till they got out of bed in Tokyo to get a decision, or try to work hard to get information out of them on what exactly was going on, and that was the case at Sega, very much so. You've got the developers running the show there; as I call them in my book, they're the prima donnas a little bit, because they're rock stars in Japan. That was not the case at Microsoft.
It was a question of us all pulling together, all rowing in the same direction. Dozens of decisions being made every day - getting the marketing right, the positioning right, obviously the hardware right, making sure that we were building out a robust platform for Xbox Live. Spending a ton of time traveling the world, talking to third-party publishers, doing deals with third-party publishers.
And how did those third-party conversations go? Because as you said, you were the challenger brand. I imagine if Sony walked into a boardroom it was like, Okay, you're PlayStation - what would you like? But what did you have to do to convince people to back Xbox?
Peter Moore: Well, money talks and bullshit walks-
[Eurogamer laughs]
Peter Moore: That was certainly the case where you're putting in seed money, right? No two ways about it. You're going in, you're working with publishers, and in some instances they would let you sit down with the head of development or with the studios, and say, Okay, this is what we're looking for and this is what we're willing to finance and fund. Because look, I get it, we're not the leader and we've got to help you. Here's your software development kits, here's where I think your game would be brilliantly positioned in relation to what we think the demographic of the platform is going to be. And we're going to help you by writing cheques to support your development costs. And we hope that your sell-through on your game will be sufficient that you will come back and you will make a second game and a third game and a fourth game. And obviously that worked.
You absolutely have the ability to invest in a Konami or a Namco, or whomever it needed to be - a Bizarre Creations for Project Gotham Racing. All of that. Or Lionhead for Fable. So you do that, and it's a bet, and you're placing a bet on that developer and publisher, and if it pays off, you're not continually writing cheques after that because they're making money. And our job is to get an installed base where they can build a strong attach-rate that they're very happy with, and that's exactly what happened.
Part two of the Peter Moore interview will be published tomorrow.