A Week in the Fast Lane of
Interactive Entertainment

REDMOND, Wash., April 23, 2007 – Peter Moore, corporate vice president for Microsoft's Interactive Entertainment Business, had a full schedule last week. He kicked off the week with a keynote at NAB 2007, the annual conference of the National Association of Broadcasters, where he addressed how Xbox 360 is changing the way people interact with their television. Next it was off to the Computer History Museum in Silicon Valley where he addressed Microsoft’s gaming platform as having the most advanced controls in the entire interactive entertainment industry. Moore also visited the University of California, Berkeley’s Haas School of Business, where he addressed the next generation of business leaders and shared information about his own career in the video game industry. Last, he discussed video console sales data released late last week by the market research firm, NPD.

As corporate vice president of the Interactive Entertainment Business in Microsoft's Entertainment and Devices Division, Moore is responsible for leading both the Xbox and Games for Windows businesses. Moore’s team also owns driving games development at Microsoft Game Studios, as well as cultivating relationships with third-party game publishers and developers around the world.

PressPass spoke with Moore for additional background on the thoughts he shared with broadcast-industry leaders and how video gaming is reshaping the television landscape.

PressPass: Your keynote at NAB 2007 was titled “Interactive Entertainment Goes High Definition and Online…And How TV Will Never Be the Same Again.” How is Xbox 360 ushering in an era of change in the digital entertainment arena?

Peter Moore: Television has changed forever. Video game consoles are brining social networking and HD entertainment delivered over the Internet to TV for the first time. In November we launched Xbox LIVE Video Marketplace, which allows Xbox 360 owners to download hundreds of standard and high-definition, full-length TV shows and movies directly to their consoles. Partners like CBS, Warner Brothers, MTV and Paramount Pictures tell us that Xbox 360 became the #2 distributor of TV and movie content on the Internet overnight, only behind iTunes. But we’re #1 in high definition and #1 where it matters most – in the living room. On the social entertainment side, next month we’ll launch Games for Windows Live on the PC and Windows Live Messenger on Xbox 360, expanding the largest social network on television.

PressPass: Tell me about how the rise of digital downloads affects games, TV shows and movies.

Moore: Today’s customer wants a console that does it all and grows with them all the time. With Xbox 360, we’ve delivered a system that plays games in high def. It connects you to friends and HD content through Xbox Live. It plays DVD movies and digital music right out of the box. That’s just the start.

In an online world, the system evolves every day with new players, new features and new content to enjoy. It’s an incredibly dynamic world. Sometimes people want to play Halo with friends. Sometimes they only have five minutes for Pac-Man. Sometimes, they want to watch a movie in HD, or laugh to an episode of South Park or the Colbert Report. Xbox 360 seeks to serve those ever-changing entertainment moods – offering something for everyone at anytime. And digital downloads play a big part in satiating the entertainment appetites of today’s consumer.
PressPass: What is different about this wave of next-generation consoles?

Moore: Beyond realism and immersion, this generation of consoles brings more social, more personal experiences into the living room.

With Xbox LIVE we offer the largest social network connected to your TV. The Xbox LIVE community was originally built to connect people who have a love of gaming, but it has since evolved into an incredibly rich and diverse community of six million people, who can connect daily with their friends and family in ways we never expected.

Members of the Xbox LIVE community currently send more than 2 million text and voice messages a day, and will soon be able to use Instant Messenger with up to six people on their contact list at one time, while playing games, listening to music or watching movies. IM adds to the variety of options friends and families already have to communicate with on Xbox LIVE, including voice and video chat.
It’s a community that’s growing in leaps and bounds, and continues to grow at a rate faster than industry analysts predicted and that we ourselves anticipated.

What’s most remarkable about Xbox LIVE is the “stickiness” of the service, which is how we in the software and services business measure our product’s true success. Xbox LIVE, quite simply, gets used.

PressPass: Many of Xbox LIVE’s community members are in their teens. What is Microsoft doing to help ensure parents that they have control over their children’s gaming habits?

Moore: It’s our responsibility to give parents the tools and the information they need to be involved in the interactive entertainment choices of their children, and we’ve taken a leadership role in this space.

Just last October, Microsoft launched a citizenship campaign with the Boys & Girls Clubs of America and Best Buy Co. Inc. to address the concerns of parents surrounding age-appropriate content in video games. It's called “Safety is no game. Is your family set?” The campaign is a grass-roots effort to educate parents about Family Settings, the Xbox parental controls feature, as well as parental controls on the PC, and other tools they can use to help control the entertainment choices of their children. Xbox has also developed a quick, easy-to-read curriculum, called “Helping Parents Protect Kids: A Family Guide to Video Games,” to provide parents with more information about Family Settings and resources to help them make the choices that are right for their families. We’ve also created an interactive Digital IQ Quiz, a “language of video games” glossary and a video you can watch on our Web site to see just how easy it is to use Family Settings. We’re at the end of a 20-city bus tour where we’ve been talking to parents across the country about safer gaming and providing them with hands-on training for Family Settings.

PressPass: What does the "Is Your Family Set?" campaign plan to accomplish?

Moore: The campaign is designed to inform parents and caregivers about the technology, resources and information available to them to help guide their family’s interactive entertainment choices. The goal of our campaign is to provide clear and accessible information to parents and caregivers about our Family Settings technology, the Entertainment Software Rating Board (ESRB) video game ratings system and a variety of other resources.

PressPass: Xbox 360 was the first console to introduce parental controls, with Sony and Nintendo just catching up this past November. How is the competition between the next generation of consoles faring for Microsoft?

Moore: On the console competition front, NPD – a market-research firm that provides news and information for various industries, including the video game industry in the U.S. – just released its March sales numbers. We’re happy to announce that Xbox 360 sold 199K units for the month of March.

PressPass: Xbox 360 has held the industry record in software attach rate, or games sold per console, for eight months in a row. To what do you attribute this success?

Moore: Our best-in-class game portfolio is the core of why our customers are passionate about their Xbox. Xbox 360’s software-attach rate continues to outperform the competition at 5.7 games sold per console, according to NPD. This record continues to demonstrate the depth and breadth of the Xbox games portfolio.

Xbox 360 also continued to deliver four of the top 10 games for the month of March, including “Def Jam Icon,” “Guitar Hero II,” “Major League Baseball 2K7” and ”Tom Clancy’s Ghost Recon Advanced Warfighter 2.” This summer we’re looking forward to offering highly anticipated blockbusters like “Shrek the Third,” “Spider-Man 3” and “Pirates of the Caribbean: Dead Man’s Chest.”

We’re also thrilled about the early success of “Guitar Hero II,” which exploded onto the Xbox 360 platform in April, selling 291,000 units after only five days on the market; that means nearly 2,500 units per hour were rolling off the store shelves. This made it the number three top-selling game in this period across all consoles. Games like “Guitar Hero II” that were once PlayStation exclusives are now enabling consumers to have more choices when it comes to platform selection, while also broadening our portfolio of games that appeal to customers of all ages.

We will have more than 300 titles by the end of the year, so the hits just keep on coming.

PressPass: What direction is Xbox 360 heading through 2007 into 2008?

Moore: We’re right where we want to be at this stage in the game. All in all, 2007 continues to be a very exciting year for Xbox 360 as we continue to expand our library of some of the best high-definition content, and the upcoming release of the worldwide phenomenon – "Halo 3" - which is among the biggest entertainment properties in history. We’re also appealing to a broader audience by offering a deeper portfolio of games that appeal to gamers and non-gamers alike, and really get you off the couch and on your feet, like “Guitar Hero II” and favorites like “Dance Dance Revolution”.

In addition, we recently announced a new version of Xbox 360 called the Xbox 360 Elite. This console includes a 120-GB hard drive, a high-definition multimedia interface (HDMI) port, a high definition (HD) cable and a premium black finish, and comes with a wireless controller and Xbox Live headset. The Xbox 360 Elite’s larger hard drive gives the gaming community an opportunity to enjoy all that the next generation of entertainment has to offer – from video games to movies and TV shows available through Xbox LIVE Video Marketplace. Xbox 360 Elite joins the ranks of our Core and Pro offerings that provide consumers with the flexibility to purchase the version of Xbox that best fits their unique needs.

With our strong portfolio of games and industry-leading services like Xbox LIVE and Marketplace, we’re excited to say we’re still on track to hit our target of profitability in FY08.



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