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Originally published Saturday, June 9, 2012 at 8:01 PM

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Microsoft's Mehdi talks up Xbox plans

If you're looking for inflection points in Microsoft's consumer business — or at least where big deals are going down — find...

Seattle Times technology columnist

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If you're looking for inflection points in Microsoft's consumer business — or at least where big deals are going down — find Yusuf Mehdi.

Over two decades at Microsoft, the 46-year-old Mehdi rose to brigadier general in Microsoft's war on Google. He played key roles guiding strategy and deals as Microsoft invested billions overhauling its consumer online services and advertising business, culminating in the giant partnership with Yahoo.

Then Mehdi, who grew up in Bellevue and graduated of Princeton and the University of Washington, made another deal between Bing and a big consumer business that led to him being hired to lead marketing and strategy. That would be Microsoft's Interactive Entertainment division, where Mehdi began working with group President Don Mattrick to put Bing onto the Xbox. Mehdi became head of the division's strategy and marketing six months ago.

It's a busy time for Interactive Entertainment. It's been on a deal-making tear, hooking up with media companies around the world as Microsoft builds the Xbox and Xbox Live online services into entertainment hubs. Simultaneously, it's developing the next Xbox console and working on the bundle of services that will come with the Windows 8 launch, probably later this year.

Mehdi's background may help Microsoft sort out the jumble of entertainment brands and services offered by different parts of the company. It's trying to turn Xbox Live into a universal media service, connecting all sorts of devices to music, video and games.

At the same time, Microsoft is tinkering with new pricing models, offering $99 bundles with two-year subscriptions to Xbox Live, and introducing a new "SmartGlass" technology to extend Xbox entertainment services to phones, tablets and PCs.

During an interview in Microsoft's sprawling, two-story booth at the Electronic Entertainment Expo [E3] last week, Mehdi discussed his new role and where Xbox is heading with new services and entertainment content. Here are edited excerpts of the conversation.

Q: You're here [at E3] to turn up the emphasis on services on the Xbox?

A: That's right. Don [Mattrick] and I joke the recruitment process actually started a year and a half ago when I was on Bing and he and I got together to basically get Bing on Xbox.

Q: Does your arrival on the Xbox team mean more ads and market development; that it's time to start squeezing the platform a bit?

A: It's a little mix of both. Part of it was just more natural progression of jobs and working together. But part of it was, "Hey, this is a good time because Xbox is transitioning from a gaming console for hard-core gamers to more of a broad entertainment platform where service and multidevice [support] and media become front and center."

Q: Do you still have a foot in the online services side?

A: I have an emotional attachment to all that work for 10 years ... but I'm fully here with Xbox.

Q: When we hear about new services on Xbox, are they because you're maximizing the 360 during the last phase of its life cycle, or are they a foundation for the console's next generation?

A: It's actually a bit of both. Some of this is "plan-full" and some it was actually serendipitous. It was "plan-full" that we said we want to broaden the value of the Xbox. Our mission is: Let's make the entertainment you love more amazing ... using our Kinect and our interactivity to make that come alive. ...

Some of it was serendipitous in the sense that, as we started making that happen ... , we released a bunch of applications for this latest release of Xbox software and the usage has just skyrocketed. We're up to 84 hours a month for an Xbox Live gold user in the U.S. using the service.

The killer thing was in that period, more minutes were spent on nongaming than gaming, which has got to blow your mind. The reason Xbox Live is such a hit is multiplayer gaming for games like "Halo" and "Call of Duty." To have the [game] minutes passed shows you the interest level people have ... to use it as an entertainment device in the living room.

That told us we can really broaden the current platform.

But you're right. It teases up for how we want to go forward.

Q: With SmartGlass connecting different devices to Xbox Live, it seems like you're trying to make Xbox Live a sort of über consumer cloud service.

A: There's two concepts. Xbox as a service is going to become the premium entertainment service for all consumers across all devices for entertainment. When we talk entertainment we mean specifically games, movies, television and music. ... We want to bring them to all of your devices and we want to move more of that as a cloud.

SmartGlass is a technology and an application platform that will unleash a whole new round of content creation you haven't seen before.

Today people create for the television for one screen, but you have all these devices [phones and tablets] within reach.

You can now create experiences if you're a game developer or a movie producer or a TV producer to have richer interactivity.

Q: It sounds like Xbox Live will be a cloud for nonowned content, like movies you stream, as opposed to music tracks and photos you own and want to store online.

A: There are two different things that will go on. Windows is building a different set of services and experiences to do what you just said — roam your files, roam your settings.

Xbox Live is how we will run the entertainment service. Some of that you will own — say, the music in your playlist. Some of it will come from content providers.

Q: You said the new Xbox Music service will have 30 million tracks. Are those tracks for sale or to stream, for a monthly fee?

A: What we have today is a download-to-own and a subscription product, Zune. Xbox Music will be a superset of Zune. We're going to take all of that good work, broaden out, and then enhance it with the ability to personalize.

There will be some great social things and a number of other things we're holding back.

Q: It sounds like you're also sorting out the different music services and brands at Microsoft, including the Xbox Music service and the "Music" app on Windows 8. Should we think of them as the same thing?

A: Yes, this announcement of Xbox Music is very significant in a couple of ways. We had done Zune. It's actually a very good product. The problem is, we originally did it for one hardware product.

Now it works great on our phone, but our phone hasn't got as much volume yet so it's not mainstream. But the actual software, the music library, the capabilities, the music licenses, are all quite strong.

So part of what we're doing now with this announcement is saying we are going broad now. It will go on tablets and phones and your Xbox.

The second part is we are going to clean up the branding and really invest behind Xbox Music. So Zune will morph into Xbox Music.

The third thing is that Xbox Music will come to the tablet so when you come and play any piece of music on Windows 8, the Xbox Music app will be the experience to do that.

Q: Are the services you're announcing enough to get another holiday season of growth for the platform? You don't have the Kinect launch or new hardware, so how can you get the same numbers this holiday?

A: We're pretty optimistic because of the value of what we're shipping. This year probably is one of the best years ever for Xbox 360 functionality upgrade.

No. 1, you have the best lineup of games ever ... that's going to drive a lot of volume this holiday.

The second thing is all this entertainment value we're bringing, in addition to doubling the number of entertainment content providers. ...

And, finally, the SmartGlass, which makes the experience a lot richer.

Is that enough value to go through and tell people to buy another Xbox if you haven't or upgrade your old one? Absolutely. A ton of value — we're doing some smart things with price points and I believe it can grow quite a bit.

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com.

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