INTERVIEW: The X Men

What has been the key to your recent success in Europe?
CL: EMEA remains our most critical worldwide geography to achieve the global success we want. We’ve made heavy investments in terms of people and marketing in the region.

We’ve put a lot more weight behind our media – our fingerprints are far more noticeable and impactful. We’re at a price point that is uniquely placed – not least of which because we’re in somewhat of a challenging economic time. Ever since we dropped the price seven weeks ago, we’ve outstripped PS3 on a weekly run rate in all the territories we care about in EMEA – specifically the UK, France, Germany, Spain and Russia.

DG: When I was brought on board eight months ago, it was really clear what our challenge was. The performance in that time – certainly the last six weeks – has shown people the true capability of what Xbox can do in the region. And not only do in one country, but in a number of countries. We’re in a position now where we’ve sold over seven million consoles in EMEA, which puts us in a fantastic place versus PlayStation 3. It provides a platform for us going forward to continue to invest.

How much cash have you spent on Q4 marketing?
DG: More than we’ve ever invested before – almost to the degree that we would launch a new console. We’re talking many of hundreds of millions of dollars across the region, to get the brands out there. From a strategic standpoint, we’ve broadened.

We’ve not forgotten about the core, with the likes of Gears II and Fable II, but we’ve become incredibly relevant and salient with the family, female marketplace. Then there’s Live, which has generated over a million dollars – and that’s before we make it more fun, social and broader with NXE this month.

It’s the combination of elements that put us in a fantastically strong position. We have 360 degrees of entertainment. We’ve got real momentum. We’ve got real traction in all European markets, we’re beating PS3 with a significant margin and will continue to invest to ensure that continues. When you look at what we’ve got coming, just in the next three or four weeks, that gives us the confidence that this will be the best ever Christmas in the history of Xbox.

CL: We’ve already surpassed the installed base of the original Xbox – a significant milestone. Online was always at the core of our business, but even we’ve been blown away by the appetite of people to consumer digital entertainment experiences.

What would you say to retailers who might be concerned your recent success will be short-lived?
CL: One of the things we will admit is that our marketing in the past has been a little sporadic. It’s been good, but there’s been peaks and troughs. It’s been lighthouse marketing: We’ve dazzled folks at the holiday or when big games get released and then we go a little bit dark.

That’s not a tolerable situation for us, nor a sustainable one in line with our ambition. Retailers want good, meaningful, sustainable coverage from Microsoft. They want early information, partnerships and joint promotional activity. All of those things will continue, but we can’t afford to go quiet after Christmas and come over all self-congratulatory.

It’s also about consistency and reliability of supply. We haven’t always been top notch on that in previous years – partly because we’ve seen demand that’s outstripped our own expectations. But this year we’ve made a very clear statement to ourselves to ensure there will be plentiful supply across our SKU line-up. This Christmas is a critical one, but we’re not just in it for Q4 2008. Our ambition is right through this generation and beyond.

DG: We’ve been very aggressive on price – and given the current economic climate that creates the perfect storm. On Arcade, we’re half the price of PS3, and we’re cheaper than Wii. It’s an opportunity for people who have never owned a console before to come in and enjoy a more enjoyable gaming experience than that would with a very basic entry level console like a Wii.

We know from our research that people buy a Wii, play it once and then put it under stairs – whereas people that buy an Xbox 360 play it consistently. When people are looking for value for money, we’re heads and shoulders above the rest.

The UK is obviously going well, but how are you doing across Europe?
CL: In Italy, we were double PS3’s sales last week. In France and Germany we are at or better than PS3 consistently now. We dominate in Russia and the Nordic countries. And in Spain – a traditional Sony stronghold – we’re now outselling PS3. It bodes incredibly well for our Christmas prospects.

DG: Spain is real a swing state. People are voting with their Euros and Pesetas to say which is the console of choice between us and PS3. But we’re just at the beginning. We have real system sellers: Gears 2, Fable II and many more. The other two platforms don’t have that. We’re going to reinforce that with Lips, with You’re In The Movies and the brilliant third-party products on a system that it’s proven to be easier to develop for than the others.

What do you make of the sheer amount of marketing the whole games industry is producing – at a time when other trades are cutting back on spending?
DG: If you look at the High Street, the shining beacons are retailers that sell games. People will always advertise what’s selling – and what’s hot with the consumer.

That’s especially true of retailers. We’re also at a stage where we have three home consoles that are performing – some better than others, as we know – but they’re all being heavily invested in. Publishers are seeing games work on three platforms, so they can spend more money on pushing them.

Speaking for us, we are investing in a way we haven’t done for some time: to drive brand awareness. We want people to say: Bloody hell, you’re everywhere. We can’t turn on the radio, TV, can’t go to the cinema or open the newspaper without seeing Xbox.”

CL: We try and hire marketers from broader industry bases now. We’ve got one from Ferrero Rocher, one from L’Oreal and more that can complement the expansion of the business. The industry has generally has come more into the light in that regard as people’s appetite for digital entertainment becomes greater.

Your logo seems to be shown after every other game advertised on TV at the moment. How much assistance are you giving third parties – and are you trying to achieve a brand association with the likes of Far Cry and Tomb Raider in the same way you did with GTA?
CL: It’s great people are seeing it that way. We’ve planned very deliberately to partner even more deeply with those organisations. We understand the criticality of those genres of experience to the platform.

We were not synonymous with GTA. But we got behind it, invested with that partner and really got fixated around clear message – and our performance versus PS3 is a good example of the success we can have by doing that. And you’re going to see us develop that content, whether it be exclusives or cross-platform.

DG: We’re investing to win in Europe. We don’t want to be a one-trick pony. Look at Nintendo’s success and it’s great – but the publishers aren’t sharing in that. We understand the eco-system.

We understand how that needs to be built – and that partnering with third parties is really important. We’ve worked unbelievably hard to partner with key publishers to get some real weight behind those titles.

It’s about credibility