Microsoft's Future Begins Now: Shane Kim Speaks

Many judged Microsoft's press conference to be the triumph of E3 -- with a slick television-oriented presentation that showcased promising games and appealing new tech. Of course, the most talked-about part of the conference was the public debut of the company's Project Natal, its wand-free, camera-based motion control peripheral.

Shane Kim, Microsoft's corporate VP of strategy and business development for its interactive entertainment business, spoke with Gamasutra at the show on how he sees Project Natal as a relaunch for the Xbox 360 console -- and the challenges of attracting new consumers to the fold is not lost on him. After all, the company called its New Xbox Experience, which drastically changed the system's interface, a relaunch too.

But it's not just about Natal, of course. Microsoft's strategy also, much more quietly, grows in the form of Joy Ride, the first free-to-play, pay-for-items console game to be launched in the West.

Navigating from its current market -- where success is built upon a sea of hardcore gamers -- toward a future of growth for the platform is difficult. It's hinged on opening it up with software approaches and peripherals both, and here Kim offers his take on how Microsoft will handle that change.

Brandon Sheffield: What do you think of the Sony motion control offering? What's your opinion?

SK: Well, you know, obviously they haven't shared too much information with us yet, but Project Natal isn't about Sony or Nintendo. It goes well beyond anything either of them is doing. If we had created a physical motion controller, I think it would have been easy to question our approach and say, "Okay, are you guys just being derivative of what Nintendo's doing with Wii."

Project Natal goes well beyond that. It's full body gesture, full scale tracking, 3D depth sensors so you move around in space, facial recognition, voice recognition -- I mean, it's much more complex hardware and software behind it.

So, you know, it's really not about what those guys are doing, but for us, we really focus on, "How do we break down the barriers that prevent people from enjoying all the great stuff that we have to offer?" Not only on Xbox 360 and Xbox Live, but from the industry as a whole. So, this isn't about how do we get more casual players; it's how do we get more people just to participate in everything we do.

BS: One thing about Natal that's been interesting to hear people talk about is -- some people, mostly perhaps enthusiast press, are saying things like, "Well, how would you do a first-person shooter on it? It would just look stupid." But maybe the point is that you're not supposed to make a first-person shooter for that; you can just use a controller for that.

SK: Yeah. I don't want to rule anything out, Brandon, because I think there are people out there who will figure out, I mean, much the same way that people said, "Hey, there will never be great first-person shooters on the console period," right?

BS: Right.

SK: That's not the case anymore. So, I always believe in the power of creators to adapt and adopt new technology in creative experiences we haven't thought about. I do think they will be able to enhance core game functionality, and there will be people who figure out how to create great core games with Natal, but I do think we're going to create experiences and games that haven't been imagined before, that haven't been possible before.

BS: I'm definitely curious to know how much of what was shown in the video of Natal before the actual live demo, what percentage of that is real, and what percentage of that is concepts of things you would like to happen.

SK: Well, you know, I actually don't know the specific answer. I think a lot of it conceptual, what we hope to be real, right, at launch?

BS: Yeah.

SK: It was all not about gaming either, right?

BS: Right.

SK: You've got your friends there, and you're dressing your avatar... that's a completely plausible scenario, right? Will that be real, actually -- will someone do that when we launch? We'll see. But the ability to digitize objects? That's the kind of stuff that we absolutely expect to be real.

BS: It seems like with this skateboard-scanning scenario, that's some hardcore technology to be able to do that and extract a background and actually make skateboard scanning. That was one that stuck out for me, like, "That one would be tough."

SK: It's like Milo -- I mean, the piece of paper with the drawing.

BS: Right, that's true.

SK: That would be scanned in, too. So, look, I agree that those are the tough challenges that we have to solve, but that's why the power of Natal is not about the hardware. The power is actually in the software. That's where the magic happens.

BS: Yeah, I'm really curious to see how that Milo thing goes, considering -- I mean, you obviously can't have thousands of different ways of saying every name that exists.

SK: It will take time to build the vocabulary, you know, right? And so forth. But the promise is there, absolutely. The promise is there.

BS: I definitely think it's an intriguing device. I was doing an interview recently with Jenova Chen from thatgamecompany. You know, they do flOw and Flower and all that. And basically, he was talking about how he envisions that in the future, you won't actually need a controller to play games, and you'll be able to have facial recognition, and your friends will see you moving as you would move, and then a couple weeks later, there's this. It's kind of interesting. I wonder what someone like Chen would be able to do with it.

SK: Well, it would be a great follow-up thing to, you know, go back to him now and say, "Okay, you've seen the Natal stuff. What do you think?"

BS: One thing that I found funny from Sony's press conference was the claim of Final Fantasy XIV being a PS3 exclusive when it's also showing up on a Microsoft platform, PC. [laughs] What is the importance of an exclusive nowadays? Does that even matter anymore?

SK: Well, I still think exclusive content is really important. First of all, in games, we've said for a long time that a key part of our strategy with Xbox 360 was a level third-party playing field. Now we've effectively done that with Metal Gear Solid coming to the Xbox 360.

The economics are such that third parties also have to support multiple platforms, and you can't ignore Xbox 360. It's the second leading platform. It's too much of a business-driver to just be focused on a single platform if you're not a first party. So, it's up to the first parties to deliver the bulk of the exclusive game content.

Now, we're having success with third parties because we can still get exclusive downloadable content, because of the service we've built with Live and the business we've been able to generate for third-party publishers there. But I also think we have to broaden our definition of exclusive content, now. It has to include things like Xbox Live, because I do think Xbox Live is a real competitive differentiator for us.

And now Project Natal is going to be an exclusive thing, too. And so, we feel good about how that's shaping up, but it's really not about relying on third parties, because I don't think that that is sustainable, as we've proven. And it's up to each of us to differentiate on our own.

Kris Graft: If I could jump in before we get totally off Project Natal -- what is the third-party publishers' reaction been to it? A lot of them probably just officially found out about it this week, right?

SK: That's not true. Actually, we took it on the road a couple months ago to show our third-party partners.

KG: Okay. So, how's the reaction, then?

SK: They've been super positive. And that was important for us, because that was the first time we disclosed it publicly, if you will, to people outside of Microsoft. You know, when you're so close to it, you sometimes don't know how great it is or isn't.

And we all thought we had some magic on our hands here, but it wasn't until we went on the road to show third parties -- and we showed people outside of the industry, which is how Steven Spielberg got involved in it as well -- and they validated sort of that Spider Sense that we had about what we potentially could create with Project Natal.

In this week, we shipped development kits to people, so they will get their hands on those and start to imagine and design experiences that are specifically centered around Natal functionality.

KG: When you told them, like you called them up on the phone, "Hey, this is Xbox. We want to show you a new camera for games." Is there any apprehension about that or skepticism?

SK: That's not how it works.

KG: Okay. [laughs]

SK: As a platform owner -- at least what Microsoft does, I don't know about the other guys -- we have very extensive and close relationships with third parties, so we go to visit them very regularly. So, we did those in the context of one of those regular road trips.

So, it wasn't like, "Hey, we've got something new to show you." But as part of those visits -- it was to an exclusive group, you have to keep in mind, because we were trying to keep this under wraps as much as possible, and I think we did a pretty good job of that -- we showed them in the context of that. It wasn't like, "Hey," we chatted on the phone, "Guess what, John Riccitiello? We've got this cool..." you know.

BS: Natal is obviously a much more inclusive type of environment for players. How do you foresee Microsoft as a company trying to attract people to it? Is the scenario: the box is in the home on the back of the hardcore kid who bought it, and now the mom is going to be interested in it? How do you see yourselves pushing that forward?

SK: All of the above. I do think that today, obviously, given the core gaming base that we have -- we have 30 million Xbox 360s out there today -- we've already seen this with NXE and Netflix, that there's greater usage in existing Xbox 360 homes. Do I think it's helping sell Xbox 360 more people? Absolutely.

But where we're seeing a lot of benefit is in those existing homes, where we're getting great usage, and I do think that's part of the reason why our Live membership has grown so much now to 20 million members.

In the future, as we continue to add more content, we expand the social networking integration, and create gaming experiences like Natal -- based on Natal for a broader audience -- I think you're going to see Xbox 360 become much more appealing to a much wider fan base.

BS: The social networking and the accessibility, it strikes me more as something that would support people that came to the console that were more casual -- rather than drawing them in, necessarily.

SK: That's right. You know, I'd love for this to be the case, that people went out and bought a 360 and said, "I did it specifically because I want to have the Facebook experience on my television instead of on my computer." But the more that we add functionality like Last.fm, like instant-on 1080p HD, and so on and so forth, I think it really starts to make those kind of scenarios more realistic.

You look at what we're doing in the UK with SkyTV. With Sky, we're delivering live television programming now over Xbox Live, something we don't do in the U.S. today. That's again another compelling reason why you might go out and buy an Xbox 360 even if you're not a core gamer.

BS: Will Natal be usable on arcade consoles that don't have a hard drive?

SK: Yeah, I believe that.

KG: How far off is it? I'm sure there's no specific date, but you're showing it here, so?

SK: No. There's no specific date. It's not in 2009, but we have delivered development kits this week, so it's more real than not. That was not concept technology. That's real technology. We wouldn't be able to send dev kits for partners if there wasn't anything to start building off.

So, there's still a lot of work for us. There's no question about that. We feel really good about the progress that we've made. We've been working on it for quite some time. Now was the right time to unveil it to everybody, and I think the reaction that we received validates that decision.

KG: How does the marketing shift? It seems like it's going to aggressively evolve once Natal changes the situation. You and I have talked about going after casuals before -- but this goes way beyond just launching Banjo-Kazooie.

SK: Oh yeah. It's going to be the launch of Xbox 360.

KG: It's going to be like a relaunch?

SK: Absolutely. It will be that big. Now, the good news is that it's not a new hardware architecture; we're not forcing customers to have to go buy a new console because it will work with every existing Xbox 360 out there. But in terms of its importance and scale of what we're talking about, yeah, absolutely, it will be like the launch of a new Xbox.

BS: How precise can it actually be? Because I know that even on the game development side, the cameras that can do motion capture of live actors that don't have nodes all over their body -- that's still very much in a developing stage. So to premier this at a consumer level seems like you may have to sacrifice some precision to get it out there.

SK: It's amazing fidelity that we already have. Hopefully, you got a sense of that up on the stage. I mean, with Ricochet, Abby doing the Ricochet demo. I mean, her avatar is responding with very little to no latency, right? And you're able to play that... That's a game that even I can do, get in there any enjoy right away. We should try to let you guys get some hands on with Natal as possible, but you'll see for yourself that it's very, very real.

Again, it would be easier if we were just talking about two points of motion, but we're doing full-body, full-scale tracking. And the power of the software that goes behind that, you're absolutely right to point out that it's a challenge, but that's the advantage we have as a software company.

KG: I heard that you guys are demoing Burnout Paradise with it.

SK: We have that hooked up, and I think that that's part of what we have here. By the way, Kris, that was the first time I interacted with Natal. And, you know, for me, driving that game was as natural as using a steering wheel or a controller.

KG: So it drove like an invisible car, right? [laughs]

SK: I tell you what, it's less intimidating for some people to be out there like this than holding a controller in their hands, too.

KG: Sometimes, I don't buy that people are just incredibly intimidated by controllers. I mean, obviously, it's more accessible to punch, and stuff like that.

SK: No, but this is more than just motion control, too; it's voice. So, it's very natural... It's obviously pretty natural to speak, to speak commands, and things like that, to have a larger vocabulary than just be limited to... You know, remember Mass Effect, right? People thought the dialogue system there was pretty incredible. We just expanded it, we simplified it, and it was pretty incredible.

But this goes well behind that, where you're having a natural language conversation with a character or giving commands to something, speaking to a pet, you know, right? It's not just about the motions -- because I do think that that's a big deal, especially the fact that we can track the entire body. But the fact that now I can go in, and it will recognize who I am, and I can speak; that's as natural as it gets.

KG: Did that voice recognition tech, that didn't come as part of the claimed 3DV acquisition, right? That's separate, internal...

SK: You know, again, being part of Microsoft is a big competitive advantage for us, because we can take advantage of all that R&D work that's happening at other parts of the company, including Microsoft Research. We've had a long-standing focus on natural user interface, including voice recognition, so, yeah, we get to integrate all of that stuff and take advantage of it. That's why we can get further ahead faster.

BS: How's it going to deal with multiple bodies? Because that's really tough.

SK: Again, that's obviously part of the work that we still have to do, but we can already support multiple people today. That's, again, all about the software. The software, the processing software, how we can extrapolate the data, so you hand can cross in front of each other, go behind him. So, we're extrapolating your body. We know where your shoulder is, we know where your hand is, where your elbow is. That's just math.

KG: Again, back to the retrofitted Burnout Paradise, it's kind of interesting... Will third parties be able to like deliver an update through the system and, you know, make it compatible?

SK: All those details will come out, but, you know, our goal again is to make this compatible with existing 360s. Hopefully, publishers are going to look at it and decide do they want to do that, right? And enhance their core games. Or they'll use it for games going forward.

But it's a great example of just how simple it is to adapt. You know, it's not like we went into the source code. But you can adapt an existing game and make it work. It's pretty neat.

BS: It looks like you've pretty much got the first free-to-play pay-for items, microtransaction-oriented title [Joy Ride] on consoles. Obviously, this is sort of a feeling out, testing out the waters. Do you foresee more of that in the future? And will it be possible for third parties as well at this point?

SK: Sure. Sure. I sure hope so, in the same way that 1 vs 100 is completely ad-supported, right? You know, we want to create and expand the business model on Xbox 360 and Xbox Live, and having a service like Xbox Live enables us to do that.

Whether you're talking about MMOs, you're talking about downloadable episodes like Grand Theft Auto, or songs, or now items for Joy Ride or 1 vs 100, which is advertiser-supported, that's a really cool thing and the great thing about having a service like Live because it does enable us to differentiate and also diversify the business model for us and for our partners.

BS: It also could potentially allow some of the more traditionally PC-oriented companies to get into that market.

SK: Sure.

BS: For example, Nexon, Free Realms, and that kind of stuff.

SK: You know, that model obviously exists. It's not like we're inventing the model, so it's pretty prevalent in the PC world, especially in Asia. And so it would be great if those folks thought that Xbox 360 and Xbox Live was a great platform them to reach a new audience.

KG: Why would they want to do that, though -- go from using an open platform like the PC...

SK: Well, it depends, we've got access to the television here. You can have a great social experience with the television. All the things that we offer with 360 and Live. It's up to them to decide if that is worth the economic trade-off because you're right; it's not a completely open system, and it's a different development platform than the PC.

But again, people didn't think that some of these other genres were going to come over to the console, and I see no reason why -- because it's a great way to tap into most consumers, particularly because we don't necessarily have to make it one or the other, right? Anything we do on Xbox Live could be integrated with their existing MMO world stuff they've already created.

BS: Do you think that it could be possibly a way to break into the Asian markets a bit more, is that not necessarily your plan?

SK: I don't think it's just about the content there. I mean, there's a lot of different challenges and requirements in some of the Asian markets, right? I mean, China and Korea are very dominantly PC game markets.

You know, it's relatively simple to say we're going to export our hardware into a market, but the fact of the matter is you need the entire program. You have Live there, and you have to have content there.

Now, if I'm a Chinese game developer, sort of like what we were just talking about with the MMO guys, why am I going to spend the resources to develop my game now on a console that doesn't have an install base like the PC install base, particularly with internet cafes and blah blah blah? How do I sell an expensive piece of hardware in these markets? That's a very different kind of proposition.