Ed Fries, one of the original team members at Microsoft that co-created the Xbox, shared his behind-the-scenes stories from his time at the tech giant as part of a celebration of the Xbox project’s 20th anniversary.
Fries spoke at the WN Conference in Seattle last week as part of a discussion hosted by Venturebeat’s Dean Takahashi, author of the 2002 non-fiction book Opening the Xbox. In an hour-long conversation with Takahashi, Fries talked about the Xbox console, its development, his personal history with it, and his current business, a venture capital fund that specifically invests in up-and-coming game developers.
Fries came up through Microsoft in the ’80s, after the video game crash of 1983 forced him, as he put it onstage, to “get a real job” instead of pursuing game design. He worked his way up at Microsoft as a young programmer, working on Excel and Word before taking over Microsoft’s then-nascent games division in 1995, a move that multiple Microsoft vice presidents told him was “career suicide.”
After scoring a hit for the company with the original 1997 Age of Empires, Fries was still the lead at the games division when a group of what he called “evangelists,” including Seamus Blackley, met with him to pitch the project that ended up becoming the original Xbox. That put Fries in the position of leading the Xbox team, from the project getting approved on Valentine’s Day of 2000 up to its launch on Nov. 15, 2001.
Fries later left Microsoft in 2004, after shipping dozens of games and playing a role in Microsoft’s acquisitions of Rare (Battletoads), the now-defunct Lionhead Studios (Fable), and Bungie (Halo). He subsequently raised two sons, founded a company called Figure Prints that specializes in creating models of customers’ World of Warcraft characters, and currently works as a general partner at 1UP Ventures.
Some of the fun facts to know and tell about the Xbox that Fries shared during the chat include:
- Microsoft’s early attempts to break further into the video game industry included failed attempts to buy Electronic Arts (Madden, Apex Legends) and Westwood Studios (Command & Conquer) in the ’90s.
- The Xbox project was so expensive at its outset that an unnamed Microsoft VIP left the company rather than deal with it, telling Fries that “I like to work on businesses that make money.”
- At the same time, however, Microsoft was pulling in so much revenue on both Office and Windows that the expenses for creating the Xbox still weren’t big enough to affect the company’s overall bottom line. In terms of growing Microsoft’s business, “Almost nothing else we could propose made sense to do,” said Fries, noting that at the same time, Sony’s relatively new PlayStation had risen to provide 40% of the company’s profit. “If we won, it was going to be worthwhile.”
- The original Xbox team was described by Fries as a group of PC developers trying to understand the console market, which was effectively ruled by Japanese studios at the time. The question among the original Xbox team was whether it could effectively bring some of the then-current developments in PC gaming, such as multiplayer first-person shooters, to the console space. That debate was settled, according to Fries, when the Xbox launched; “Halo took off, and [notoriously weird platformer and Xbox exclusive] Oddworld: Munch’s Oddysee did not.”
- The Xbox project was a money sink on both the hardware and software sides, with Fries estimating it lost $1 billion per year for Microsoft until he left the company. Considering the current revenue that the Xbox brings in for Microsoft, however, Fries calls it “a bet that was worth making.”
- Steve Ballmer was so excited about Xbox Live that, in 2003 in a meeting with Fries and Xbox newcomer Peter Moore, he punctuated his sentences by pounding on the table in the conference room. This led to Ballmer accidentally destroying the meeting room’s speakerphone.
- The biggest mistake with the original Xbox, as per Fries, was that the hardware “was not at all designed to be cost-reducible.” Unlike Sony and Nintendo, who owned the IP to their console hardware, Microsoft had designed the Xbox to use parts from both Intel and Nvidia. The Xbox also, unlike its competition, contained an internal hard drive that couldn’t conveniently be shrunken down.
- As a result, while Sony was able to repeatedly redesign the PlayStation 2 into smaller “slimline” models as its hardware got cheaper, there was effectively no way for Microsoft to do the same thing. This is what led to the first Xbox’s relatively short life cycle, with its successor the Xbox 360 launching a scant four years later.
- One of the factors that led to Microsoft losing money on the Xbox’s software was that, at the time, first-party exclusives like Halo were limited to only being sold on Microsoft’s own console. “If they really wanted me to make the business profitable,” Fries said, “I would put out a PlayStation version of Halo. It’d be profitable tomorrow.” This mirrors Microsoft’s current strategy with the Xbox Series X|S, which has almost no traditional exclusives.
- Microsoft has filmed a documentary about the start of the Xbox, a process Fries called “the train to hell,” which was announced at its own anniversary celebration on Nov. 15. Power On: The Story of Xbox is planned to debut on IMDB TV, YouTube, and other streaming networks on Dec. 13, with commentary from Fries.
The WN Conference is a business-to-business and networking event for the international games industry, hosted by a Russia-based events company of the same name. Before 2020, it was typically held three times a year in Moscow, St. Petersburg, and assorted cities in Europe. Its 2021 show in Seattle, at the Washington State Convention Center, is WN’s first conference in the US.
The event was previously known as the White Nights Conference, which references the period of time during summer in St. Petersburg when, due to how far north the city is, the sun never quite goes down. When the COVID-19 pandemic struck, its events team moved the conference online and shortened its name to simply WN, which informally now stands for “Worldwide Networking.”