 Microsoft announced the Xbox One in May with a huge focus on entertainment and apps, an additional development environment based on Windows 8 that sits next to the traditional high-powered game console. But since then, all they've really talked about is the games. We haven't seen a lot of the new dashboard, we haven't seen much of those apps, and we certainly haven't seen much more of the TV integration, which sits on top of an existing cable box, a strategy we haven't really seen since, well, the Google TV. That leaves a lot of open questions as the Xbox One moves towards launch. So we're here at Studio A on Microsoft's campus to talk to the team behind the Xbox One, see what they think of this platform, where it is now, and where it might go. Think back to 2004, we're working on 360 and it's a completely different world. No smartphones, no tablets, no app stores, all that stuff. What you do on a box is just play one game. It runs one thing at a time, and I don't know if most people realize this, but in a console like 360, when you switch games, you reboot the box. It's constantly rebooting into the game. Now come forward to, you know, when we were thinking about Xbox One, and it's a different world. There's devices everywhere. The next generation gamer is a multitasker, and you sit there and you realize as an operating system designer that you have this tension. You've got the customer, the next gen gamer, wants to do lots of things all at the same time, and they want to have something that changes and grows and evolves, but the game developer wants a very consistent box. They want to know it's going to run exactly the same way every single time so they can optimize the art and have it work as well as it possibly can. And it's really hard to come up with one OS that'll serve both. So in a way, you could say we gave up, and well, let's make two operating systems. One aimed at the interactive, growing, evolving world, and one aimed squarely at the game developer. So you've been saying that you are running three different operating systems under the hood, right? You've got three different platforms happening. Which one is this? Is this sitting on top of all of them? It doesn't matter. It doesn't matter? It works for people. They don't have to think about what operating system is where. It is definitely an incredible technological achievement that we've been able to build all of this power into a system that's this simple. Well, so the reason I ask that question is because this looks a lot like Windows 8, and it looks a lot like Windows Phone, and there's obviously a lot of convergence happening. There is definitely a common design language there. I think when people see this, they think, oh, Windows. And there's an expectation that it'll do Windowsy things. Is that how you think of it? No, we don't necessarily think of it necessarily as Windowsy things. The things that we think are really important is it's great to have a common design language so that people feel at home. You want it to be a familiar experience. But we really put entertainment front and center on your television screen. You know, TV is super interesting because it's one of the technologies that kind of hit this good enough point like a long time ago. Once the remotes went cordless and we got rid of the dials on TVs and then DVR came along, we've kind of been there for a while, and people like it. I mean, I could go on about TV. I would like you. I think that's one of my top questions. I think that's particularly exciting, how do apps mix in with what a show is and what's the changing nature of a show. What you'll see in the beginning is the basics. Can you hook up to cable? Can you get channels to go? Is this the heart and soul of your TV experience? I believe it's the heart and soul of your living room experience. More TV is an integral part of that. In the US, people watch four hours and 35 minutes of TV per day, 35 hours a week. So if you want to be the soul of the living room, you really have to have a great TV experience. Otherwise people will just be switching you out on inputs. Right. Here's how it works. If you're like most people, your cable box is plugged into the first input on your TV, and a game console like the Xbox 360 is plugged into the second input. To switch from watching shows to playing games, you've got to pick up the remote and switch inputs, and the 360 doesn't know anything about what's on your TV. But the Xbox One is designed to change that. Your cable box plugs into the Xbox, and the Xbox plugs into your TV. So watching TV is the same as before, but now the Xbox operating system is always active and can overlay your TV signal. That means you don't have to switch inputs to play games anymore, and you can just dive right in. But it also means you can get notifications like game invites and Skype calls while you're watching shows, and you can treat TV almost like another app. You can even snap to the side of the screen while you play a game. But while that's a clever move to make sure the Xbox One is always active and always available, it's still kind of a hack. The Xbox One doesn't know what your cable box is actually doing. You still have to use your clunky cable interface to manage the DVR and watch on demand, and the only way for the Xbox to control your cable box is by blasting IR commands out of the new Kinect, kind of like the world's most expensive universal remote control. Nothing about this is particularly clean, but even getting next to TV is a big deal if the Xbox One is going to take over your living room. And Microsoft is betting that this first step will open the door to even better integration sometime in the future. Generally when people get cable or satellite, there's an installer that comes to their house that gets it all set up, and for most people, they're like, never touch it again. So we spent a lot of time on this first experience to try to make it easy as possible. And the first thing we'll ask you is what is your brand? And when I click next, what we do is we know what the best command is to understand how to control your TV. So in this case, for Samsung, it happens to be mute. And yes, that worked. And now we know how to talk to your TV. Oh, wow. So I want to set up one guide. It's going to ask me for my zip code. I click enter. It asks me who my TV provider is. And it only knows the ones in my zip code. And then it's going to ask me which is my TV lineup. Isn't there an element of this where this is like you're definitely building the most refined version of the future past? You're still using IR. This is the best universal remote control ever made. They required an AMD processor and Windows to make this finally work this simply. Thank God. But shouldn't you be using all this technology to really integrate this stuff? And I've asked you this question before in like 15 different ways. It's when you see this setup and it's like it took all of this work to make this process this simple. There is no one on your team who is like, guys, let's just call Comcast and ask them if we can pipe in the cable signal directly. Oh, no, I mean, I look at this as an and. It's not an or. We're going to do one or the other. This gets the TV experience in Xbox One and one guide into everyone's hands. And then we'll continue to work with people on in-depth partnerships, whether it be cable or satellite providers, app partners. Some you'll see, like you saw today, are integrated in from launch on. Some we'll see emerge in year five of the program. This is the launch of the new generation. So I can just say Xbox, watch TV. So it's going to launch right into TV. Xbox One guide. And there's your programming guide. What's on the Discovery Channel? It's going to jump to the Discovery Channel. I can just say watch this channel. Watch this channel. And it's going to change the channel right to the Discovery Channel. So this is the thing I haven't complained about, which is it's showing me the Comcast guide. It goes right away. You can watch TV right through your Comcast box that you already had in your living room. There's some walls that you're going to hit with TV, right? I mean, you can't search the DVR. Do you have any facility for searching DVR? This is the place where you can pick up your set-top box remote. And you use TV like you always have, which you can do with the Xbox TV experience. And then we're looking forward to shortly after release having smart glasses available as well so you can interact with your set-top box through smart glass. What goes through your mind when you see the One Guide change a channel and the Comcast channel banner go up? Does that look like the future to you, or is that a compromise that you have to make? I think it's an expression of the reality of the technology that's in market today. Yeah. Absolutely we talk to Comcast, and absolutely we talk to everybody. But there's a tremendous inertia of hardware that's in market. And you cannot go and ask everybody to just go and spend several hundred dollars and replace all their boxes and come up with new protocols. That's not our reality. So you have to come up with a plan that works with the install base and does the best job it possibly can with the machines that people have, and is intended to be upgraded over time so as new hardware comes along and new services come along from these providers, it can be more integrated and it can look as good as it possibly can. So you've got to take that first step to get it out and to start the conversation. But it is a conversation, and it will continue over time. So now it's showing me this is right built in the guide. It's showing me what's on all these various services, including the NFL, you have an NFL partnership, and what's on your SkyDrive, which is very interesting. So this is my SkyDrive, which I already loaded up. Xbox, go to Internet Explorer. And it's going to jump right into Internet Explorer. So I started playing Forza 5 before any of this happened. I logged out in the middle of a lap, and now I can actually, it's Forza Motorsport 5? Yep. So I can say Xbox, go to Forza Motorsport 5. Bam. You're always talking about households. You're always talking about families and secondary users, which is, I think a lot of people have Xboxes plugged into a TV in the basement, and that's it. And that's the TV that runs the Xbox. So you're elevating this to sit in front of an entire family, not necessarily three college kids in a dorm room. You're making a play for a family that has a cable subscription. Is that the target? I'd say we want something for everyone. I think we'll have a great service for the three guys in the dorm room. I brought up those guys for a very specific follow-up question, by the way. Oh, great. Well, we'll wait. Will your IR blaster work through a haze of weed smoke? Just put that out there. I think you'll be amazed at the power of IR blasting, and so will they, especially in that state. The game side is very much, there's all kinds of new horsepower. We've seen game developers go through this kind of transition. The demos are amazing. That feels familiar in a way. And it should feel familiar. You want to continue the legacy of consoles always getting better and games always looking bigger. But that shared side, that app side, is really interesting, and you're going to see lots of evolution and lots of change there. So Windows app developers, they can just publish to Windows. Oh, yeah, totally. I'd throw it out there. If you know how to write an app for Windows, you know how to write an app for Xbox One. The big disruptive innovation for television hasn't really occurred yet, right? And even the Xbox One requires a cable box with a pretty crappy UI to get the full experience out of. So what hooks are you giving developers to enable kind of the big innovation? Well, again, it's those app channels. You think so? Yeah, the app channels is where you can mix in hooking up with your content, bidirectional communication, real-time bidirectional communication from your servers to the end client, and have it mix into a guide that makes sense. So let's look at one of the trends in TV shows. You've got a lot of, I'm going to call them interactive TV shows. Think two-hour show where there are a lot of contestants come on and they do their thing, and then followed by a one-hour voting window where everyone picks up their phone, and then there's a one-hour show afterwards with the results. Those are video games. They're not TV shows. They're video games. Now, what could you do with those if you actually had a real-time bidirectional communication with the end consumer? Does it have to be a one-hour voting window? Could it be a 24-hour voting window? What could you do to change the nature of that program where they don't know the end result way in advance? That's super interesting. I think we still have 10 years of learning and innovation and improvement that are ahead of us. I mean, if you look at the leaps that we've made in just three years, look at the technology we had when Kinect first launched with what we're shipping with Xbox One. This is just the beginning. We're not slowing down. If anything, we're accelerating. To assume that we've got, hey, this is the best and greatest right now, I don't think that will survive for all time. When you launch a new console, you've got a tremendous amount of work to do. You take on as much as you possibly can, and you just about kill yourself trying to get the thing out the door. You can't do any more than that. You lay a good foundation for the future. Now, you've got 10 years to play this thing out and to keep innovating and to keep coming up with new technologies and new ways of having experiences. I view this as step one. The beauty of Xbox One is that it is going to change. That is the bet, is that it is going to change and evolve and improve over time, and that these experiences are all going to get fleshed out. We can't declare what they are. We have to work with content partners. Together, we will explore this territory, and we've built a platform which is all about embracing that change. I find that very exciting. The clock is ticking, but a countdown isn't necessarily to a completely finished product, but rather to the release of a platform, a platform that Microsoft itself acknowledges will grow and change over the next 10 years. What's it going to look like at the end? I don't really know. Sometimes, I get the sense that Microsoft doesn't really know, but the overwhelming sense here in Studio A is that that change is what's going to make the Xbox One stronger and stronger over time. Microsoft Office Word Title Microsoft Office Word 97-2003 Document MSWordDoc Word.Document.8