Shane Kim (MBA ’90), Corporate Vice President of Microsoft Game Studios (MGS), spoke enthusiastically about the bright future of interactive entertainment to a crowd of over 100 HBS students on September 26th, 2007. The appropriately-timed event, which was organized by Shane Rahmani (OG) and co-sponsored by the Entertainment and Media, Marketing, and TechMedia Clubs, occurred the day after Microsoft launched its flagship video game, Halo 3.
As the head of MGS since January 2004, Kim oversees the development and publishing for all of Microsoft’s first-party video games for Xbox 360 and Windows PCs. MGS is responsible for a number of blockbuster franchises including Fable, Age of Empires, Microsoft Flight Simulator, and Zoo Tycoon.
Halo, a first-person shooter set in a futuristic sci-fi world, has emerged as the crown jewel of the MGS portfolio. The original title, Halo: Combat Evolved was developed in 2001 by wholly-owned publisher, Bungie Studios. It became an instant classic that was vital in driving the adoption of Microsoft’s original Xbox console, which launched in the same year. Kim hopes that the third installment, Halo 3, will have similar results for the Xbox 360, the high-definition console introduced by Microsoft in late 2005.
Kim, who controls a $300 million R&D budget, described the role of a game developer as a unique challenge, “Our job is to drive the success of the platform with content. Developing a great game requires the perfect combination of art, design, and engineering. But, when you can capture that lightning in a bottle, you know you have something special.”
With $170 million in opening day U.S. revenue, Halo 3 is that lightning for MGS. This mark eclipsed enormous media franchises like Spider Man and Harry Potter to become the biggest single-day launch in entertainment history. To achieve this level of success, Kim described Microsoft’s need to cater to its core market, the 18-34 year old male gamer, while also making Halo relevant outside of this demographic. Kim remarked, “We are in the entertainment business. We are trying to get people who are not gamers to care about .”
Kim said that MGS’ strategy to expand its customer base involved thoughtful advertising. To prove his point, he showed several Halo trailers that have been released over the past two years. One segment, the “Believe” campaign, pans through an intricate diorama depicting an “against-all-odds” battle to save mankind. At the end of the 90-second clip, the focus moves to Master Chief, the hero of the Halo franchise, who appears lifeless in the clutches of an alien. At that moment, he raises his head and stares back into the camera as if to say, “There is hope. Trust me.” The screen then goes black and the word “Believe” flashes on the screen.
After playing all of the trailers, Kim pointed out that none showed actual game play. Doing so, he said, might have limited their appeal to a gaming audience. Instead, the intense focus on heroism and storytelling in its advertising is one way that it is attempting to broaden its demographic beyond the hardcore gamers.
Kim also discussed how Halo 3 is one component of a broader Xbox strategy to make interactive entertainment more compelling to a broader audience. “There are 25 million core gamers [in the U.S.],” he said. “We would like to grow this to 75 to 100 million.” Pushing the Xbox platform to the masses is in line with Microsoft’s strategic goal for entering the console space – to be the center of a connected home. To that point, Kim joked that Steve Ballmer and Bill Gates did not build the Xbox because they wanted to dominate console gaming. They built it because they perceived gaming consoles to be a credible threat to the Windows-based PC.
When asked about the emergence of Nintendo’s Wii as a popular social gaming device that was expanding gaming to an audience that previously had not embraced it, Kim was quick to recognize the Wii’s success. However, he was far from conceding victory to Nintendo, citing Microsoft’s relative strength in driving the “attach rate” (game and accessory sales per console). In a statement that surprised many in the audience, Kim even claimed that Nintendo was not Microsoft’s primary competitor in the console market. Rather, he still perceives the Sony’s PlayStation 3 as his primary competition despite its lackluster sales results.
With the holiday season around the corner, the battle for dominance in this console cycle is shaping up to be an intense one. Microsoft has made entertainment history with Halo 3, but will Master Chief have enough ammunition to win the console war for Xbox?
Scott Benson interned at Xbox Retail Marketing for Microsoft this summer.
