The Making of Xbox: A History

By M. Kang

Posted on January 16, 2021

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When people think about the big gaming companies, Nintendo, Sony, and Microsoft are usually the first three that come to mind. Of the three, Microsoft was the latest comer to the scene and as such, the one whose staying power was most in question.

In an eye-opening article by Bloomberg, reporters spoke with some of the key figures in the making of the original Xbox. These figures range from industry titans, technology officers, Bungie employees to former Microsoft CEO and President Steve Ballmer.

Bill Gates’ incentive for Xbox

While the gaming industry seems like a great investment now, it’s striking just how much pushback there was from inside the company.

However, what pushed Bill Gates and other executives was competition from Sony. With the release of the PlayStation 2 and its promotional material calling it a computer, Microsoft felt pressure to respond somehow.

After several company meetings, the company settled on creating “a PC that was pretending to be a game console.”

Gates and other executives felt comfortable with this idea, as it both addressed Sony’s encroachment onto Microsoft’s territory and stayed generally on brand with Microsoft’s market image.

However, they couldn’t get other companies, namely EA, to sign onto this idea. Quickly, the idea changed to “Microsoft would build its own hardware, and the software would be developed specifically for the Xbox.”

Microsoft’s big break: Bungie

Part of the process was getting developers to sign on to provide software content while Microsoft focused on the hardware. It was difficult convincing industry veterans that if Microsoft doesn’t succeed, “it would be a rounding error on [their] balance sheet,” but that wouldn’t be the same as for the companies they work with or try to acquire.

EA and Bethesda both took the wait-and-see approach, but Nintendo and Square Enix both scoffed at offers to acquire.

Eventually, Microsoft and Bungie got in touch. At that time, Bungie was an independent student working largely on a PC version of Halo.

When Microsoft purchased them, the reigning wisdom of the gaming industry was that first-person games did not do well on console. But Microsoft committed to Bungie, Halo, the multiplayer experience, and they came to show that first-person games can do extremely well on console.

Unfortunately, however, not all things went as Microsoft would have hoped.

The Japanese market, an unforeseen challenge

For starters, they had hoped to enter the Japanese market. The original Xbox’s design, however, was incredibly bulky and big. While iconic, it meant that they had essentially lost the Japanese market given the preference for perhaps more aesthetically pleasing design. The Xbox continues to be a distant third place within the Japanese market.

However, that’s not to say the Xbox itself wasn’t and hasn’t been a success. On launch day on November 15^th, 2001, it was clear that Xbox would become a phenomenon. Halo itself became a console-selling title, as “Halo was why you, as an Xbox owner, were smarter than your PlayStation 2-owning friends.”

Looking back, even though he may have had gripes about the Xbox during the process, Gates stated,

“One of my favorite things about Microsoft… was getting to explore big, new ideas that might seem impossible to other people… The early Xbox days were a great example – with a group of people who knew that gaming would be huge, and they believed Microsoft had a role to play even though it would mean starting something completely new.”