Changing the Way People Buy: Physical to Digital on Xbox LIVE

Ben SmithDirector of Program Management Xbox 360 - Xbox LIVE - Kinectbensmi@xbox.com

In the beginning…

Part 1:A simple story about a man and his horse…

And the people spoke…

and voted with their wallets

Lessons

• People will buy digital goods, even if they don’t have intrinsic value

• Most people would prefer in-game items that have value in the game

• People were/are still developing their digital-value instincts

• The is money to be made and customers to make happy

Part 2:Plastic guitars that mint money

http://www.joystiq.com/2009/03/26/npd-rock-band-surpassed-1b-in-retail-sales-in-north-america/

Experience + Microtransactions = $$$

• According to NPD, by March, 2007 both Rock Band and Guitar Hero passed $1B in sales.

• In 2008-2009 Rock Band topped Xbox 360 in:– add-on revenue– downloads– More downloads that the rest of the Top 10

combined

Lessons

• Existence proof that a viable business model in console gaming that relies as much or more on digital add-on sales than physical media

• Content matters, especially having content people love

• You can build a franchise online within console gaming

Part 3:The Map Pack Revolution

Call of Duty MW2 Stimulus Package

Lessons

• Digital is a real, viable channel on its own• Be prepared for unbelievable demand• Just because you aren’t worried about supply

chain problems, doesn’t mean you won’t have capacity issues

Part 4:Power of Pint-size People

Lessons

• People love to express themselves – it about “me” and “who I am”

• Be ok with being playful• The uncanny valley is not a fun place• Hardcore gamers aren’t immune from

expressing themselves if you let them “drive”

So what?• Future is very digital • Virtual is less virtual everyday • Still have a lot to figure out:– DRM policies and technology– Value/Price balance in mainstream markets– Interesting twists – scarcity, limited edition,

transfer, time expiration, rental, etc….– Fraud and other unfun topics– How micro can you go?

The Final Word

Thank you!