"The beauty contest"

Bill Gates presides as Microsoft's WebTV and Xbox development teams duel for the honor of attacking Sony.

By Dean Takahashi

Apr 25, 2002 | Chapter 9: The Beauty Contest

The game strategy meeting with Bill Gates occurred in the boardroom at Microsoft headquarters in Building 8, an office building that looks like a couple of small letter "t"s connected at the tips when viewed from the air. The room wasn't ostentatious. It had a big oak table that probably looked chic in the 1980s. There were big black leather chairs with soft cushions, enough to seat about 20 people. There were no exterior views, so the executives meeting in the room could gather without fear of eavesdropping. One wall of the room was made of glass; that was the side that bordered the hallway that led to Gates's office. Outside the entrance, stacks of papers were piled high. Several executive assistants to Bill Gates controlled access in the waiting room.

The atmosphere was nervous. The meeting was set up as a beauty contest. The Xbox presenters included the Four Musketeers [Seamus Blackley, Kevin Bachus, Otto Berkes and Ted Hase], who were joined by Nat Brown, Ed Fries, Rick Thompson (vice president in charge of hardware), David Cole (vice president in charge of consumer Windows), Jay Torborg (the director of multimedia), and Rick Rashid (vice president of research). Nat Brown was the appointed speaker for the Xbox side.

The other side included WebTV's Dave Riola, Tim Bucher, Bruce Leak and others; vice presidents Craig Mundie and Jon Devaan; and Ted Kummert, Chris Phillips and Harel Kodesh of the Windows CE group. Neutrals included Eric Rudder (Bill Gates's technical assistant) as well as a variety of other executives. The timing of the meeting was good. The scheduled recess in the antitrust trial had stretched from five weeks to more than three months. Gates wasn't distracted. Noticeably absent was Steve Ballmer, Microsoft's president.

Craig Mundie began the meeting, saying that everyone believed there was a threat to the PC business in the home because of the PlayStation 2. The question at hand was whether Microsoft would come "down from the PC" to do battle with the PS 2 via the Xbox, or come "up from the appliance world" via WebTV.

Nat Brown gave the Xbox presentation first, with Blackley and Bachus piping up to bolster him. Hase stayed silent so he could be the observer. He wanted to listen so he understood what every person's position was. His job was to read the body language to figure out who was engaged or detached from what was being said and then tell everyone about it in the post mortem. Brown began talking about slides showing the Xbox's "guiding principles," which included taking advantage of PC volume economics. He said the Xbox would capitalize on Windows assets for its operating system. It would try to harness the enthusiasm of game developers and rely on existing technology. PC makers would launch the box in the fall of 2000 with a PC microprocessor, graphics from either Nvidia or 3Dfx, a network connection, a DVD player, 64 megabytes of dynamic random access memory, and, most controversial of all, a hard disk drive. The box would run PC games and Xbox games. The machine's graphics would process about 50 million polygons per second, which was less than the PS 2. But it would also be updated every two years, giving it a chance to leapfrog the PS 2 and take advantage of new graphics technology.

Brown said the goals were to make money, expand Microsoft's technology into the living room, and create the perception that Microsoft was leading the charge in the new era of consumer appliances. The initial cost estimate was for a machine with a bill of materials (engineering talk for cost) of $303. That machine would debut in the fall of 2000 and use a $20 microprocessor running at 350 megahertz from Advanced Micro Devices. The machine would also have a $55 hard disk drive with two gigabytes of storage, a $27 DVD drive to play movies, a $35 graphics chip, $25 worth of memory chips, and a collection of other standard parts like a motherboard, and power supply. Over time, these prices would decline. The WebTV crew weighed in again with their objections. They said the hard disk drive was unnecessary and too expensive. Brown said hard disk drive prices were falling and that he had seen one priced as low as $35. But Chris Phillips remembers thinking, "Oh great, you found a cheap hard disk on eBay and now you think that's what they cost."

Next Page: Battling for Bill Gates' attention

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