Xbox (console)
Bill Gates stood before the public in late 1999 and declared his vision for a new machine. He wanted the system to be the platform of choice for the best and most creative game developers in the world. This declaration came as Sony prepared to launch its PlayStation 2, which threatened to replace desktop computers in living rooms. Gates feared that this all-encompassing entertainment device could eliminate consumer interest in personal computers entirely. Microsoft had not entered the home console market until then, despite success with titles like Age of Empires on Windows PCs. The company had approached Sony CEO Nobuyuki Idei about developing programming software for the PlayStation 2, but Idei declined the offer. Gates also tried to acquire Nintendo but was turned away by Hiroshi Yamauchi and Genyo Takeda. In 1998, four engineers from the DirectX team began discussing ideas for a new console. Kevin Bachus, Seamus Blackley, Ted Hase, and Otto Berkes formed the core group behind the project. They codenamed it Midway after the World War II battle where Japan was defeated by American forces. Their goal was to surpass Sony in the console market using standard PC components rather than custom hardware. A meeting on the 5th of May 1999, saw two opposing teams pitch their visions to Gates. The WebTV team argued for an appliance running Windows CE, while the DirectX team insisted on repurposing PC hardware including hard disk drives. Gates sided with the DirectX concept because it allowed direct implementation of online access and easier game porting. He gave Berkes permission to create the new video game console.
The Xbox was built around standard PC components that made it much larger and heavier than its contemporaries. It used a 32-bit 733 MHz Intel Pentium III Coppermine-based processor paired with an Nvidia GeForce 3-based GPU. This combination resulted in a bulky tray-loading DVD-ROM drive and a standard-size 3.5-inch hard drive inside the chassis. Microsoft became the first company to include a built-in hard disk drive in a home video game console. The system ran on a heavily modified version of Windows 2000 and utilized DirectX as its operating system foundation. Early production units suffered from a high failure rate of approximately 25 percent before Flextronics repaired them at their Guadalajara factory. The original controller design was nearly three times the size of Sony's DualShock 2 controller due to circuit board constraints. Sony refused to manufacture the folded and stacked circuit board design requested by Microsoft. This led to the bulky Controller S being released later for international markets while Japan received a smaller version called Controller S from the start. The console featured breakaway cables for controllers to prevent it from being pulled off surfaces during intense gameplay sessions. Internal hardware revisions continued throughout the product life cycle to discourage modding and reduce manufacturing costs. Later generations replaced unreliable Thomson DVD-ROM drives with Philips VAD6011 models, though these still caused errors reading newer discs.
Microsoft officially launched the Xbox at midnight on the 15th of November 2001, just three days before the Nintendo GameCube arrived. A special event kicked off sales at the flagship Toys R Us store in Times Square where Bill Gates personally sold the first unit. Preorders had sold out within thirty minutes at both Toys R Us and Amazon prior to launch. Unit sales surpassed one million after only three weeks and rose further to 1.5 million by the end of 2001. Halo: Combat Evolved drove much of this success by selling over one million units by April 2002 alone. The system achieved an attachment rate of more than three games per unit according to NPD Group data. Despite strong North American performance, the console failed to gain traction outside Western markets. It sold poorly in Japan due to its large physical size which did not fit well in smaller living spaces. Analysts estimated Microsoft would ship six million consoles to Japan by June 2002 but only managed 190,000 units by April that year. For the week ending the 18th of July 2004, the Xbox sold just 272 units in Japan even fewer than the PSOne had sold in the same period. By the time production ended in 2005, the console had sold a total of 24 million units worldwide with 16 million coming from North America.
Microsoft lost approximately $125 for every system sold because manufacturing costs reached $425 while retail prices sat at $299. Robbie Bach noted that within six months of shipping they could see the price curve and know they were going to lose billions of dollars. In April 2002, Microsoft lowered the retail price further to $199 to drive hardware sales despite increasing losses. The company accumulated an overall loss of four billion dollars during the console's market life. These financial struggles persisted even though software attachment rates remained high throughout the product cycle. Gates, Ballmer, and other executives viewed the venture as positive because it brought them into the console marketplace against industry doubts. The strategy relied on selling hardware below cost to build a user base that would generate profits through game sales. Despite losing money on each unit, the Xbox outsold both the GameCube and Dreamcast lifetime totals. It failed to match PlayStation 2 sales figures which reached 106 million units by comparison. Microsoft turned a profit only at the end of 2004 after years of heavy investment in the platform. The decision to enter the market was driven by fear of Sony replacing personal computers rather than immediate profitability expectations.
Microsoft launched its Xbox Live service on the 15th of November 2002, allowing subscribers to play online games with others around the world. Users needed to purchase a starter kit containing a headset and subscription fee to access the broadband-only feature. In its first week of operation, the service received one hundred thousand subscriptions and grew to two hundred fifty thousand within two months. By July 2004, membership had reached one million subscribers and doubled again by July 2005. Membership numbers ballooned to twenty million current subscribers by May 2009. Support for original Xbox games ended on the 14th of April 2010, though a group known as Noble 14 kept servers running for almost another month. Revival servers like Insignia later brought back online multiplayer features to the original console. The dashboard updated frequently via Live to reduce cheating and add new features during the support period. Early pilot titles included MotoGP, MechAssault, and Tom Clancy's Ghost Recon which helped establish the platform's viability. Halo 2 became the third killer app after MechAssault and Rainbow Six 3 drove adoption rates higher. Microsoft made deals to put Electronic Arts titles on Xbox Live to boost popularity of their subscription model.
The popularity of the Xbox inspired efforts to circumvent built-in hardware and software security mechanisms starting within months of release. MIT student Andrew Huang broke the initial layer of security on the BIOS using custom-built hardware to extract hidden boot ROM contents. Once available, the code was modified to skip digital signature checks allowing unsigned code and game backups to run freely. Modding an Xbox voided its warranty since it required disassembly of the console itself. Having a modified system could also disallow access to Xbox Live if detected by Microsoft according to Terms of Use agreements. Various methods emerged including installing modchips inside the unit or reflashing onboard BIOS chips with hacked versions. Softmods exploited programming errors in the Dashboard to gain control without requiring physical disassembly for most users. Game save exploits used official releases to load saves that triggered buffer overflows and installed necessary files automatically. Hot swapping involved changing data on the hard drive using a computer while the console remained powered on. These techniques allowed users to install alternative operating systems like Linux distributions based on Gentoo or Debian. Some communities repurposed consoles as media centers running XBMC4Xbox instead of playing games.
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Common questions
When did Bill Gates officially launch the Xbox console?
Microsoft officially launched the Xbox at midnight on the 15th of November 2001. The launch event took place at a flagship Toys R Us store in Times Square where Bill Gates personally sold the first unit.
What hardware components powered the original Xbox system?
The Xbox used a 32-bit 733 MHz Intel Pentium III Coppermine-based processor paired with an Nvidia GeForce 3-based GPU. It also included a bulky tray-loading DVD-ROM drive and a standard-size 3.5-inch hard drive inside the chassis.
How many units of the Xbox were sold worldwide before production ended?
By the time production ended in 2005, the console had sold a total of 24 million units worldwide. Sixteen million of those units came from North America while sales in Japan remained significantly lower.
Why did Microsoft lose money on every Xbox console sold initially?
Microsoft lost approximately $125 for every system sold because manufacturing costs reached $425 while retail prices sat at $299. The company accumulated an overall loss of four billion dollars during the console's market life to build a user base.
When was the Xbox Live service launched by Microsoft?
Microsoft launched its Xbox Live service on the 15th of November 2002. Users needed to purchase a starter kit containing a headset and subscription fee to access the broadband-only feature.