e spent a solid half an hour grilling Peter Moore all about the Xbox 360 launch, what we can expect as far as console supplies over the next few months, his response to lower sales in Japan so far, information about the newly announced external HD-DVD drive, and what he thinks about Sony’s recent smack talk.

Game Informer: So now that the initial launch is behind you, are you guys pretty excited to have that under your belts at this point?

Peter Moore: You’re excited to have it off the ground, but it’s like putting a rocket in orbit. You know, getting it up there 80% percent of your fuel is usually expended getting it into orbit once it gets going, but you’ve got a lot of work to do. While it is a relief from the point of view that it’s out there. People are having a fabulous time out there.

As we saw last night it’s not just a piece of hardware you’ve got – I’m just downloading the Mission Impossible 3 trailer - and you’ve got so many more things you can do. I mean, as you know games are the core but we’ve got much more stuff going on. And we’ve got to be that much more nimble with the competition coming out. So yeah, I think it was a bit of a relief, a lot of excitement about what we’ve got, a little bit of trepidation that we need to keep up with demand. There are still a lot of people that are somewhat pissed with me personally for whatever reason, but we are doing everything in our power to get more systems into the U.S. and Europe where the need is the greatest.

Peter Moore, GI editor Lisa Mason, and GI Online editor Billy Berghammer.

GI: How much faster does adding a third production partner make the manufacturing process?

Moore: It’s a good question because you don’t know until you get them actually producing. It’s not zero to sixty here. It’s a very complex manufacturing process. So having two factories already up and running you learn an awful lot. You then apply that to the third factory. But then they’ve got to get going so there’s a ramp up time. Something goes wrong, you stop and you fix it, and you learn by that. It’ll certainly get us to the 4.5 to 5.5 million units. I mean, that’s part of the plan.

Then you’ve got three factories that are really cranking it out. And then come by summer and ready for the fall, you’re getting to where all three factories are doing full capacity output and that puts us in a lot better position to take on, you know when our competitors come out, but we will not be capacity constrained coming into the holiday and I think our competitors will. We’ll be in the position to have plenty of consoles on the shelf around the world at a time when, by my best estimation both the PS3 and potentially the Revolution will still be going through the usual struggles you go through getting your silicon right, making sure everything comes together, getting the titles right, your software, your games tweaked. I feel real good where we’re at.

GI: So when do you think I’ll be able to walk into an EB or a GameStop and not have to worry about picking one up?

Moore: That’s a great question. The behavior that we’re seeing right now is that consumers that are realizing that you just couldn’t do that right now are going on a list.

GI: A long list…

Moore: Yeah, and Best Buy will deliver 50 in one day and 55 people will replace those people on a list. So it’s going to be a little while before you can simply walk in and see a pallet stack there at Best Buy or stacked in there at EB. Because of this phenomenon right now the people are going on a list. So when the store manager gets them in he makes 25-30 phone calls and those people come and get them. But my hope would be that later on in the Spring that we finally catch up with the demand curve of people who have to have it and are willing to place a deposit. And to get more to the normal curve of “here it is. Come on in and buy it.” We’re still a ways from that right now.

GI: As far as your launch in Japan you sold less than half of the 360 consoles that you did the original Xbox at launch. Are you guys satisfied with that?

Moore: The numbers that anybody has given so far are speculation because we haven’t given any numbers, and I think Famitsu has maybe gone around and counted and then extrapolated. Because it’s a pretty unsophisticated market over there for recording. Yeah, I’m satisfied. It’s a solid if not spectacular start. But the way we’ve looked at Japan this time around is over a three-to-five year period developing deep role playing games. Clearly Sakaguchi with Lost Odyssey and Blue Dragon being very important. Miziguchi with Ninety-Nine Nights coming up in the spring.

And as I’m fond of saying, it’s a marathon, not a sprint over there. While you would like to just walk it out of the gates, realistically, for an American company going in taking on Sony and Nintendo in their backyard coming off a disappointing first generation, and going in there and having to prove ourselves all over again. And the one thing, historically, you can bet on is you produce particularly a role playing game that is fresh, innovative, and from somebody the quality of Sakaguchi - that moves hardware. We’re still a ways away from delivering the first one, which will be Blue Dragon. Then it’s going to be great because probably less than six months later…

GI: N3: Ninety-Nine Nights should be out before then, right?

Moore: Oh N3 will be out in spring. Not an RPG. It’ll move systems, but not to the extent where Lost Odyssey or Blue Dragon. People are excited because N3 did come out while at TGS, and we’re disappointed it didn’t make launch. Yeah, but you know what happens on a regular basis. Miziguchi and I are pretty good buddies so we have a working agreement that we’re not going to force it out there. When it’s ready it’s ready. And of course we’ve got the guys at Phantagram in Korea doing the core development work.

GI: We’ve all heard about the stocks of Xbox 360s sitting on shelves in Japan. Was the worldwide launch more of a mindshare benefit?

Moore: Well, whatever’s on the shelves in Japan in the thousands and ten thousands, it’s not an exact science that you can immediately predict six months out that 152,595 of these are going to sell in Japan. You supply the channel. And then if you’re left with weeks on hand inventory, then so be it – then you’ve got content flowing. We managed to get 18 titles ready to go, which I still argue is one of the greatest lineups a console has ever seen. The only thing we lacked was, if I’d have had Oblivion: Elder Scrolls there, had that RPG, I’m thinking there’s nobody in there. It’s coming. But that was the only little thing that I said, “God, that would have been fabulous.” Because nobody’s ever delivered an RPG at launch of that quality. I think it is.

I think we’re in a global economy. We have global consumers of Xbox Live. And leaving people behind makes no sense. When we look at Japan, we look at Europe, we’re going to be at thirty countries by March. There’s a downside that you just can’t keep up with demand. But you’ve put the stake in the ground. You’re there. You’re winning share of mind. The people who’ve got them.

My family back in England, clearly my nephew somehow managed to get one. My nephew and I IM all the time. He’s 12. He says, “At least 50 kids have been by my house because I’ve got one.” And he’s smart enough to say, “And they all are going to buy one because they’ve experienced it. They’ve seen me play Perfect Dark Zero.” Don’t tell his mother, who’s my sister. But what you’ve done is you’ve evangelized. You’ve made a statement in the marketplace. And despite the fact let’s say it’s 100,000 in the UK, I don’t know what the number is, a million people have experienced it. They’ve seen it. They’ve sat there with the controller. They’re blown away it’s a wireless controller. And they have PAL TVs which are typically widescreen anyway. It’s fabulous.

So my marketing hat says, “I’ve landed.” The landing crafts have hit the beach. We’re there. Do we have a lot of troops on the ground yet? No. But we’re there. We’re in country, as they used to say. And that’s better than promising that we’re going to ship something and “Wait for me. I’m going to come. And the next generation isn’t going to start until I say it does.”

Millions of people around the world have sat down and experienced an Xbox 360. That’s very valuable. And global launches in today’s world, like last night, The instant gratification that anybody around the world last night that heard me say, “Fight Night 3 now available in Xbox Live Marketplace.” And then I guess our server farms just lit up because we went live. We let everybody know. The demo was huge. People were watching the webcast of Bill and Steve going at it last night, which was funny. Apart from Steve spiking his controller, which I scolded him again for doing (laughs). I think we’d do it all over again the way we’ve done it. And that’s the way it should be.

GI: Now that the launch games are out and we’re looking at 2006, what’s coming in the future? You haven’t made a lot of announcements looking from now until E3. There aren’t any first party titles that are coming out. Why is that?

Moore: Because we take a portfolio view. Two years ago we looked at calendar Q1, calendar Q2 2006. Looked where our partners were going to be. Looked where EA, Activision, Ubisoft in particular, Tom Clancy. Looked at where 2K would be, where Bethesda would be, well we hoped it would be launch, but reality tells you Q1. We take a portfolio view and you look at where the gaps are. You say alright, and then Tomb Raider comes and then you say Gears of War and Crackdown fit into this.

You don’t just dump it out there without strategic thinking about what genres you need and when you need them. And you do this 2 to 2 ½ years out. I’ve sat there at 2003 looking at where Gears of War needs to end up. I’ve sat down there in 2003 talking to Realtime Worlds about Crackdown. This is two years before we announced the games, but we’re doing portfolio planning and because both first and third party report up into my organization, I can take a portfolio view and make sure that both our partners and out own internal studios are in step with each other so we’re not cannibalizing sales and not stepping on each other’s toes.

It’s very important that we flow content out. It comes at strategic times. That it doesn’t arrive in July when the world’s watching the World Cup this year. We think through like that. You’re not going to see a huge release while the semifinals and quarter finals of the World Cup, and maybe the U.S. as well, is completely engrossed in World Cup Soccer. I’m not leaving the house to go get video games. And their TVs are being used for one thing and one thing only and that’s to watch guys in shorts kick a ball around.

GI: So you’re kind of leaning on your third parties until fall?

Moore: We’re not leaning. You say what bullets do I have in my chamber for first party? And when do I fire them? And you’re not putting out a first party title every month. So you strategically align on a quarterly basis where you think you need to be on a particular title. We’ve got a great line up of third party titles over the next few months, and I’m very happy with that. And then summer comes and things get a little quiet, July, August. And we’ll then start thinking about Gears of War and Crackdown. And then of course you’ve got Mass Effect. You’ve got Too Human. And these are titles we started thinking about 18 months ago of where they all fit.

GI: Do you think all of those titles are going to hit in 2006?

Moore: Uh, no. No, it would be stupid if they all did. Even if they were capable of doing all that you’d re-merchandise them. In other words, you sit down and you look at this title could be ready, but it’s going to cannibalize or jump right on top of this title. And so as a result we’re going to invest two more months in development or in some instances you finish the title. You have it ready but you hold it for a month till it’s ready to go.

GI: Bill Gates said that when PS3 comes out Halo 3 will be there. So hypothetically if PS3 comes out next holiday are we looking to see Master Chief in 2006?

Moore: Bill, god bless him, has retracted that statement. And I think his statement was, “The guys at Bungie do great work and they’ll have the game ready when it’s ready.” That was out of Time Magazine. And I think it was a hypothetical situation. But obviously quoted as reality.

The good news is interestingly we’re riding this wave of success and Halo’s still sitting in the quiver. Ready to pull out when we feel like it’s done. One of the things we said to ourselves a number of years ago is that this has to be more than a Halo box. This has to be more than a shooter box if we’re going to grow and expand the marketplace, and expand our own marketshare in the marketplace. We need to broaden who we are as a brand, which I think we’ve done very well. And we need to get away from some of the darkness of being a shooter box. There was a lot of anticipation but everybody forgets that we’ve done this without Halo. We have done all this without our number one piece of intellectual property. And that still sat right here in the back pocket. Not yet, but eventually that IP will be brought to bear when we feel it’s appropriate.

GI: Well, I think you’ve done it with Halo because people that I’ve talked to that have bought a 360, they know a Halo’s coming.

Moore: A lot of people are playing Halo 2 on their 360s because it just looks so good.

GI: A lot of the developers that I did talk to about development for the 360, because the timing of when they got their tools and when they got their kits, said that all of the launch games are only running on one core of the system. When do you think we’ll see developers using all three?

Moore: That’s an interesting point that I was not aware of. I’m the wrong guy to ask about that. Todd Holm, Shane Kim, whoever. It’s news to me that they’re only running on one core. I guess if that’s the case it may be good news. I don’t know. But that’s a technical development question. A) I’m not sure that is the case, and B) What the implications of that are. I can only believe that if the message is we’re not even tapping the potential of this box, it sounds like good news for everybody.

GI: Is Day One Studios still a Microsoft Game Studios developer exclusive?

Moore: I’m not sure they’re exclusive. We’ll find out.

GI: Last night you said that 10% of Xbox owners were on Live and that over 50% were on 360?

Moore: 10% of Xbox owners connected their boxes to Live that’s correct. Now we have 50% of our current installed base connect. We know exactly who’s connecting of course. What I did was talk about Xbox Live Silver service. It’s not Gold members that are 50%. People connecting the box, which is our number one priority, to get your box in a connected state. It’s great if you want to be a Gold member. That’s obviously what we want, but we wanted to take down the barriers. The barriers of commercialism.

You don’t need a credit card anymore. And you can go on and there’s lots of free stuff to do and get it out of the way. That’s very important for Europe, but not so much here in the U.S.. Everybody here seems to be able to get their hands somehow on a credit card. Whether it’s yours or your mom’s. Europe, big deal. The minority of people carry credit cards. That was stifling our growth. And secondly, and perhaps most importantly was the intimidation factor of having to go in there and go play multiplayer games against strangers around the world. And so we see Live, Xbox Live Marketplace, Xbox Live Arcade, as great ways to get in before you go into some massive deathmatch in Perfect Dark Zero. Arcade is unbelievable. I haven’t met anybody in the hundreds of people a week doing this kind of thing that doesn’t say “I’m just totally addicted.” From Bill Gates and his Zuma addiction downward.

GI: Last night one of your biggest announcements concerned an external HD-DVD drive. How are you going to connect this to your 360?

Moore: It’s actually several ways we’re working on right now. I’m not going to give you any details, but we built this box with a view to - and J Allard being the guy that really has done the thinking - to the flexibility of where life will be in 2007, 2008, 2009. We call it future proofing. So the ways that you can connect - there are a number of different ways - I don’t want to get into it right now. The most obvious sat right in the front there.

GI: The USB?

Moore: USB. You could absolutely do it. But we may or may not choose that route.

GI: Will it be used for games?

Moore: Right now it is movie playback. It is all about implementing HD-DVD movies for your Xbox 360. Allowing you, and I know I’ll buy one, if you want to watch an HD-DVD movie, don’t want to have to go out and buy another player. Although as cool as the Toshiba one was for $499, that’s just another piece of hardware on my shelf. And I’ve already got a lot of what I need inside that box. I just need a drive. That’s what I’ll do.

GI: But won’t that drive just be another piece of hardware on your shelf? I mean why not just get an external player?

Moore: No, my view of that drive is either something you can tuck behind, or it’s there. I can put it in a drawer if I’m not using it. I don’t know if you saw the HD-DVD player. That’s a big box. Think of an external DVD drive on a laptop. Think of it in those terms that you just put it away. I don’t know. I am philosophizing at this point, but think of it in those terms and the important thing is you don’t have to buy it. People are delighted with this thing. But there’s all those guys out there, and I’ll be one of them, that have spent some money on their home about having a really nice theater setup. And I’ll want to watch it. And I bought a 360, and I want to watch it, and I can almost guarantee you that an external drive’s going to be a lot less than a standalone player. I don’t know, but conventional wisdom would assume that it would be. And I’m in business.

GI: So why not announce at E3 that you’re coming out with a new version of the 360 with an HD-DVD drive?

Moore: How would you feel about that?

GI: I’d be pretty pissed off because I’ve already spent $400. (laughs) So it’s not to say you guys won’t have something next holiday?

Moore: I never say never. But it doesn’t make a lot of sense. The key is you built a house. We’ve spent a lot of money building a house. And because you want a third garage you don’t go and buy a new house. You add on the third garage to the two you’ve already got. You just take advantage that you’ve got the basic infrastructure. You’ve invested in it. It does a lot for you. You add on the third garage. And that’s what we’re talking about here.

GI: Sony keeps reiterating the point that high definition doesn’t start until they come to the market…

Moore: This is where I got pissed off with somebody. I’m a big consumer of Sony stuff. I have Sony digital cameras. I have Sony TVs in my house. So it’s funny when they said, was it Phil Harrison that said the real Hi-Def is 1080p? So I go back and look at my Sony TV that’s got High Definition there that outputs at 720p. I either want my money back or I want an explanation. (laughs) High Definition is 720p. It’s good enough for me.

GI: So what’s your new year’s goal?

Moore: We’ve got a very simple six month goal: 4.5 to 5.5 million units by the time we close down on June 30th for the fiscal year. Got to have shipped at least 4.5 million units. Keep our attachments strong. Keep strong games flowing into the marketplace. Keep stuff like the Mission Impossible 3 trailer.

I was making a presentation to Hollywood about 2 or 3 months ago and started giving a full demo of this before we launched this thing. People were blown away. These are the chairmen of Universal Studios and what have you. And I made the same comment from last night that we can deliver more 18-34 year-old males than CSI or The Office. And both they, 20th Century Fox, Epic Records are now seeing it as a very deliberate way, and you guys benefit because you get to see cool stuff for free at your choice. Or you don’t if you don’t want to. It’s very cool.