1. The Future of Online Games on Consoles Jon Grande Lead Product Planner Microsoft Game Studios

2. Outline Consider … –The audience –The medium –The competition A roadmap of the potential future Unless …

3. Consider … The audience –MMORPG Gamers –Dual Gamers (Online and Offline) –Console Gamers The medium –Keyboard, mouse, monitor @ a desk –Controller(s), voice @ couch & TV The competition –Competitive products –Other targets for discretionary spending (time and $’s)

4. Compared to dual and console mostly gamers, MMORPG gamers are older Dual and console mostly gamers play both PC and console games, in aggregate, 11 or more hours a week. Although 59% also play console games, MMORPG gamers spend the vast majority of their time playing online PC games (19 hrs/wk, on average) Console Mostly 96% 22 yrs $56.2k 0% 1 hr 18 hrs 3 hrs 100% Offline Dual 95% 23 yrs $55.5k 0% 10 hrs 14 hrs <1 hr 100% 21 yrs Online Dual 97% $55.4k 0% 14 hrs 13 hrs 11 hrs 100% MMORPG 92% 25 yrs $60.5k 41% 20 hrs 7 hrs 19 hrs 59% Male Median age Avg. household income Play PC games only Avg # hrs/week play PC games Console games Online games Play PC & console Audience Profiles

5. Time Allocation Across Platforms MMORPG gamers spend the vast majority of their total gaming time playing massively multiplayer online games Online dual gamers spend approximately half their time on the PC, and half engaged on the console –Even within PC gaming, more time is spent online than offline Offline PC games MMP online games Other online 'core' PC games Console games % of time allocated to: MMORPGOnline Dual Gamers Console Mostly 13% 21% 31% 6% 72% 23% 5% 6% 13% 3% 9% 43% 65% 86% Offline Dual Gamers

6. Preferences for Online Social Interaction MMORPG gamers don’t have a strong preference for playing with either friends or strangers For online dual gamers, playing with strangers is their least appealing option Offline dual and console mostly gamers prefer to play with friends - in the same room Total MMORPG % Preferred playing scenario* Playing games online with friend(s) you know 83 Playing games with a group of friends in the same room 64 Playing games with a friend in same room 58 Playing games online with strangers50 Playing games alone44 Met online while playing93 Friends in real life69 Met in chat rooms, clubs or forums16 Met online using matchmaking service5 Don't play with others online* * ranked 1st, 2nd or 3rd ** among those who play games online Online Dual Offline Dual Console Mostly %% 663547 728374 708376 381534 558469 744955 727357 272031 15513 31216 Way met people play online with**

7. Interest in Playing Online Using a Console System Online dual and console mostly gamers are the most interested (79%-83%) But among current MMORPG gamers, at 39%, interest in online console gaming is very low. Not surprising, as they are devoted to PC gaming Rule of thumb: Extremely/very interested score above 70% is very good, 60-70% is good, below 60% is weak How interested are you in playing online games using a console system, in other words, playing games with anyone, anytime, anywhere? Even if you don’t currently own a next generation console system, we’re interested in your opinion Based on a 5 pt rating of extremely, very, somewhat, not too, or not at all interested Extremely interestedVery interested Online Dual (522n) Offline Dual (188n) Total (2270n) MMORPG (1356n) Console Mostly (204n) Xbox Owners (918n) PS2 Owners (770n) 36% 21% 61% 42% 64% 63% 41% 19% 18% 24% 18%20% 55% 39% 82% 83% 61% 66% 79%

8. Chat Preferences for Online Console Gaming Voice chat is clearly desired for online console gaming Online and offline dual, and console mostly prefer to pair voice chat with a console controller while current MMORPG gamers prefer to pair it with a special keyboard designed for the console MMORPG 52% 18% Voice chat & controllerVoice chat & special console keyboard Special keyboard only Console Mostly 73% 20% 7 Base: Extremely, very, somewhat interested in online console gaming 59% 33% 8% Online DualOffline Dual 70% 26% 4 30%

9. Best Platform for MMORPG Have content that is ever evolving and continually updated Have better community and social interaction Be easier to find other people to play with (matchmaking service) Have bigger, more expansive worlds Have more strategic/tactical gameplay Enable you to play in more than one world (travel between worlds) Have unpredictable gameplay Have a greater variety of gameplay experiences Have a better user interface Have better graphics Have less lag/no lag Have faster, more intense/action oriented gameplay Be easier to play Be easier to learn Better on ConsoleNo difference 14% 16% 18% 19% 22% 26% 28% 36% 40% 43% 58% 59% 63% 28% 27% 31% 26% 28% 41% 44% 30% 21% 36% 22% 20% 23% 58% 57% 51% 55% 53% 37% 30% 42% 43% 39% 21% 20% 21% 14% Better on PC Base: Interested in playing online console games, 1734n

10. Other meaningful data points Most but not all MMORPG gamers subscribe to only one MMORPG game (84%) –7% subscribe to two - suggesting that when a new game becomes available, avid gamers will try it Lag and grief players were cited by half of all MMORPG gamers as a “major” problem Billing is significantly more of a problem for younger MMORPG gamers –Among 14-26 yrs: 41%, among 27-40 yrs: 22%

11. Topline Audience Conclusions Console comes with: –Clear advantages: Perception of being easier to use –And disadvantages: Perception of limited experience Dual gamers are the most likely to convert Dedicated PC-MMP players are the least likely to convert

12. A roadmap of the potential future Console online gaming – in order of most likely appearance –Matchmaking for retail games –PC-MMPs ported to console –Incremental content downloads –Subscription oriented MMPs The same model that PC gaming followed –If that happens, on-line console gaming will: Be a lucrative business for a very small set of developers and publishers But will be played by a very small percentage of the overall gaming market

13. Unless …

14. … We Instead Focus on Combining the Best of Both Platforms Game mechanics –Take: PC – self realization through character, ability to affect the world, evolution of the world around the player Console – ease of entry, visceral gameplay, encourage and enable short game sessions –Leave: PC – complexity of interface/controls, perception of having to devote your life to the game to succeed Console – perception of a closed/fixed world, less predictable gameplay

15. … We Deliver Content & Settings that Console Gamers Want Fantasy is popular –But it is popular with console gamers due to Lord of the Rings, not traditional Dungeons & Dragons popularity –And it has a great deal of baggage among console players Seen as not realistic enough Seen as too time intensive Other genres are the most fertile ground –“Plausible” settings are most interesting Present day, near future, and future settings

16. … We Remember the Customer Demographics – PCMMP and Console players are very similar Psychographics – they are as different as night and day Think of either customer on a Friday night: –PC-MMP player – at home in front of their keyboard, knee deep in orcs and goblins –Console player - is just as likely to be at a concert or a party as they are to be in front of their console

17. Questions and Discussion