Microsoft One Step Ahead With Xbox 360 In StoresPeter Moore, the executive in charge of Microsofts Xbox business, discussed the companys strategy and the competitive landscape in an interview with the Seattle P-I Thursday at the E3 video-game convention. Edited excerpts: Q: Sony this week announced that versions of the PlayStation 3 will cost $499 and $599, at least $100 more than the Xbox 360. Does the price difference give you a better chance of being the market leader in the long run? AP Peter Moore, the executive in charge of Microsofts Xbox business, shows off a Grand Theft Auto 4 tattoo Tuesday before introducing a trailer for the video game at the 2006 E3 electronics expo in Los Angeles. Moore: I certainly think it opens an opportunity for us. ... But we had kind of built into our assumptions that these would be the types of prices it would have to be. Youve got to look not at the launch price but at the cost reduction and the price curve as it comes down, because thats the key to our industry. Pricing is important in year two and year three, where youre looking at those big consumer bubbles, the people who wait to come in at sub-$300 or sub-$200. Sony needs to be able to chase that curve down, and they cant do it without huge financial implications. We have the benefit of a company that takes big chances and has the balance sheet to back it up. Weve made our bets, and Wall Street doesnt like it, but boy, we believe in the future. This is one of the big bets. The fact that Bill (Gates) came down and said this is what were going to do should be a big indicator of how serious we are. Q: Bill Gates announced a new initiative here called "Live Anywhere" that will connect Xbox Live to mobile phones and Windows Vista. Whats the business strategy? Moore: It ties in what were best at, which is building platforms. If that makes the Vista operating system a more vibrant system that has more social and community links -- and theres nothing hotter than video games right now -- and it links that all in, well, were going to sell more Vista. Its as simple as that. Q: But if a consumer has a PC that can play the same game as on the Xbox 360, and it has the online component that you can get on the Xbox 360, whats the incentive to spend $300 or $400 for the Xbox 360? Moore: Well, the PC game experience is different from the console experience. Its the 2-foot lean in vs. the 10-foot lean back. There will only be so many games that are applicable to cross-platform play. Q: Youre now the only one of the big three game console makers without a motion-sensing controller. Does that put you at a competitive disadvantage? Moore: I dont believe so. Remember, we did a motion-sensing controller, the Freestyle (for PC games) a long time ago. It was met with interest but overwhelmingly a bit of a collective yawn. It works in some games. It doesnt add to the game mechanic play of the great majority of games. ... I think Sonys controller is more reactive to what Nintendo is doing, which I believe is true innovation. Q: Are you ruling out the notion of coming out with your own motion-sensitive controller for the Xbox 360? Moore: No, I never rule anything out. Like I said, we did it a while back, and maybe I just blow the dust off a few of those and bring them out again. The key is, youve got to make sure its what the consumer wants to do, and that the game designers see value in it. Q: You announced a deal this week that will put the next "Grand Theft Auto" on Xbox 360 when the game is released next year. Previously, those games have been on PlayStation first. How did that agreement come about? Moore: Well, all I can say is that were big fans of the franchise. I believe it was instrumental in driving a large part of the installed base of the PlayStation 2. When you look at whats going to drive console adoption, certainly price is always an issue but content and exclusive content are important. Q: Youre planning to come out with an HD-DVD drive as a peripheral for high-definition movies on the Xbox 360. Are you tied to HD-DVD exclusively or could you also do something with Blu-ray (the competing format that Sony supports)? Moore: As we sit here today, we believe as a corporation in HD-DVD. Q: Are you ruling Blu-ray out? Moore: You dont rule anything out, but were not in the format wars, were in the games business. If there is a format war, I dont believe it gets itself resolved for a couple of years, at least. I dont think it really brings itself to bear on our business right now. Our belief is that HD-DVD has actually got some good traction.