Xbox vs Playstation (REMIX) | The Betrayal | 2

0:08February 2001, Austin, Texas, nine months before the first Xbox launches. David Shippey enters the Ginger Man bar and waits for his eyes to adjust to the gloom. He's a microchip designer with unruly hair, and he's here to meet a former colleague from IBM about a top-secret job. Shippey! Shippey turns and sees his IBM pal Jim Cale waving at him from a corner booth. Ha ha! Good to see ya! You too, man! Cale signals the waitress for two beers. Shippey slips into the booth. So, why all the secrecy? You working for the CIA or something? How are the kids? They're fine. You're just gonna leave me hanging about this job, aren't you?

0:52Hey, yep. The waitress delivers the beers. After she leaves, K.O. leans forward conspiratorially. IBM, Toshiba, and Sony have formed a joint venture to develop the microprocessor for the next PlayStation. Shippy figures this chip must be a big deal if those three tech giants have joined forces. Kale leans closer. Sony wants it kept quiet so Microsoft and Nintendo don't know what it's doing. Ken Kutaragi instigated it. Kale notices the blank look on Shippy's face. You don't know who Kutaragi is, do you? Jim, I barely know what a PlayStation is. Hm. Kutaragi's the father of the PlayStation, and PlayStation is Sony's biggest business now.

1:37Okay, so? So, the first PlayStation was huge. PlayStation 2 is going to be even bigger. But Kutaragi's already thinking of 2005 when the PlayStation 3 will launch. He wants it to push the technological boundaries, which is why he's brought in IBM and Toshiba to help. Okay, you got my attention. What kind of chip architecture? Kale double-checks. No one's listening. So, Kutaragi? He's demanding. Knows what he wants. I went to Japan and showed him everything IBM's got, but he didn't want any of the microprocessor designs we already had. So, what did he want? A supercomputer on a chip with totally brand-new architecture.

2:21What? No one's done that for, like, 20 years. Exactly. He's talking multi-gigahertz, billions of operations per second. Something that can animate characters in games to move realistically. And without those noisy cooling fans, because it's going into homes. Shippy sinks back into his seat. That'd be real difficult for the competition to beat. And tough to build. And that's why I want you to design its core. You'll get to build the highest performance microprocessor in the business. the building block for the next wave of computing. At worst, you'd have fun designing the heart of the PlayStation 3.

3:03Shippy takes a long sip of beer. It is a once-in-a-lifetime opportunity. He puts down his mug. All right, where do I sign? Sony's super chip will be called The Cell, and if all goes according to plan, it will be the H-bomb of microprocessors and help PlayStation win the console wars once and for all. But in war, things often don't go as planned. And Sony's secret plan to crush Microsoft is about to be thwarted by a greedy double agent.

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6:15On the last episode, Sony's PlayStation 2 raced ahead of the competition. The sci-fi shooter game Halo zapped the skepticism surrounding Xbox, and Nintendo's GameCube found itself fighting for second place with Microsoft's console. Now, Sony is building a super chip for the next PlayStation that it believes will annihilate its rivals. But Microsoft's about to roll out a secret weapon of its own. This is Episode 2, The Betrayal.

6:53November 2002, the Microsoft campus, Redmond, Washington. Boyd Multerra hurries down the corridor towards the Xbox Live Ops Center, with his ponytail swishing behind him. Multerra is the co-creator of Xbox Live, an online gaming service that lets Xbox owners play with friends online for a monthly fee. It launched today, and across America, people are now plugging Ethernet cables into their Xboxes to play online. But something's wrong. Multerra enters the Ops Center. It's packed with computers and tangled wires cover every surface. The team's huddled around the desk. What's happening? A team member replies.

7:36Active user numbers are all over the place. They don't make sense. Multerra checks the figure on the screen showing how many people are connected to Xbox Live. Okay, that's not the real number. It's way too low. Let's check the reporting code for bugs. The team fans out to hunt through thousands of lines of code for the suspected error. and they need to find it. Because Xbox's future depends on Xbox Live, proving that Microsoft offers something Sony doesn't. Microsoft is using Xbox Live to relaunch the Xbox. It's been a year since the Xbox went on sale. The initial buzz about Halo has subsided.

8:17The European and Japanese launches disappointed. Microsoft needs a new story to tell, And it hopes to do that by making the Xbox the go-to console for playing online with others, wherever they are. But Sony's already gunning for that space. Three months ago, it launched the PlayStation 2 Network Adapter, a$40 device that plugs into the PS2 and allows people to play online. It's a hardware play by a company known for gadgets. Sony sells the adapter, but leaves it to the developers of individual games to support online play. In theory, everyone wins. Sony sells some adapters, game makers keep control over players' experiences and data, and gamers don't get charged fees by Sony to play online.

9:09But Microsoft's taking a riskier path with Xbox Live. It's not selling a device. It's selling a service. Xbox Live costs$10 a month, but in return, players get the slickest online gaming experience around. Unlike Sony, Microsoft's not letting developers handle the tech. Instead, it's built dedicated data centers to minimize game-breaking outages and slowdowns. Subscribers also get to create a GamerTag, an online identity that works across every game and saves them from needing multiple logins. Players can build friends lists, check their scores on a global leaderboard, and chat with the people they're playing with.

9:55But charging a monthly fee is a big gamble, and one that split the Xbox team. Half think it's an error to charge when Sony doesn't. The rest think Xbox Live's so good, gamers will pay. And now, the moment of truth has arrived.

10:18In the Xbox Live Ops Center, Boyd Multerra stares at his screen with a team gathered around him. He glances at the faces peering over his shoulder. That looks like the bug to me. A team member leans past him and corrects the code. There, fixed. Multerra nods. Okay, let's reboot. The team waits. Then, the real number of Xbox Live users appears on the screen, and their jaws drop. Tens of thousands of people are going head-to-head in trigger-happy Xbox Live games, like Tom Clancy's Ghost Recon. The number of users shatters Microsoft's most optimistic projections. In the first week, 150 ,000 people sign up for Xbox Live.

11:05By the end of 2003, there will be 750 ,000 subscribers, each paying$10 a month and giving Microsoft an ongoing revenue stream that Sony lacks. But it's a small victory in a one-sided war. Just 5 % of Xbox owners play online, and the PlayStation 2s outsold the Xbox five times over. The Xbox has inched ahead of the Nintendo GameCube, but it lost$4 billion doing it. But with Halo and Xbox Live, Microsoft has won gamers' respect and convinced them that it is Sony's biggest rival. Now, it's out to create a new Xbox, one that can peel players away from their PlayStations.

12:01It's February 2003, and in a hotel meeting room in Snoqualmie, Washington, Xbox boss Robbie Bach writes 2005 onto a large sheet of paper pinned to the wall. He turns around and looks at the Xbox executive team. 2005. That's when we can expect the PlayStation 3. We must beat them to market or match them. Xbox's marketing chief nods. Totally. Launching a year after the PS2 cost us. We don't want to give them another head start like that. Xbox's tech visionary Jay Allard pipes up. 2005's perfect. High-definition TVs will be going mainstream. Broadband will be widespread. Box scrawls 2007 on the sheet of paper.

12:49That's the year Xbox must become profitable. Steve Ballmer won't tolerate another multi-billion-dollar bonfire. To help get there, we should get rid of the hard drive. It cost a fortune to put that in the first Xbox and people barely used it. Hallard scowls. It's not expendable. Xbox Live is what sets us apart and it needs a hard drive to work. Bach pauses. Okay, how about we sell two models? A basic model with no hard drive and a more expensive model with a hard drive. I can live with that. Are we sticking with DVD? If we've got games in high definition, maybe we need to have a HD DVD or Blu-ray drive so people can watch movies in HD.

13:33Bach frowns. No to Blu-ray. Sony owns that and we're not paying Sony for every Xbox we make. Besides, adding these drives is pricey and we're trying to lower costs, not increase them. Okay, then how about we offer HD DVD drive as a sold separately add-on? The marketing chief interjects. Yeah, I like that. Sony's certain to use the PlayStation 3 as a way to establish Blu-ray. If we have a HD DVD drive, at least people who want to use their consoles to watch HD movies have an option. Agreed, but we still need to reduce costs. Xbox's hardware chief pipes up. We should use custom-designed chips. We used off-the-shelf ones last time, and they're fixed price.

14:17If we get Intel or NVIDIA or whoever to design custom chips for us, we can streamline things and reduce the cost per Xbox over time. But can we do that by Christmas 2005? Sony's been working on its new chips for two years already, and it's still not done. Sony's building something totally new. It's tight. If we build something that works with standard PC architecture, we'll make that deadline. The team leaves with a plan for Microsoft's next console. the Xbox 360. But to build it in time for a 2005 launch, they need to move fast.

14:59Summer, 2003, Austin. David Shippey steps out of the elevator and onto the sixth floor of the IBM building, where he now works. It's been two and a half years since he agreed to help IBM design the core of the PlayStation 3's cell microprocessor. Since then, his team of IBM, Sony, and Toshiba engineers has designed a core that's fast, small, powerful, and energy efficient. And it's on track to meet Sony's goal of a 2005 launch. Shippy enters his boss's office. It's drab, windowless, and lit by a buzzing fluorescent light. Hey, you wanted to see me? Shippy's boss gestures for him to sit. Yeah, so I have news.

15:47Another customer wants to use the PlayStation 3 core you're working on. Shippy's surprised. He knows IBM has the right to sell the core to other customers, but he always thought that would happen after the PlayStation 3's release. Well, who's the other customer? Microsoft. They want it for the next Xbox. Shippy blinks in shock. It might be legally okay, but it feels wrong. He's got Sony engineers working on this tech just a few floors below. Shippey struggles to contain his fury. How did this happen? Well, Microsoft made a blockbuster offer. One IBM couldn't refuse. More than a billion dollars.

16:33We showed them your team's work, and they were impressed. They think we've been working on it internally. They don't know it's also for the PlayStation. Shippy spins around to face his boss. Tell them they can't have it. It's Sony's. It's not Sony's tech. It's IBM's. Besides, the train's already left the station. This decision comes from the top. Shippy's boss hesitates, then drops another bomb. What Microsoft wants is what you're doing for Sony with a few enhancements. And they won it for a Christmas 2005 launch. Shippy's eyes widened in horror. That's almost a total redesign. It took more than two years to get this far.

17:20We can't do all that for Microsoft in time. It's impossible. Unless we give them the same design? Shippy's boss nods. IBM's about to cash in on the console wars. by supplying both sides. In the months that follow, IBM tries to keep Sony in the dark about its new customer. But after Microsoft and IBM issue a low-key statement about their new partnership on the next Xbox, Sony connects the dots. By then, it's too late. To fire IBM would derail the entire PlayStation 3 project. Sony is trapped. It hoped its unique microprocessor would banish Xbox for good. Instead, Sony is helping to create the chip for its competitor.

18:16PlayStation and the Xbox are now locked in mortal battle and inextricably intertwined.

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20:09It's December 2004, and the heat is on at IBM's offices in Austin, Texas. The team's got just days left to deliver the microprocessor core designs for Sony and Microsoft's next consoles. And if it misses the deadline, the chances of the PlayStation 3 and the Xbox 360 reaching stores before Christmas 2005 are slim. Chief Architect David Shippey wanders through the maze of cubicles on the engineering floor with his morning coffee in hand. The team's focus now is weeding out all the errors in the design. It's critical work because once manufacturing begins, fixing bugs costs millions. Shippy reaches the desk of the IBM engineer tracking the team's efforts.

20:57What's new? Three new bugs. Two insignificant. One major. Shippy grimaces. A major bug isn't good this close to deadline. Shippy takes a sip of his coffee. Okay, get the logic designer on that up here. See if they can fix it without major surgery. The engineer looks uncomfortable. Yeah, thing is, the PlayStation 3 can tolerate this bug, but not the Xbox 360. And the logic designer is a Sony engineer. He'll notice that there's no reason to fix it this close to deadline. Shippy gulps. This is really bad. This bug will break the Xbox 360, but the only engineer who can fix it works for Sony. Shippy asks his senior technician to review the error.

21:47An hour later, the technician drops by his office. Well, we just dodged a bullet. We did? So it wasn't a bug? Oh, it was a bug all right. But I talked to the Sony engineer. He agreed to fix it. Does he know he's fixing this for Xbox? We didn't discuss it, but yeah, I'm sure he knows. He fixed it anyhow. Sony's just saved Xbox from a serious setback. Soon after, the designs for both the Xbox and PlayStation cores are sent to the factories. But more problems are landing. 2005 dawns with less than a year to go before the PlayStation 3 and Xbox 360 launch. But then, the IBM plant that produces their microprocessor cores hits a snag that delays production by six weeks.

22:41The delay means the cores won't be fully tested in time for a late 2005 launch. IBM advises both Sony and Microsoft to delay their consoles to 2006 rather than push ahead with manufacturing. Sony takes the advice. Work on the PlayStation 3 is already running late, and game developers haven't had time to get to grips with its unique microprocessor. As a result, Sony's console won't have enough eye-catching games to make a 2005 launch worthwhile. So, Sony delays the PlayStation 3 until 2006. But Microsoft won't let anything slow it down. It's the underdog. And for Xbox, it's 2005, or bust. So it orders manufacturing to start.

23:33Errors be damned. But it's not just the microprocessor core where Microsoft's taking risks with the Xbox 360's hardware.

23:48August 2005. Three months until the Xbox 360 launches. In a vast factory in southern China, thousands of Xbox 360s ride in procession along the conveyor belts, past employees wearing white overalls. One freshly assembled Xbox 360 arrives at the testing area. A technician lifts it off the conveyor, adds it to a rack full of upright Xbox 360s, and plugs it in. The ring of LED lights around the power button alternate between green and red as the test equipment checks whether this Xbox 360 is functional. The technician looks at the test machine's screen in size. He disconnects the Xbox 360 and adds it to the reject pile.

24:36He does that a lot. In consumer electronics manufacturing, a fault rate of over 10 % is considered bad. The Xbox 360's fail rate is 32%. The factory's pile of rejects is now a mountain, but it's even worse than that. In its rush to get to market first, Microsoft hasn't fully debugged its testing equipment. And that means faulty Xboxes are passing the tests and heading into stores and people's homes. But the Xbox team's forgotten something important. that Sony's not its only rival.

25:23It's September 2005, and at the Tokyo Game Show, Nintendo's showcase presentation is underway. Near the back, Xbox chief Robbie Bach and some colleagues are checking out what Nintendo's up to. While Sony and Microsoft have been hyping their next consoles, Nintendo's said little. But now, the house of Mario is ready to show its hand. The auditorium darkens as Nintendo plays a video trailer. On the screen, Nintendo's new game controller appears. Everyone in the auditorium looks confused. It's nothing like an Xbox or PlayStation gamepad. It's like a TV remote. The video switches to footage of people playing games just by moving the controller.

26:11A teenager swings the controller like a baseball bat to hit a ball. A rock fan uses two controllers like drumsticks. An elderly couple conduct an orchestra. And a young man wields it like a sword. Bach is gobsmacked. Nintendo's Wii has just erased the biggest barrier to people enjoying games. The challenge of mastering multi-button controllers. The Wii is a console that anyone can enjoy. It's revolutionary, enough to flip the entire game business on its head. Bach turns to his Xbox colleagues, stunned. That is going to be a problem. But it's a problem Microsoft can't do anything about right now, because the Xbox 360's about to launch.

27:07It's late November 2005, and in California's Mojave Desert, hundreds of excited Xbox fans wait outside a huge aircraft hangar for Zero Hour, a three-day party to celebrate the arrival of the Xbox 360. Xbox executive Jay Allard clambers up the steps of the metal scaffolding position near the hangar doors. He looks down at the crowd. It's mostly made up of young men who've come here to experience what Microsoft's PR team describes as a burning man for gamers. Allard picks up the mic. Who's ready for the Xbox 360? The crowd roars and then roars again as the hangar doors slowly slide open. The sound of taiko drumming fills the air.

27:53Bright white light beams out from inside. and through the parting doors, they see a huge banner inviting them to jump in. The crowd surges forward, hungry for their first taste of the Xbox 360. Inside, the hangers bathed in acid green light. The crowd rushes towards the dozens of Xbox 360s that are waiting to be played. They grab controllers, slump into the beanbags, and play as hip-hop blasts from the stacks of speakers. It's a non-stop game party, and for the next 30 hours, no one's leaving. Then, on November 22nd, the exhausted and over-caffeinated fans get to buy Xbox 360s off the back of Best Buy trucks.

28:40At the same time, the Xbox 360 arrives in stores worldwide. The next round in the console wars is underway. By the end of 2005, Microsoft sold one and a half million Xbox 360s. But in the blaze of publicity, few noticed the scattered reports of Xbox 360s dying shortly after purchase. And as Microsoft's new machine keeps selling, the number of faulty Xboxes will keep rising until it becomes a tidal wave that threatens to destroy the brand.