• Illustration: Controllers to Go Multiplatform

A unified development platform for Xbox and PC games could mitigate the rising costs of game development, a problem that is particularly acute on the Xbox platform because of its relatively low installed base. Dubbed XNA, the initiative could increase third-party interest in Xbox development by effectively adding hundreds of millions of Windows PCs to the Xbox installed base, and it will also help developers make the transition to the next generation of the console. However, the long-term deliverables for XNA are vague, and companies that currently specialize in game development tools may experience new competition from Microsoft.

High-Cost Business

Video games are big business by entertainment industry standards: consumers spent more than US$7 billion on PC and console games in 2003 (according to NPD Funworld), compared with about US$9.3 billion on movie tickets (according to movie industry analysts Exhibitor Relations). However, as is the case with movies and other entertainment businesses, video gaming is a "hit-driven" business in which most of the profits come from only a few games. According to Xbox Vice President J Allard, 40% of video game projects are cancelled before release because of financial concerns, and fewer than 20% earn enough to cover their cost of development. Much of this cost comes from developers writing low-level code to handle complex technical issues, such as creating realistic pixel shading and programming audio. About 80% of the game development process is spent on such tasks, according to Allard.

This cost problem is particularly acute for Xbox because it has a relatively small installed base of about 14 million, compared with more than 70 million for Sony's PlayStation 2 (PS2). This makes it more difficult for Xbox publishers to sell enough games to recover their costs and makes third-party developers reluctant to create Xbox-exclusive titles that could boost the popularity of the platform.

Microsoft also has a direct financial incentive to lower the cost of Xbox game development. The company currently creates about 25% of the titles for the console, and if it reduces this presence, third-party developers might sense a lack of commitment to the platform and flee. But unlike third-party publishers, Microsoft Game Studios cannot increase its odds of having a hit game by porting Xbox games to PS2. Maintaining this presence is particularly troublesome for Microsoft, given that the company also loses money on each Xbox console sold—so far, the Home and Entertainment business segment (in which Xbox and Microsoft Game Studios are included) has lost more than US$2 billion since the introduction of Xbox in Dec. 2001.

Other Problems

In addition to making it easier for third-party developers and Microsoft Game Studios to recoup the costs of Xbox development, Microsoft must address other impending problems:

Xbox hardware jump. The next version of Xbox is expected to be based on completely different hardware than today's version, including IBM CPUs similar to the PowerPC processor (instead of an Intel CPU) and an ATI graphics chip (instead of an Nvidia graphics chip), and it may not have the built-in hard drive of today's version. Unless Microsoft can take steps to ease the transition from one hardware platform to the next, third-party developers may either take longer than Microsoft would like to create new and compelling games or they might decide to skip the next Xbox altogether and focus their efforts on Sony's PS2 and its successor.

Long time until Longhorn. Microsoft's competitors in the console business, Sony and Nintendo, have little interest in spurring PC gaming. However, PC gamers are among the earliest adopters of new technology, making them frequent upgraders. Meanwhile, PC game developers cannot program to a static hardware platform as console developers can, which means they must spend even more time on low-level plumbing issues. With the next version of Windows not likely to appear until late 2006, Microsoft wants to help developers create games that require and take full advantage of the latest hardware so that gamers will remain engaged and buying new PCs.

No online PC gaming service. Although some companies—notably Sony with its Everquest series—have had success with subscription-based online PC gaming, Microsoft's presence in this market is limited to basic games delivered through The Zone (part of MSN). Microsoft does have an online gaming service, Xbox Live, but it's currently limited to the console platform.

What Is XNA?

Introduced by Home and Entertainment Senior Vice President Robbie Bach at the Mar. 2004 Game Developers Conference in San Jose, CA, XNA is a broad initiative to create a unified game development platform and set of tools for both PC and Xbox games. (Informally, XNA stands for "Xbox/DirectX Next-Generation Architecture," but Microsoft refers to it only by the acronym.)

Microsoft's main goal with XNA is to help game developers keep up with hardware developments on both PC and Xbox and incorporate the latest features expected by gamers without writing large amounts of low-level code. This will leave developers more time to focus on gameplay and other specialties, such as 3D graphics, realistic physics, and artificial intelligence.

The first concrete deliverables for XNA are expected to appear in summer 2004 and include the following:

Xbox tools available for PC. Since first introducing Xbox to developers in 2000, Microsoft has released several Xbox development tools, such as PIX for exploiting the Xbox's graphics capabilities and XACT (pronounced "exact") for creating audio. These tools and APIs were previously available exclusively through the Xbox Software Developer Kit (XDK), which is available only to select Xbox partners.

With XNA, these technologies will be made broadly available to Windows game developers, and future Xbox development tools will be released to Windows developers as they are included in the XDK.

Microsoft has never offered toolkits specifically for PC game developers, and although XNA is the company's first focused effort in this market, it will not take the form of a new Windows gaming SDK. Instead, these tools will be added to or supported by existing Microsoft tools used by game developers, such as the DirectX SDK and Visual Studio .NET. The tools will also be made available for third parties to incorporate into their own game development tools and platforms, such as Criterion Software's Renderware. The XDK will remain separate and available only to Xbox developers.

Xbox Live available for PC. Beginning with the introduction of Xbox Live in 2002, Microsoft made available APIs for developers to tap into the many features offered by the Xbox Live service, such as sign-on and authentication, billing, security, buddy lists, and matchmaking. In summer 2004, these APIs will become available to Windows developers. This gives Windows game developers an easy way to online-enable their games, while opening up a huge new pool of potential Xbox Live subscribers for Microsoft.

Common controller platform. Microsoft will develop a common interface and input APIs for Xbox and Windows game controllers, enabling future controllers to be used on both platforms. (See the illustration "Controllers to Go Multiplatform".) The company does plan to develop and market Xbox controllers to PC gamers, in effect reentering the PC game controller market, which it exited in mid-2003. (See "Gaming Peripherals Discontinued" on page 22 of the Aug. 2003 Update.)

PC advances quickly available in XDK. Microsoft continues to improve core technologies used by Windows game developers, such as the DirectX APIs, which are used to help programmers write software that works with the latest video cards and processors. Microsoft has also created some new technologies used by Windows game developers, such as High-Level Shader Language (HLSL), a programming language used to simplify the process of shading pixels (e.g., to create realistic-looking 3D surfaces). Although the XDK is regularly updated to include such advances, the time lag between platforms is long—for example, HLSL was introduced in July 2003 and still hasn't found its way into the XDK. XNA will reduce and eventually eliminate this lag.

Support for new features, platforms. Over time, Microsoft says, XNA will evolve to support any significant advances in PC hardware (such as the emergence of 64-bit processors), graphics, audio, or other areas relevant to game development. The company also plans to extend the platform to Windows Mobile and to the next version of Xbox. However, details of these planned transitions are vague, and Microsoft emphasizes that XNA is not intended to be a porting technology—developers will still have to do additional work to move games among platforms.

Focus on the Future

XNA may help Windows game developers keep up with the evolution of PC hardware in the near-term and eventually could spur Xbox game development by adding Windows to the installed-base equation.

For the time being, the installed-base gap between Xbox and PS2 will continue to make third-party developers and publishers reluctant to create exclusive Xbox games. Although Nintendo's GameCube faces a similar problem, two factors work in its favor. First, Nintendo has traditionally focused on creating more first-party titles for its platforms and is therefore less reliant on third-party developers. Second, GameCube's lower price (currently US$99) has made it a formidable competitor to Xbox, with more than 14 million consoles sold; Microsoft was recently forced to cut the price of Xbox to US$149 in North America to stay competitive.

XNA could change the picture for the next generation of consoles, however. If Microsoft can lower the cost of game development while adding more than 200 million Windows XP computers to the installed-base equation, the company could have a much easier time convincing developers to create third-party exclusives for Xbox—if Xbox sales don't pan out, the developer theoretically could develop and sell a PC version of the game at little additional cost. However, XNA's long-term deliverables are so vague at this point that the promise of easier cross-platform development could turn out to be illusory.

Microsoft's increased interest in game development tools might also affect some incumbents. Companies that specialize in game-specific areas are safe, as Microsoft is unlikely to develop and license a 3D graphics engine like Id, a 3D modeling library like Epic, or a physics engine like Havok, for example. On the other hand, companies like Criterion, which create both reusable technologies and tools (such as Renderware) to help implement these technologies across multiple console platforms, face more of a threat. Microsoft says it's committed to working alongside, rather than against, these third-party tools developers. But if XNA succeeds in changing the question from "Xbox or PS2?" to "Xbox/PC or PS3?", the demand for third-party console-focused tools might drop.

Resources

Microsoft's XNA site is at www.microsoft.com/xna.

Third parties interested in Xbox development, including the XDK, should see www.xbox.com/en-us/dev/ for more details on how to get involved.

Microsoft's DirectX page, which includes links to technical resources on MSDN (which is where the DirectX SDK can be found), is at www.microsoft.com/windows/directx.

An introduction to HLSL is at msdn.microsoft.com/library/en-us/dnhlsl/html/shaderx2_introductionto.asp.

Renderware is at www.renderware.com.