Ex-Microsoft gaming VP reveals why Xbox was greenlit despite how “unlikely” it was — “they saw it as a hedge against the threat” of Japan in tech

Microsoft's Xbox has grown to become one of the largest gaming brands in the entire industry, but before it could even get off the ground, it was almost killed in the crib by Bill Gates and Steve Ballmer, who were the company's chief software architect and CEO at the time, respectively.

Former Microsoft game publishing vice president Ed Fries discussed the infamously heated meeting in 2000 in which Gates and Ballmer almost canned the creation of the original console in a new interview — and also went into detail about why it was ultimately given the go-ahead.

"Yeah, I mean, it was unlikely. In fact, we had the famous Valentine’s Day Massacre meeting [in which Bill Gates berated the team proposing Xbox for hours] in February 2000 to get final approval to launch a project we knew was gonna lose at least a billion dollars," he told Luke Lohr of The Expansion Pass.

"Ultimately, [we got] approval for kind of a funny reason … it wasn’t so much that they were excited about games, even though, obviously, we were, I was. But they saw it as a hedge against the threat that Sony could represent towards the company in the future," Fries said.

This much was known already, as it was revealed in 2021’s Power On: The Story of Xbox documentary about the platform’s history. Here, though, Fries discussed the matter on a deeper level, explaining that Sony was viewed as a threat not necessarily just because of the PlayStation, but also because it’s a Japanese company — and at the time, many feared that Japan would grow to rival western countries like the United States in tech and other sectors.

Ed Fries on Halo, Bungie & Building Xbox | Xbox 25th Anniversary - YouTube

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"It’s kind of hard to think about now if you weren’t there then, but everything we see now about the rise of, say, South Korea, and then China, and the rest of Asia where their economies are growing really fast — that was all Japan back then,” he explained. “Japan was on track to pass the GDP of the US. Everybody thought that was going to happen. You know, when I went to school, you had an option to learn Japanese. You know, French, Spanish, or Japanese, because that was clearly gonna be one of the places of the future, right?"

"It didn’t really work out that way, but there was no bigger brand coming out of Japan than Sony at that time,” he continued. “It didn’t end up being the threat that it looked like at the time, but it was still super important."

Fries went on to point out that Japanese companies were Microsoft's biggest competitors in gaming, especially since it was Nintendo who revitalized the industry after its massive crash in 1983 with the release of the Nintendo Entertainment System (NES).

"When we were doing Xbox, all our competitors were Japanese, right? Nintendo and Sony. All the big, most important game developers on console were Japanese. So, it’s kinda hard to look at it that way now, you know? Japan is still there, important things are still happening there, but the market is so much more global than it was," he said.

Ultimately, it's pretty fascinating to learn that Microsoft wasn't just afraid of losing a market to the PlayStation specifically, and feared the rising influence of Japan in gaming and tech in general. Fast forward 25 years, and Xbox is in third place compared to Sony PlayStation and Nintendo...but it's competing fiercely with Xbox Game Pass, integrations with the PC gaming market, Xbox Cloud Gaming, and more.

💬 Does Xbox compete well against Sony and Nintendo?

Sony and Nintendo have always been Microsoft's rivals in gaming, but this new interview with Ed Fries sheds some light on why it feared them in the wider tech industry, and ultimately chose to greenlight Xbox to compete with their gaming systems.

25 years later, I'd like to know: do you believe Microsoft and Xbox have done a good job going up against Sony PlayStation and Nintendo? Let me know in the comments, and vote in our poll as well.

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