The pressure was on to put up or shut up. Bill Gates was already signed up to deliver his first GDC keynote. Would it be the Xbox announcement or something about games and graphics? The meeting of February 14th, 2000 was convened at 4 pm to find the answer to that question, and many others, and to lead to a definitive decision.

On the night before and the morning of the meeting, J Allard wrote a pair of emails to Bill Gates and the senior management. The first email, (which you can read in the Appendix, page 374), described the technology of Xbox as they had it been planned. He started out the email writing, “goal of this mail is to be full-disclosure and to clarify technical points on xbox as there seems to be the serious confusion.” The second email (viewable on page 381) attempted to answer more questions about the vision and future expectations of Xbox.

The meeting was packed with executives, including Gates, Ballmer, Thompson, Allard, Ferroni, Bach, Fries, Mundie, Rick Belluzo*, Rick Rashid from Microsoft Research, and Todd Holmdahl. Allard was, by now, one of the chief advocates for Xbox. This was Team Xbox’s moment of truth. According to Bachus, “We say, we’re building it ourselves, we’re marketing ourselves, it’s going to cost billions of dollars to do, and it’s the right thing to do. We think it can go successful, but it’s going to take a while to succeed. And it was a massacre. I mean that was a very, very contentious meeting. It went on for a long time.”

* Rich Belluzo came from 23 years at Hewlett-Packard and a brief stint as CEO of SGI, before spending 14 months as President and COO of Microsoft, leaving in 2002 to become CEO of Quantum Corp.

Fries remembers how the meeting began and, in particular, Gates’ dramatic entrance. “Normally my boss, Robbie Bach, was good at doing what we called ‘pre-disastering Bill,’ but apparently we hadn’t pre-disastered him. We’re in the board room, it’s full of vice-presidents—I mean, pretty high-up people in the company—and Bill walks in and throws the deck down on the table and says, basically, ‘This is an insult to everything I have done at this company.’ And that was the start. Sometimes he could be dramatic like that. We had seen stuff like that before, so we didn’t give up hope, but we were kind of off to an interesting start to the meeting. And we all turned to J because we knew why Bill was mad. He was mad about Windows being gone, and we expected J to put up some fight.* But J was kind of caught off guard, didn’t really say anything. So I tried to say something, and Bill just kind of shot me down, and then Robbie tried to say something, and he shot him down and, and then it just kind of went like that for a few hours.”

*According to Allard, he had done the predisastering: “I had pre-mailed two long emails the day before that spelled out my posiition. Asked bill if he read it. Let him cool down. Made others uncomfortable but hyperbolic “Hyperbole Gnip Gnop” wasn’t going to advance the meeting. Bill knew the plan and the logic. He just needed to put his opinion on the record one last time. The plan was go/no-go and we weren’t going to suddenly change our mind and try and stuff the full Windows OS into this gaming optimized 64Mb box.”

The meeting focused on everything that had already been discussed and argued and beaten to death, and it dragged on and on. People argued the costs of the project, the business model of selling essentially a $500 hardware device for $300 and losing money on each sale, manufacturing and inventory risks, and so forth. Clearly, in the minds of some people, the plan had changed since September, when it was still based around OEM-built machines, to now, when it was clearly about Microsoft getting into the console manufacturing and marketing business. Of course, it was Gates and Ballmer who needed to be convinced, and so the attention was on them.

Everybody I’ve spoken to who was at that meeting agrees on several things:

1. It was incredibly contentious.

2. It dragged on for hours… and hours.

3. Almost everyone, at some time during the meeting, left the room to call a loved one and say they weren’t going to celebrate Valentine’s Day together.

However, there are different opinions about how the meeting eventually arrived at its resolution. What follows are the specific recollections of some of the main participants:

Allard says, “the one standout in my mind was rick belluzo who gets little attention in all of this. i think he pretty much put it over the top as i remember it. while it wasn’t the ‘final word’, at some point steveb looked to rick and said “what do you want to do?” and rick said “i don’t know a whole lot about the space, but i understand the plan and i believe in the team. i think we should bet on these guys”. i don’t remember it word for word, but it really stuck out that rick filtered the decision through PEOPLE whereas bill generally would orbit the TECH and steve the BIZ. so, it was a standout for me since i hadn’t really seen an executive in the company make a call like that before.”

Bachus believes that the point of decision coming might have come when Gates issued an ultimatum, something like “Here’s the way that I see it: We need to have something like Xbox to build a cohesive consumer strategy. We either do Xbox or we get out of the consumer business altogether. Sell off the game division to Electronic Arts, sell off MSN, shut down the print productivity stuff, get out of the consumer business and basically go head-to-head with, let’s say, Oracle on the business side.” Nobody liked that option, and so the decision was made, and Xbox was approved. (According to one participant, this might have been a different meeting.)

Bach remembers saying to Gates and Ballmer,

“‘If you guys don’t think the strategy we’re on is the right strategy, let’s just stop.’ I mean, I still had a job. I could go back and do my day job. Everybody else on the team could go back and do what they’re doing before. Let’s not get ourselves down the path on something we don’t believe in.”

Fries remembers the pivotal moment. “Then, at some point, Craig Mundie said basically, ‘Well? What about the competition?’ Meaning Sony, of course. And Bill and Steve looked at each other, and their expressions kind of changed, and Bill says, ‘You know, we should do this.’ Steve says, ‘Yeah, we should do this.’ And then they completely changed, you know, 180 degrees from where they were. They turned back to us and said, ‘You know, we’re going to give you guys everything you need, and we’re going to let you go off and be your own part of the company. We’ll give you all the resources that you’re asking for, and we want you to go off and do this thing and make it be successful. And that part lasted about 5 minutes. And then the meeting was over.”

“Steve said, ‘This is what we’re going to do, so we believe,” adds Bach. “You’re not going to get second guessed by us anymore. Go forth and prosper.’ He didn’t use exactly those words, but that’s the videogame equivalent, and from that date forward, to their credit, Bill and Steve never doubted us.”

“As Robbie and I walked out,” says Fries, “I just remember turning to Robbie and saying, ‘You know, that was the weirdest meeting I’ve been in during my fifteen years at Microsoft.’”

Cam Ferroni says, “We honestly thought they wouldn’t go for it.  When they did - we were elated… and scared.”

During the meeting, Thompson says, “Stuff was flying around, hot and heavy. It’s like being in your first fire fight to watch something like that. So we sat there all evening and sort of sang Kumbayah… Well, that’s the wrong way of saying it. We sort of girded ourselves. ‘We’re going to do this. We’re really going to do this.’ That sort of thing. And then on March 10, 2000, I did the Tokyo announcement, Gates did the San Jose announcement, and J Allard did the London announcement. And we were off to the races.”

In retrospect, the Valentine’s Day meeting was the culmination of the many smaller go/no go decisions, and it would be fair to say that the project was approved several times leading up to that meeting. In fact, some people say, erroneously, that Xbox was approved back when Rick Thompson and J Allard were put in charge back around August/September. But this was it… the moment when it was full steam ahead.

One real irony is that the final project—the Xbox—was a dedicated game console, not the modified Windows box that Gates had wanted and that the Xbox team had initially proposed. Further irony was that the ex-3DO/WebTV/WinCE guys had wanted to do a console from the beginning, but it was ultimately the DirectXbox, which depended on the DirectX APIs, that prevailed. Whether, as some maintain, that was the Xbox team’s plan all along, or whether the concept evolved out of the research the team had done to convince Gates and Ballmer, the end result was something that most people thought would never happen—and, perhaps, almost didn’t: A Microsoft game console system.

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