LAS VEGAS--On the opening day of the Consumer Electronics Show, GameSpot spent some time with Cameron Ferroni, the general manager for the Xbox software platform team. We asked Cam to both look back on the division's sizzling performance in the latter half of 2004 and open up and reveal as much as he could about plans for his division in 2005.

　　Cameron Ferroni

　　GameSpot: It's a new year and time for some reflection. What's your assessment of your 2004 performance and what are you looking forward to in 2005?

　　Cameron Ferroni: I'm actually thrilled. It's interesting, I've been on the team for five and a half years now, and it's the first time I can actually say we won. November, December: 40 percent share in the United States. That's a big deal. We took first place.

　　So we're really excited about that. We've had some great content. Fable has sold over 1.3 million units. Halo 2 sold over 6.3 million units, with first day sales of $125 million . It's just become a total pop culture phenomenon, which is great to see.

　　And Xbox live is doing really well as well. We've had over a million unique people play Halo 2 online, which is outstanding. 69 million hours of gameplay on Halo 2 alone. You do the math. It's only been out for eight weeks, so you've got 69 million hours, a million people, eight weeks. That's like nine hours per week, per person. It's nutty. It's absolutely nutty.

　　GS: And looking ahead to '05?

　　CF: Looking forward, we've got some great content coming. We've got Forza Motorsport. We've got Jade Empire. We have a lot of great games this year, and we hope to build on that lead and start to take the battle to Sony.

　　GS: Speaking specifically on the software side of things, the Xbox portfolio has become a lot more diverse. You've done the music mixer product, and you have the media extender kit. The platform is evolving. It's not just for games anymore. Is that going to continue in 2005?

　　CF: Absolutely. One of the things that I think about a lot, and I realize the more I talk about it, the more it sinks in with me, is that it's all about the software. It's all about the evolution of the software. When I think about Xbox Live, for example, and where we need to go with Xbox Live and what we need to do in order to get from that, we're on track for a million and a half users for this fiscal year, and I'm pretty sure we're going to clear that. But you want to get to the 2 million, to the 5 million kind of mark.

　　GS: What's the strategy there?

　　CF: You've got to make it more approachable. You've got to make it easier to connect the Box. You've got to make more content that appeals to a broader audience online so it's not just first-person shoot-'em-ups. If you go play MechAssault today, the only people that are playing it are just amazing at it now. That's where it's evolved to. You need more content where you don't need to be great to have fun, and all of that comes through software. All of that comes through innovations in software.

　　GS: Where's the room for improvement?

　　CF: We need to do a lot better integrating with Windows and with the PC and with mobile devices. The fact that we have a friends list in Xbox Live that's different than my instant messenger friends list is crazy. It was a necessary thing that we had to do in order to get up and running, but we recognize we've got to bring those communities together. You have got to bring that presence together so it doesn't matter if I'm on my mobile device, or on my PC, or on my Xbox. I can see what my friends are doing, what all my friends are doing, not just my Xbox friends. So there's a lot of room for innovation, and it's all primarily through software.

　　GS: Microsoft has introduced video conferencing in the feature set for the Japanese Xbox. Will we see video conferencing or other advanced communication features such as voice-over-IP stateside?

　　CF: I think it has a lot of appeal. We haven't done a lot of voice-over-IP specifically, but we do support voice extensively over Xbox live. On the video chat, there are a couple of factors there. First off, Japan's got the bandwidth to handle it. It's kind of funny. Five years ago we talked to the Japanese teams, and they were like: "You can't go broadband. Broadband? Everyone's on dial up." And now they have faster downstream and upstream bandwidth than we have here in the States. So they've got a unique opportunity there, and that was a good market for us to test that out first.

　　GS: Looking at Xbox Live, how close do you think you guys are to meeting the goals you had for the service? It's not like one of those things that you can say: "Well, It's out. It's done."

　　CF: It'll never be done. That's one of the interesting things about it. How close are we? I'd say we've honestly realized probably 80 to 90 percent of our original vision of what it could be, and that vision started. I mean, I wrote the first online think-paper for the console, literally, five and a half years ago. So I think at this point we've realized the majority of the stuff we envisioned at the time.

　　GS: So, you folks are satisfied with your performance?

　　CF: We're completely not satisfied. We don't think we're done. As we learn more about our customers and what they want and what they're looking for, we're going to constantly want to innovate. We've built an amazing service that satisfies the hardcore gamer. The voice stuff, the friends stuff, the service, the updates, the anticheating stuff, the stats, making it easy to find people, making it easy to hop into games, great game experiences. We nailed all that, but we've got to go a step further. We've really got to start looking at integration with things like Passport, Messenger, and better communication across multiple devices. We've got to be looking more at various media and entertainment scenarios and how those are going to play out...and the role that Xbox and Xbox Live plays within those worlds and those spaces. There's a whole new five-year vision to be executed against, but over the last five years, we nailed our first five-year vision pretty well.

　　GS: The next Xbox is on the horizon. Looking back at the launch of the Xbox through now, what have you learned, and what key points do you feel will help make your next system successful?

　　CF: Obviously, we're not talking about the next generation yet, but in terms of what we've learned this generation that has helped us, and frankly, what's helped us get to the number one spot this holiday, I don't even know where to begin. We've learned so much as a company and as a player in this industry.

　　GS: Maybe you can start with the biggest lessons…?

　　CF: I think one of the biggest lessons that we've always known, but have really come to roost for us, is that execution is critical. The number one thing you can do in this business is hit your dates. It seems like the most fundamentally silly thing, but it's just so critical to say: "Look, this is what we're going to do. We're going to stay focused on what we're going to do. We're not going to get distracted by a bunch of random periphery kind of stuff. We're going to nail it. We're going to hit our dates, and we're going to deliver on what we commit to, and we're not going to overpromise, and we're not going to underdeliver. We're going to underpromise. We're going to overdeliver every step of the way and really make it happen."

　　You can't afford to slip. That's the big thing. Whether it's slipping a date or slipping a game or just slipping up in execution in not having enough units on shelf, [or] in not having enough peripherals, [or] in not having those things. That's been a real key lesson: staying laser-focused on what you're trying to accomplish and not getting distracted.

　　GS: How do you see future hardware battles shaping up?

　　CF: Something that sets us up again, and why this holiday was so successful and just bodes well for us, is now we're in the business for five years. We've established ourselves as a leader in this business. People see us a leader in online. People see us as leader when it comes to the attach rates of software titles. People see us as a leader when it comes to all of our processes--the way we work with our third parties, the way we work with our retail partners. We've established those relationships, and we're seen in a leadership role in all of those areas. And that's something that just took time. It takes time to come from nothing to having those relationships and knowing the people and knowing the intricacies of the industry.

　　We kind of came on the scene, and we made a few mistakes, and we learned from those mistakes, and we learned what it meant to be a great partner to our publishing partners and our retail partners. And now, they're looking at it going, "You're well on the way to 20 million." They're just dying to publish for us. They just want to throw content at the Box. It's a huge captive audience.

　　I think those are probably the two biggest things, and I'll throw a third one in: We've learned a ton about online. We went into it knowing a lot about online. You look at the team I hired to do most of the Xbox Live stuff and they're made up of folks from Messenger, Passport, SQL Server, Exchange, and Windows. We've got some of the cream of the crop in terms of people who understand networks, people who understand service, people who understand what it takes to run a service versus shipping a product, which is a very different beast, and we've still learned about what it means to manage a community, to run a 24/7 service, to be constantly updating it every year with new features, and listening to the customers. We've just had a huge head start there really managing that community and really managing that service. It's all evolutionary from here.

　　As long as [we] execute and don't fall down, it's going to be a fun fight.

　　GS: When talking about leadership, the next big thing is going to be when everybody announces their next-generation system. It's going to be like a Mexican standoff, almost like a game of chicken to see who's going to announce first. Do you feel that you have enough of a leadership position that you don't have to match Sony step for step?

　　CF: I think the most important thing for the next generation is we need to launch, not necessarily before them, but at a minimum, they can't have a holiday advantage. The most important thing in any region is we both have to be there. Well, I don't care whether they're there [laughs], to be honest with you, but there's no way that we can let them have a one-holiday advantage.

　　GS: As Sony did previously?

　　CF: You look at this generation and they had an 18 month head start. If they didn't have an 18-month head start, this would have been a very different battle. Who announces what, when, where, how, you know what? I do think we're in a leadership position at this point. I think we're in a position where none of us need to necessarily respond or react. I think you've got to march to your own drum when it comes to that particular element, but when it comes to being available for Christmas, if you've got a Christmas with one but not the other, it's not going to be theirs.

　　GS: Building on the success of Xbox Live, you spoke about integrating more media center-type features. Would that be built with Xbox Live or built on top of Xbox Live almost like a new Xbox environment.

　　CF: It's actually something we're thinking a lot about right now in terms of the evolution. Our strategy is and always will be that the PC is the hub of your media. No one wants to manage 5,000 songs on the Xbox. No one wants to store them there. It's not where you create playlists. It's not where you burn CDs. It's not where you copy music to a portable device. The PC is the hub for that information.

　　GS: Where does Xbox fit in?

　　CF: The question is: What is the right experience on an Xbox? Is it fully remoting everything from the PC, which is what we've done with Media Center Edition? We certainly think that's a key piece of it. Are there scenarios where you want to have services available directly to the Xbox? Potentially, it's something we need to understand from customers.

　　The reality is almost every Xbox will be in a home network environment. Almost every Xbox will exist in a home that has a PC that has an Internet connection. So understanding exactly the role of the Xbox in those scenarios is something we're spending a lot of time on talking to customers to understand what they want. We've got some ideas of our own, but at the end of the day, it's the consumers that matter.

　　GS: Will there be a slimmed-down version of the Xbox, like the PlayStation 2 redesign?

　　CF: I don't think so. You never say never, but it's a pretty major, massive engineering undertaking, and I'm not sure that the bang for the buck is necessarily there. The reality is that no matter what we did to the Box, there's still a hard drive in there. Sony may actually get a slimmed-down one, and, oops, they don't support the hard drive anymore. It's a little strange, and that's not something we could ever get away with, so I'm not sure if the bang for the buck would be there with our current architecture. But you never know.

　　Click here for all of GameSpot's CES 2005 gaming hardware coverage.