In this episode of Acquired, hosts Ben Gilbert and David Rosenthal, along with special guest Ed Fries, former Microsoft executive, delve into the acquisition of Bungie by Microsoft. Fries played a crucial role in the acquisition, which brought the iconic video game franchise Halo to the Xbox platform. The conversation covers the early days of Bungie as a Mac game developer, the financial struggles leading to the acquisition, and the subsequent success of Halo, which became synonymous with Xbox and revolutionized multiplayer gaming. The discussion also touches on the importance of maintaining a company's unique culture post-acquisition and the eventual spin-off of Bungie from Microsoft. The episode highlights the strategic significance of the acquisition in establishing Xbox as a major player in the console market and the broader implications for the gaming industry during platform shifts.
"Hey guys, it's Ben. The audio in today's show is a little degraded since we recorded from Skype, but we're super pumped about the show nonetheless."
"And we're here today to talk about the Bungie acquisition by Microsoft."
The quotes explain the context of the episode and the main topic of discussion, which is the acquisition of Bungie by Microsoft. The speakers are setting the stage for the conversation with Ed Fries, who played a significant role in the acquisition.
"So most people are probably familiar with Bungie, the creators of the video game franchise Halo. The company was founded in the early 90s by two undergrads at the University of Chicago, Alex Seropian and Jason Jones."
This quote provides a brief history of Bungie, highlighting their early success and the unveiling of their most notable project, Halo. The information is relevant for understanding Bungie's position before the Microsoft acquisition.
"We got final approval to make the Xbox at a meeting we called a Valentine's Day massacre that happened in February 2000."
"And so starting then, my life was really crazy because I knew that I needed a portfolio of games ready for launch in November 2001, which was less than two years away."
These quotes explain the urgency for Microsoft to secure game titles for the Xbox launch and set the stage for why the Bungie acquisition was strategically important. Fries' personal interest in Bungie's games also played a role in the acquisition process.
"So I had to call up the head of Take two, which is a guy named Ryan Brandt. And we kind of had to work out between the two of us how to split the company into two pieces."
This quote details the negotiation process between Microsoft and Take-Two Interactive, emphasizing the complexity of the deal and how the companies reached an agreement on dividing Bungie's assets.
"Steve Jobs was not happy. So, I don't know, a few weeks later, once the deal was announced, I got mail from Steve Ballmer or got a call from Balmer or something, and it just said, steve Jobs is mad about that you acquired Bungie. Call him and try to calm him down or something like that."
This quote captures the fallout from the acquisition, specifically how it upset Steve Jobs and led to Ed Fries having to negotiate further to smooth over relations with Apple. It highlights the broader impact of the acquisition on industry relationships.
"And Steve Jobs was really friendly on the phone. He said, that sounds great. Here, let me give you a guy on my team."
This quote indicates the ease and swiftness with which Steve Jobs facilitated the beginning of a business relationship, setting a positive tone for the partnership.
"We really don't want you guys to come in, go check into your hotel, and we'll call you after dinner."
This quote reflects the unexpected changes in the planned rehearsal schedule for Macworld, leading to no rehearsal for Ben Gilbert and Alex Saropian.
"Okay, we get no rehearsal. We're going to go stand in front of 10,000 people and we're going to say something for a minute or so."
The quote captures the nerve-wracking situation of having to speak at a major event without preparation, highlighting the unpredictability of such engagements.
"Halo goes on to the first. Halo has, I believe, a 50% attach rate to all xboxes sold within the first year of launch."
This quote summarizes the remarkable commercial success of Halo, which became a key selling point for the Xbox console.
"I hoped it would be. I have to tell you that I wish the ride on the inside was as smooth as the one you paint on the outside."
Ed Fries expresses the contrast between the external perception of Halo's success and the internal challenges faced during its development.
"We want all these walls torn out, and we just want a big open bay."
This quote illustrates Bungie's preference for a collaborative workspace, which was at odds with Microsoft's traditional office layout.
"Once things start to sell and reviewers get their hands on it, it becomes clear really quickly."
Ed Fries discusses how the market response and reviews quickly clarified which games were successful post-launch.
"But what made Halo was multiplayer and networked multiplayer."
David Rosenthal emphasizes the significance of Halo's multiplayer capabilities in its overall success and popularity among gamers.
"So people came up with all kinds of. I remember you could hook your Xbox to a pc and then people would do the."
The quote explains the creative solutions players used to play together before Xbox Live was available, highlighting the community's desire for multiplayer experiences.
"How much did you guys either, a, will both a, think about that beforehand in terms of this incredible experience of playing with your friends, but then b, how much did that shape the eventual launch of Xbox Live and Halo two being to my mind, that first real aa style, fully realized experience of what playing with other people and your friends anytime you wanted could."
This quote reflects on the consideration of player experiences in shaping Xbox Live and Halo 2, suggesting that player desires were a significant factor in their development.
"It's amazing how much that team accomplished in less than two years. I mean, that is not very much time in a game business."
The quote emphasizes the remarkable achievements of the Halo team in a short period, highlighting the breadth of features in the first Halo game.
"For me, it was like this nightmare, like Halo two, it's all screwed up. And then Jason comes back and he's like, I can fix this."
This quote conveys the personal stress and challenges faced during the development of Halo 2, illustrating the complexities behind creating a successful game.
"There's this incredible parallel here to the story of Toy Story as it was being developed, where that went totally off the rails."
The quote draws a comparison between the development struggles of Halo and Toy Story, suggesting that such challenges are common in creative industries.
"After Halo two shipped, the bungee guys felt like that deal was not followed the way they thought it should be. And they decided they would be better off separate, as a separate company again than part of Microsoft."
The quote explains the reasons behind Bungie's decision to spin off from Microsoft, highlighting disagreements over royalties and the desire for independence.
"I think the more you can do to preserve the culture of the company, the better, because I think that's really what makes them unique."
This quote underscores the importance of maintaining the distinct culture of a creative team, as it is integral to its success and the quality of its products.
"Having a strong culture that attracts specific people that fit within that culture, and really enforcing it and really making it that culture ends up just expressing itself in the product."
The quote highlights the significance of a strong, distinct culture within game development teams and its impact on the final product.
"They really got separated from the teams. And all of a sudden it was sort of an us and them kind of thing."
This quote discusses the negative impact of separating marketing teams from development teams, emphasizing the need for collaboration to ensure a unified approach to game promotion.
"But that's the kind of stuff that happened when there isn't this integrated team working together all the way through so that they really understand the vision for the product."
The quote highlights the importance of an integrated team in understanding and executing a product's vision, suggesting that a lack of integration can lead to issues.
"So with functions being, you have all the marketing people together for all the business groups and all the tech people together for all the business groups, versus having these sort of family units of these separate divisions where everyone's totally integrated."
This quote explains the difference between functional and divisional structures, emphasizing the complete integration within divisions versus the grouped functions across all business groups.
"For me it's interesting, I really pegged Halo and Bungie as a product acquisition for Microsoft."
Ben considers Halo and Bungie's acquisition as product-focused, given Halo's continued association with Xbox despite Bungie's departure.
"I'm sticking with the people for now, it's one thing to create a franchise and it's another to continue."
Ed argues for the significance of the people behind the creation of Halo, suggesting their creative contribution is vital.
"The Bungie acquisition represents the power of whenever there's a platform shift in technology."
David interprets the acquisition as an example of how platform shifts can create new opportunities and industry leaders.
"Maybe it's not just one platform shift. Maybe it's just a natural evolution of each market."
Ed suggests that the acquisition reflects a natural market evolution where acquisitions become more frequent as scale becomes increasingly important.
"I really don't. I think Halo is hugely important to the success of Xbox."
Ed expresses his opinion that Halo's success was fundamental to the overall success of the Xbox platform.
"And then where we see where it's gone today and kind of being part of the same platform as windows and doing so much more than gaming."
Ben acknowledges the growth and integration of Xbox within Microsoft's broader ecosystem, highlighting its significance beyond gaming.
"I think I removed the plus because of that. So it's an 'A' for me."
David gives a high grade but withholds the highest mark due to the belief that there was unrealized potential in the acquisition.
"I'll go with an 'A' because this was the number one one that I was involved."
Ed self-grades the acquisition highly based on his involvement and its success.
"So many great moments. Thanks again."
The hosts thank Ed for his participation and valuable contributions to the discussion.
"Take it easy, guys."
The conversation ends on a friendly note, with an appreciation for the discussion and a farewell.