Microsoft's Xbox was the last great CES reveal

A billionaire, a renegade developer and a pro wrestler walk into a keynote...

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    CES was a different show 17 years ago. In 2001, the Best of Show award went to the DataPlay disc, a postage-stamp-size memory card that held up to 500MB of data. If you can't remember it, don't worry -- the company went out of business shortly thereafter as SD became the de facto standard. Microsoft was still the biggest tech company on the planet at that point -- Apple wouldn't release the original iPod for another nine months -- and each CES began with a keynote hosted by Bill Gates.

    The first 80 minutes of its 2001 keynote consisted of clunky tech that now, in some form or another, lives in Google Home or your smartphone. But then came the reveal of the original Xbox. It arrived with none of the fanfare we expect from modern tech presentations, but, unlike the Pocket PC voice-to-text demo that preceded it, the Xbox debut changed the company's future.

    For once, Microsoft was an underdog, going head-to-head against Sony, Nintendo and Sega for control of the living room. To help sell its vision, the company enlisted a veteran game developer with a penchant for flashy footwear and, of course, a pro wrestler. This is the story of that presentation, from the people who were there.

    Bill Gates has become a lot of things -- genius, billionaire, philanthropist, malaria's worst enemy -- but back in 2001, he was not an engaging public speaker. "For the first time, let me now unveil Xbox," he said from the Hilton Theater's stage. Gates then pulled a black-satin drape off a shoulder-height pedestal and there sat a big, black, vaguely X-shaped box, with a monstrously large gamepad encased in plexiglass below it.

    At that point, Microsoft was more or less known for three things: the Office productivity suite, its Windows operating system and a massive antitrust lawsuit. The former pair were things you used every day, but they had as much personality as you could fit into an anthropomorphic paperclip. The latter painted the company as a mustache-twirling villain.

    For the next 13 seconds, Gates stood idle with a vacant half-smile on his face, arms glued to the sides of his frumpy blue button-up, shoulders rounded over as he tried desperately to look approachable. According to people in the know, he had a bad habit of putting his hands in front of his face and tenting his fingers -- "doing the 'Mr. Burns' thing" -- which the various PR people around him had warned against doing on camera.

    The audience didn't yet know what this gargantuan new machine was capable of or how it would intrinsically change the company, but they clapped anyway for the console that would eventually cost Microsoft over $4 billion.

    The original Xbox was a perfect microcosm of the CES of yore: a massively ambitious piece of tech, but no one knew how it would work or fit into their lives. At the turn of the century, the biggest TV in most houses was a 27-inch standard definition CRT display with a bubble screen, not the $4,000 rear-projection HDTV units or flatscreens we have now. Broadband wasn't commonplace. We were used to saving game progress to memory cards or game cartridges themselves.

    In that context, the Xbox felt like it came from the future. It supported 720p HDTV over component cables. It had a built-in Ethernet jack and four controller ports. It had an 8GB hard drive not only for storing game data but for playing in-game music ripped from your CD collection, too. It would hit retail 10 months later for $300, around two years after Sony's PlayStation 2 was available. Over time, Sony added these features to the PS2 with sold-separately accessories and baked them into the PlayStation 3 five years later.

    "They needed to show people that this was either worth waiting for or that [Microsoft] understood where gaming was going to go," VentureBeat's Dean Takahashi said, "and you wanted to bet on them because you could get all this cool stuff." Prior to VentureBeat, Takahashi chronicled the Xbox and its successor's inceptions in his books Opening the Xbox and The Xbox 360 Uncloaked.

    Enter Seamus Blackley, taking the stage to a low-rent Atari Teenage Riot ripoff song in jeans and a tailored, untucked black oxford. The mood shifted. Gates' "geek's geek" persona took a backseat to Blackley's punk-rock attitude and self-deprecating humor. Suddenly, the keynote went from yawn-inducing to intensely watchable.

    Blackley was part of the "rebel force" inside Microsoft that was desperately trying to overturn all the things people didn't like about the company and make something cool. The Xbox was his and co-creator Kevin Bachus' baby. Onstage, Blackley's goal was to convince developers that Microsoft was listening to him and that the console would be easy to make games for.

    Before becoming what he calls an "inadvertent, unwilling" spokesman for the console, Blackley was a game developer at Looking Glass Studios where he worked on System Shock and Ultima Underworld. He also was the driving force behind one of PC gaming's biggest flops, Jurassic Park: Trespasser, essentially a broken tech demo from Dreamworks Interactive.

    Despite that failure, he'd built a reputation in the game industry for his aptitude at programming game physics and working with 3D graphics. Fast forward a few years and he was helping comb Gates' hair in the green room before the pair revealed the console.

    Blackley said every disaster scenario was running through his mind; you could see it racing across his face as he anxiously stalked the stage. There was a chance the demos would break or, worse, that the prototype console wouldn't even turn on.

    "At that point, I'm feeling unbelievably tense because I'm looking at Bill as the guy who had potentially just spent several billion dollars on an idea that ... I thought of on an airplane and told my friends about. And that if it doesn't work, this man's going to kill me," he recalled. "I'd gone from being nervous and awestruck by the man to being genuinely fearful of having led the company down a multibillion-dollar rabbit hole."

    To reassure the developers in the audience that he and his team knew what they were doing, he donned a pair of bright red shoes. Using the specific hue in games was off-limits at the time because it and a few others would overdrive the color circuit on NTSC TVs. Wearing them onstage was a subtle indicator to the audience of 100 or so "super-important" people who he needed to make titles that his team knew the subtleties of game development, he said.

    "That was really a thing I did for game developers because the idea of Microsoft doing a game console was incredibly unpopular still," he said. "The disdain and hate for Microsoft products, being the evil empire and all, the antitrust [lawsuit], were big things I had to contend with to get people to make games for the console. So I wore 'illegal red' shoes and told people I intentionally did that."

    Did it work?

    "I don't know that anybody who is skeptical ever has that moment and says it, right?" he posited. "But what happens is people will show up and make jokes about it and you can talk to them. And then they'll take a look [at your project]."

    To show his success at convincing developers up to that point, Blackley rolled a sizzle reel of game designers breathlessly talking about how the Xbox would unlock gaming's true potential. "The constraints normally that we have to put up with with consoles, we've been freed from, really," Herman Serano from the Malice team gushed.

    "The life that's in Oddworld is going to manifest itself more clearly," series creator Lorne Lanning said over a cheesy techno beat while a neon-green X traced behind him.

    "You're gonna see musculature bulging like you've never seen before," Mike Rubinelli of WWF Raw is War boasted. "You'll probably be able to see veins pulsating if you want. You might even see somebody get goosebumps if the game calls for it. It really does represent the next generation of gaming."

    Not all of these pie-in-the-sky pronouncements came to pass, of course. The Xbox might have been the most powerful, but by the time it was in stores, Sony had an insurmountable 25-million-unit lead. Third-party developers created games for the most popular console's specifications, and as such many of the advanced hardware features Blackley worked so hard to include were unseen outside of internally-developed games like the ones he was about to demo.

    Blackley picked two titles to demonstrate the Xbox's power: Oddworld: Munch's Oddysee and Malice. Both showed off just how advanced the Xbox was compared to the PlayStation 2 in terms of graphical prowess and fidelity. They're hard to watch now, mainly because of the low-res video capture that was available at the time. But in person, the lighting, real-time shadows and sheer amount of creatures onscreen got people excited.

    "Even though the [hardware] announcements were expected, the demos were so impressive that they got everybody really riled up," Takahashi said.

    The demos were only using about a fifth of the console's total power, according to Blackley.

    One of CES's time-honored traditions is tech companies rolling out the biggest celebrity possible to show how cool their brand is by association. Microsoft's keynote in 2001 was no different.

    Pro wrestling's popularity was at a fever pitch. Commercial breaks during weekly Monday night broadcasts from the World Wrestling Federation (neé World Wrestling Entertainment) and World Championship Wrestling were dominated by video-game ads. Blackley forged a partnership with the now-defunct THQ to produce an exclusive WWF game for the Xbox.

    "I really wanted to demo this title very badly, but I didn't want to do it just on the fifth-powered system," Blackley said before walking offstage. "So I arranged to bring a 100 percent power Xbox demo system. I want to show you that now."

    Cut to Rocky "The Rock" Maivia's WWF entrance video and theme song playing in the same venue where Elvis Presley performed 636 consecutive soldout shows. The actor we now know as Dwayne Johnson makes his way from crowd to stage bathed in a sea of colored lights.

    Johnson never left character. He was a hulking superhero-size human in a designer suit and shades who was used to arenas full of wrestling fans hanging off his every syllable when he took the mic in his underwear. The self-described "most electrifying man in sports entertainment" spouted signature catchphrases, spoke about himself in third-person and never took his sunglasses off as he bantered with Gates onstage.

    If Blackley sounded excited during his intro, though, it was a ruse. The marketing team apparently came up with the idea and told him about it afterward. "I may have actually been super-irritated by it and written nasty emails," he said. "I actually don't remember. But it occurs to me that I feel like I may have done that."

    There's another wrinkle: THQ provided Johnson as a favor to Microsoft, and in those last five minutes of the keynote, Gates never thanked the publisher for that onstage. According to Takahashi, THQ CEO Brian Farrell said, "I scratched their back, and mine is still itching."

    The reveal transcended CES. Microsoft used its position as a broad tech company to compete on a playing field where, at the time, Sony and Nintendo couldn't. That keynote was a "bully pulpit," in Blackley's words. While the Xbox only occupied a fraction of Redmond's stage time, it signaled that the company knew how to talk to gamers and finally made Microsoft's ambitions to take over your living room real. Like so many CES reveals, though, it was ahead of its time.

    The Xbox went on sale November 15th, 2001. It went on to sell 24 million units to the PS2's estimated 150 million. Facing mounting losses on the hardware (mostly due to the cost of hard drives), Microsoft effectively killed the console four years later when it released the Xbox 360. That console beat the PS3 to market by a year, giving Microsoft an advantage it hadn't enjoyed previously. The Xbox 360 would go on to sell 84 million units, leading sales for most of that console generation.

    "It isn't uncommon to see something released at CES that, at that time, doesn't make sense, but then four or five years later comes to market and it's a huge hit," Consumer Technology Association Vice President Karen Chupka said.

    Gaming took a backseat at CES when Microsoft bowed out of the trade show in 2012, and while Sony has hosted a few keynotes, the PlayStation has never been the focus. Maybe that's why the 2001 address was so special.

    Click here to catch up on the latest news from CES 2018.

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