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The implications of the shift to digital distribution in the games market is heightened due to an advantage not found with video—not only can distributors of product made for the major console platforms (Nintendo Wii, Microsoft Xbox, Sony PlayStation) eliminate inventory risk if games are downloaded via online networks such as Xbox Live Arcade, but game distributors also have the ability to update games with patches, new levels, and character add-ons.

sort of Silicon Valley context, but you can program faster, you can get functionality faster in the PC C++ world. All of the games for the Xbox are written in Microsoft C++. The same goes for games on the PC. They’re incredibly sophisticated, hard things to do, and these great tools have been developed thanks to the gaming industry. There were more smart programmers in the gaming industry than anywhere else. I’m not sure the general public understands this. It was also 2000, and there were not the huge software libraries for Linux that you would find today. Microsoft had huge support libraries. So you could get a DLL that could do anything, but you couldn’t get—you couldn’t get Linux libraries that could do anything. “Two of the guys that left PayPal went off to Blizzard and helped create World of Warcraft. When you look at the complexity of something like that living on PCs and Microsoft C++, it’s pretty incredible. It blows away any website. “In retrospect, I should have delayed the brand

The CES is the world's largest annual trade show for consumer technology, with more than 140,000 attendees. Many innovative products have debuted at the CES, including the videocassette recorder in 1970, the camcorder in 1981, digital satellite TV in 1994, HDTV in 1998, Microsoft Xbox in 2001, and Blu-ray in 2003. The show is the epicenter of electronics launches in the world.

I mean, this is going to sound like heresy in a sort of Silicon Valley context, but you can program faster, you can get functionality faster in the PC C++ world. All of the games for the Xbox are written in Microsoft C++.

Some early supercomputers ran on around 13,000 transistors; the Xbox One in your living room contains 5 billion.

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If you have an iPhone, Apple could have your address book, your calendar, your photos, your texts, all the music you listen to, all the places you go—and even how many steps it took to get there, since phones have a little gyroscope in them. Don’t have an iPhone? Then replace “Apple” with Google or Samsung or Verizon. Wear a FuelBand? Nike knows how well you sleep. An Xbox One? Microsoft knows your heart rate.1 A credit card? Buy something at a retailer, and your PII (personally identifiable information) attaches the UPC to your Guest ID in the CRM (customer relations management) software, which then starts working on what you’ll want next.

The games industry calls this “first-party content,” and it can be a serious investment. Over the years, Microsoft Xbox has taken this strategy to an extreme, buying a large number of studios and bringing them in-house. This isn’t a small outlay of cash—Microsoft now owns nearly a dozen video game studios, including Mojang, the maker of Minecraft, which they bought for $2.5 billion in 2014. It might seem expensive, but this is what’s needed to win in the video game console market. Sometimes, you just have to do it yourself. Reddit didn’t pursue this type of strategy, but it could have. There could have been a world where Reddit built many internal studios—one for their “cute” sub-Reddit community, another for sports, yet another for music—and hired full-time moderators as employees of those studios to create the necessary content. While this isn’t a common strategy for social networks, it’s also not crazy. In recent years, we’ve seen players like YouTube in video and Spotify in podcasts begin to license and create more first-party content to accelerate their services.

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