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Microsoft Xbox: the day Bill Gates almost lost a $15 billion business

At a 2000 meeting since dubbed the ‘Valentine’s Day Massacre’, Microsoft co-founder Bill Gates branded the Xbox an “insult” and was close to blocking its launch.

FILE PHOTO: Bill Gates, co-chairman of the Bill & Melinda Gates Foundation, attends a news conference at the World Economic Forum 2022 (WEF) in the Alpine resort of Davos, Switzerland May 25, 2022. REUTERS/Arnd Wiegmann/File Photo

Bill Gates is undoubtedly a successful man. One of the great entrepreneurs in history, blessed with a vision to start businesses at the right time, leading him to become one of the richest people in the world. Without a doubt, Microsoft, a company of which he is a co-founder, is his masterpiece, his great legacy. But also, like everyone else, he has made mistakes in his life. And he almost made one that would have cost him dearly: he considered blocking the launch of the Xbox.

Xbox almost canned at ‘Valentine’s Day Massacre’

Today, the Microsoft console is one of the most popular on the market, competing with Nintendo and the Sony-built PlayStation. Sales of the Xbox, as well as games and subscriptions to Xbox Game Pass, are worth about $15 billion a year to the company. A huge sum that Microsoft almost missed out on.

Ed Fries, co-creator of the Xbox, shared the story of the ‘Valentine’s Day Massacre’ with the specialised video game media outlet IGN. This is the striking name given at Microsoft to an important meeting in which the fate of one of the great consoles in history was decided, back in 2000, 18 months before being launched onto the market. A meeting that could have witnessed Gates’ “biggest mistake”.

As revealed by Fries, there were teams within the company that presented to Gates and Steve Ballmer, the leaders of the company at the time, the option of creating a video game console. The co-creator wanted to develop a console with a hard drive that was, in essence, “a PC in disguise”, as Fries called it. This would run a version of Windows, as is the case today with Xbox One. In the opposite corner were advocates of a traditional console, acting as a “continuation of the Sega Dreamcast line” .

Mention of Sony changes course of video game history

Gates sided with the Fries team, with the idea of running a version of Windows. The plan went ahead until they realised that the business plan would not be possible. So they were forced to change direction and create a ”closed” system to run the games. This ended in the aforementioned meeting with Gates and Ballmer, held on Valentine’s Day.

It was at this meeting that Gates was on the verge of making his big mistake. He even described the launch of Xbox as an “insult” to everything he had done within the company. Those present knew he’d be unhappy about the absence of Windows, but they did not expect him to be quite so angry. Ballmer, for his part, expressed concern at the amount of money they could lose on the project.

Then everything changed when Sony’s potential as a home-entertainment rival to Microsoft was mentioned. The PlayStation creators were “slowly invading the living room” and could be a “future threat”, one individual at the meeting said. It was then that Gates and Ballmer gave their go-ahead for the launch of the Xbox.