In 1998, four engineers from Microsoft's Direct-X team, Kevin Bachus, Seamus Blackley, Ted Hase and Direct-X team leader Otto Berkes, disassembled some Dell laptop computers to construct a prototype Microsoft Windows-based video game console. The team hoped to create a console to compete with Sony's upcoming PlayStation 2, which was luring game developers away from the Windows platform. The team approached Ed Fries, the leader of Microsoft's game publishing business at the time, and pitched their 'Direct-X Box' console based on the Direct-X graphics technology developed by Berkes' team. Fries decided to support the team's idea of creating a Windows DirectX based console.
During development, the original Direct-X box name was shortened to Xbox. Microsoft's marketing department did not like the Xbox name, and suggested many alternatives. During focus testing, the Xbox name was left on the list of possible names to demonstrate how unpopular the Xbox name would be with consumers. However, consumer testing revealed that Xbox was preferred by far over the other suggested names and "Xbox
" became the official name of the product.
It was Microsoft's first video game console after collaborating with Sega to port Windows CE to the Dreamcast console. Microsoft repeatedly delayed the console, which was first mentioned publicly in late 1999 during interviews with Microsoft's then-CEO Bill Gates. Gates stated that "we want Xbox to be the platform of choice for the best and most creative game developers in the world."
The Xbox was officially announced at the Game Developers Conference on March 10, 2000. Audiences were impressed by the console's technology. At the time of Gates' announcement, Sega's Dreamcast sales were diminishing and Sony's PlayStation 2 was just going on sale in Japan. Gates was in talks with Sega's late chairman Isao Okawa about the possibility of Xbox compatibility with Dreamcast games, but negotiations fell apart over whether or not the Dreamcast's SegaNet online service should be implemented.
The Xbox was officially unveiled to the public by Gates and guest professional wrestler The Rock at CES 2001 in Las Vegas on January 3, 2001. Microsoft announced Xbox's release dates and prices at E3 2001 in May. The Xbox was then released on November 15, 2001 in North America.
Due to the immense popularity of gaming consoles in Japan, Microsoft delayed the release of the Xbox in Europe to focus on the Japanese video game market. Although delayed, the European release proved to be more successful than the launch of the Xbox in Japan.
The Xbox was the first video game console to feature a built-in hard disk drive, used primarily for storing game saves and content downloaded from Xbox Live.
The Xbox was the first gaming product to feature Dolby Interactive Content-Encoding Technology, which allows real-time Dolby Digital encoding in game consoles. Previous game consoles could only use Dolby Digital 5.1 during non-interactive 'cut scene' playback.