Xbox Live Arcade Was Feared to "Completely Destroy" Console Biz, Creator Says

Xbox Live Arcade, Microsoft's digital games hub for the original Xbox and Xbox 360, was a contentious feature internally that "almost didn't happen," its creator Greg Canessa said in a new interview. He told IGN that XBLA was not part of the original design document for the Xbox or Xbox 360 and in fact some at Microsoft believed it would "completely destroy" the console industry by cannibalizing retail sales.

Canessa, who left Microsoft in 2007, explained that the overarching goal for XBLA was to create a place to spotlight indie games, casual games, retro games, and smaller games.

"Games that didn't otherwise have a voice," he said. "In some ways it was kind of the democratization of console gaming. That was the vision behind Xbox Live Arcade. And there were a lot of people internally that really had an issue with that.

"They really, to be honest, didn't understand it at the time. I don't fault them now, in hindsight. We were in the process of building a platform for the future, and a console, and our presence in the console space with the OG Xbox," he added. "A lot of these decisions were that far back. We were only in the console business for a couple of years."

Canessa went on to say that "legitimate" fears existed inside of Microsoft that XBLA would be bad news for the relationships the company had in place with big publishers.

"For a time, there was a fear that if we didn't do anything that a large publisher wanted to do, that we'd be pissing them off and they'd go away," he said. "These were real fears. There was a legitimate fear that Xbox Live Arcade was going to cannibalize retail and sales and completely destroy the console industry."

The thinking was that by offering games through XBLA at price points of $5-$10, it would impact the traditional $60 retail business model and "destroy the industry" as a result. This of course did not happen. Canessa, along with the help of Xbox 360 designer J. Allard and others inside of Microsoft, championed XBLA, eventually launching it to big success.

Also in the interview, Canessa pointed out that the 70/30 revenue split between developers and storefronts that it created with XBLA has become an industry standard today. He also talked more about the origins of XBLA and why Microsoft might be smart to resurrect it for Xbox One.

Head to IGN to see the full video interview with Canessa.

After leaving Microsoft, Canessa went to PopCap and then Blizzard, where he worked on Battle.net before shifting into a new role as Activision Blizzard VP for mobile. He now works at GSN as a senior VP.