Phil Spencer On Xbox's Unusual Strategy, Working With Sony, And More

Xbox chief Phil Spencer has heard from the sceptics. They think that what he’s doing with Xbox means that Microsoft is giving up on consoles, or even going third party. That’s all wrong, he told me during an extensive interview in Los Angeles last week, where we discussed his vision for Xbox, the recently announced potential gaming deal between Sony and Microsoft, and whether he’d ever want to put Gears of War on the PlayStation 4.

(The following transcript has been lightly edited for clarity.)


Stephen Totilo, Kotaku: I want to talk first just on a platform level. I would describe what you and your team are doing these days as “refreshingly radical” in terms of how you’re running a platform.

You’ve really broken down a lot of walls and done a lot of things that, in the past, would have been thought of as things a platform holder wouldn’t do. As a thought experiment, I thought that if PlayStation was doing what you guys were doing, last year,God of Warwould have come out day and date on PS4 and PC.

Phil Spencer, Xbox: Right.

Totilo: I wouldn’t have necessarily had to pay $US60 ($87) for it. I could have gotten it as part of a subscription that got me a lot of games. And at some point in the future I might be playing it without even needing a PlayStation by just having it streamed to me.

Spencer: Yeah.

Totilo: I’m curious how far you see this vision extend, because I know some people wonder: “Does Xbox even need to have a box?” long-term. Does it need to have all its games all on one device anymore? Where does this go eventually?

Spencer: We use this tagline both internally and externally: Play the games you want, with the people you want and we say on the devices [you want], which you can think about as “anywhere.” And we are driven by that. We actually think two billion gamers on the planet, the size of the business that gaming is today, that for us the industry continues to grow when we reduce friction to people coming in.

The scenario that always just drives me crazy is, I’m a parent, you’re a parent, we live in the same neighbourhood, we have kids, you go into Best Buy and you happen to buy an Xbox.

I go into Best Buy and happen to come out with a PlayStation. Our kids want to play Minecraft together, and they can’t. And I think overall, as a gaming industry, how does that grow gaming?

It’s changing, it’s not just us. We’ve made great inroads with Nintendo. But this started when we were going to ship our first-party games on Xbox and PC at the same time, a few years ago.

There’s always the core that kind of comes back [and says]: “You’re reducing the need to buy an Xbox.” I actually find that in reality people play on a console because they enjoy playing on a television on the couch with a controller in their hands, and it’s an experiential thing more than it is trying to sell an individual device. To shorten it: We focus on the player; we don’t focus on the device.

Totilo: But you can make enough money doing what you’re doing? This is a business.

Spencer: This is easy. The business is selling software and services. The business is not how many consoles you sell. The consoles are not where the profit in this side of the business is made, which is where the whole: ‘Who’s selling more consoles’ at any one time as the kind of root good of who is doing well in the business is just not true.

You have other companies entering gaming who don’t even have a console as part of their equation. It’s all about how many games are people playing. And how much people are spending playing those games and how often they play.

Totilo: So if you had your way, would you be selling Gears on the PS4 this September?

Spencer: I think the experience we bring to the family room with Xbox and focusing on things like compatibility and focusing on things like cross-play is actually important to where we see gaming growing, which is why we are focused on consoles and spending a ton of money and resources investing in Scarlett. The same thing on PC.

So, today, people are saying: “Are you going third party?” Whatever that means. But the idea that we are a platform company continues to be true, and we think about how that platform infrastructure could grow. And we think having the world’s most powerful console, having a great Xbox in the home, is a critical component to that.

Totilo: Yeah, but you value having Cuphead and Minecraft be able to break those traditional boundaries and wind up on the Switch…

Spencer: With Xbox Live so that everybody is playing together….

Totilo: So, to go back to that, would you value at some point having a Gears or a Halo on a PlayStation or a Switch?

Spencer: The games themselves are critically important to players and people playing. But ensuring that you have a connected ecosystem with the players, where people’s save game and their state and their friends list and their entitlements move seamlessly from every ecosystem—from every device—that they want to play on is critical. There aren’t other systems where we can go do that today.

Today on the Switch, what we’re able to do is we have Xbox Live on the Switch so we can keep those communities connected. And we have, as you pointed out, a certain number of franchises that have shipped over there.

But in the end we think us having a native platform in the home for years is going to be critical for to continue to push our vision of where the gaming platform should be.

Totilo: So where would you draw the line between which games you’d value seeing on other platforms? And which you would not?

Spencer: The vast majority of what we do is going to be on Windows, it’s going to be on Xbox and it’s going to be on xCloud. And the nice thing about xCloud is that it is an Xbox in the cloud and so we don’t actually have to go build another version of the game.

That is a distinct focus for [Xbox games chief] Matt Booty and the team. We value the relationships we have with the other companies that are out there. We think that we learn from them, we think we can help gaming grow all up with cross-play, cross-buy, cross-progression, all these things that we focus on. We think we’d be incredibly limited in pushing that vision if we weren’t strong on console and growingly strong on PC.

Totilo: In terms of partnerships and surprising things, the announcement about a month ago that there’s a partnership between Sony and Microsoft that is gaming-related startled a lot of people and confused some people. Can you talk about what that deal is, where it comes from, and what it means if I think of the world in terms of Xboxes and PlayStations?

Spencer: We should start, just so we’re clear, that it’s a memorandum of understanding. It’s the beginning of the kind of conversation. Sony and Azure looking at the future of cloud gaming.

We look at what you’re going to need in order to be a future gaming platform—content, community, and cloud are things that we focus on—and there are only a couple of companies on the planet that really have a global cloud that can reach gamers everywhere. Today, it would be us and Amazon in terms of the scale. Google’s building their cloud.

So I think when you’re another gaming company and you’re looking for who you’re going to partner with, you could either go and invest tens of billions of dollars in trying to catch up, or you can figure out who your partners are. And the nice thing for us is—you can focus on Sony, you can focus on a lot of companies—we have this thing called Microsoft Game Stack.

We announced it at GDC: it’s DirectX, it’s Windows Studio, it’s Azure. Even [Google’s Phil] Harrison when he was on stage announcing Stadia was showing Havok, was showing Digital Studio, was showing things that we build—we’re going to have platform components, as Microsoft and as our gaming org that competitors use.

We do think about the strength that we get as our platform grows and having great partnerships with gaming companies helping us grow that platform strength is important to us.

Photo: Christian Petersen, Getty Images

Totilo: You could have blocked that memorandum? You could have said: “We shouldn’t work with these people. We’re competing with these people?” Would that not have been an option or a thing worth doing?

Spencer: It’s just kind of counter to the strategy and what we are as a company. But I’ll say this: I actually think gaming is a better place because of the other brands that are there.

In the last 20 years, the number of gamers on the planet has tripled. Gaming’s a $US150 ($218) billion a year business, and it's growing double digits. I don’t see us succeeding as necessarily requiring others to not succeed.

I’ve said this publicly before: I think the role that those other gaming companies play in gaming is critical. We’re a big publisher on those platforms. We have great relationships with them.

So [instead of] blocking them so that it somehow kind of minimises their impact on the future growth of gaming, I’d rather find ways of working with partners to help grow gaming. I just think it’s better, because it’s not a fixed market. It’s a market that’s growing. There are customers all over the planet that we haven’t reached that love to play video games.


We’ll have more from my chat with Spencer soon, as we discuss online toxicity, first-party game quality and more.


Comments

    Good guy - will deserve a spot in the gaming hall of fame - he's done a lot.

    Alex - the ads are causing scrolling mayhem. Worse than usual.

      Not kidding, if it's not causing chaos to commenting and battery life it's flat out crashing every five minutes.

    Jesus, Stephan, way to ask the tough questions.
    Sorry to be sarcastic but I've seen this interview already, multiple times in the past few months, almost word for word across business and gaming sites around the net and while some have tried to push harder questions, this one reads like a gushing setup on your behalf before you press play on the Spencer investor PR video tape that's been doing the rounds everywhere.

    I admit I'm a PlayStation owner for life but for four glorious years (and a bit) I was a massive Xbox fan and I really, really want to be again but at this stage it's like watching/reading an infomercial where interviewers are playing the faux critic who slaps their face in Home Alone style surprise with every bit of vague information.
    (As we aren't even getting a free set of steaks knives)

    Don't get me wrong, I don't want to diminish what Xbox has been doing lately, it's nice but that's about as far as it goes and we've even hearing this same talk for years now, the only choice I'm seeing is grab a PS5 and upgrade my PC.

    Great, now I sound like james.exe

      grab a PS5 and upgrade my PC.
      And then you can play Microsoft games on your PC, so you, Sony and Microsoft win! He says in the article he doesn't really care about selling the most consoles as that isn't where the money is. So you upgrading your PC and then maybe signing up for Game Pass or buying a Microsoft published game on Steam etc is still a win for them.

        Exactly my sentiments. Microsoft doesn't care about the console as much as Sony does, but they have to have it there or everyone will jump ship to Playstation. This way they still have a horse in the race, but win if you are a PC gamer or play through the cloud and just use their services.

        I've owned pretty much every console for the past 20 years (with the exception of the Wii U sorry Nintendo) so I have no one-sided fanaticism for one over another, but I have to applaud Microsoft for what they've done this gen and this is mainly generated by Phil Spencer's ideology. Obviously coming from a losing position, Microsoft has had to put more good will into their approach (similar to how PS Plus originally was for instant game collection) but with backwards compatibility and game pass, which looks to continue in it's day 1 release for all first party, I have found myself more and more playing games on xbox. This is in stark contrast to 2014-2016 when PS4 was my primary console.

        You lose some of his enthusiasm when it is printed, but listening to Phil Spencer talk in interviews about games, his excitement is contagious and he sounds like he just wants everyone to enjoy games wherever.

          I've never understood this need for extremes within the gaming community. I'm like you, I love listening to these people be genuinely excited about their products! I've also owned pretty much every console at some point or another (even the Wii U!), just buy what you want, play it and enjoy it.

        I've already seen his twist on console sales never being a measure of success on various business's sites but that's investor fluff.
        It's the single most important metric of console success and always has been, a measure that MS themselves held as a crown at one stage and been desperate to kill as this generation rolled on, declaring sales figures as being inaccurate before deciding pretend like it was never a big deal only recently.
        So of course they are going to say it's not a concern, saying otherwise is bad business and while I can respect it not being their focus now, to say it's never been is a little insulting.
        (I don't blame Phil for that, he's got bosses and expectations)

        As for Gamepass, I doubt I would get it because as it stands there is no value in it for me, I know I represent the preferred target audience who's subscription will eventually outweigh my actual non subscription spending, so I'm more likely to just buy a few games every now and then on sale.
        It's a lesson I've already learnt with such services, I would've dropped Netflix already if it wasn't being shared across multiple family members who basically pay for the service for me in return for not having to do anything but watch.

        It's not about MS not winning, I want to be able to sit down and play Xbox and contribute to a market I have fond memories of, but it's really not tough to see why so many analysts are writing off Xbox as a console at the moment.

          After three paragraphs I still don't really know what you're trying to say other than you don't like Phil Spencer and Microsoft?! And how can you see no value in Game Pass? If there's one game you want to play, it's cheaper to sub for a month and play it than purchase it.

            I actually like Phil, I maintain making him VP of Xbox was one of the smartest moves MS ever made but I don't see why that means I can't be critical or even why I would need to explain why liking something actually facilitates frustration and annoyance rather than eliminates them.

            I honestly don't think you have trouble understanding what I'm saying, you simply disagree which is fine but doesn't make those complaints go away or any less real, especially when they mirror the major complaints and frustrations that many Xbox owners have themselves.

            As for Gamepass it holds no value for me personally because I understand the business model and my gaming habits have changed a lot, I know I know longer fit in the category that would actually get the best value from it and I readily admit the same for my PS+ subscription.

      Funnily enough with the Xbox One X I left the PS4 platform and haven’t really looked back - mostly because the exclusives they have aren’t very compelling for me (I don’t like most Japanese games) for the most part. Microsoft have done some great things with the Xbox platform - Game Pass, Adaptive Controller, trying to focus more on actual games instead of the media centre bullshit when the One first launched... and now the PC and the Xbox are getting tighter integration, plus multi-platform streaming. I think credit is due for turning the shit show around. I still mostly play on PC but Microsoft’s platform gets more attractive each year.

        I can respect that, people like what they like and that's cool, as a PC player you sort of stand to do well outta this but as a console player I'm just sick of reading the same thing over and over again, the same scripted interviews with the same talk, little action and vague direction.

        As @pablo77 says further up they don't care about the console but have to keep it up there in case they lose the customer base to Sony but that's exactly the problem, they are still saying that it's important while also saying it's not.
        I'm cool of they want to change focus and it's kinda clear they are but I don't think it's too much to ask for them to be a little more clear on what they want to do and what they don't.
        (I also want the journos to press these questions)
        Do I actually look toward getting an Xbox or do I cast it aside as they seem to be doing and just upgrade my PC?

        It's not just a matter of being lost in print either, I've seen these exact conversations and taking points hundreds of times already, it's just frustrating, I'm ready for the how.

        Lemme put it this way, PC is easy, it's PC so we know what's up, Nintendo lost everyone with WiiU but the Switch cones along knowing what it wants to do and does it so that's now on the cards, Sony is saying business as usual and at this stage that's all they need but the Xbox as appealing as it's become just hasn't had the impact needed in the grand scheme and not much has changed for its outlook, Ito feels like the writings in the wall but nobody is willing to say it.

          Those are good points but remember: Most people don’t have gaming PCs. If you’ve got a good gaming PC do you need an Xbox? Probably not. If you don’t, then you might - and that’s what they’re targeting next year. They absolutely do care about the console but they also care about the PC market which isn’t insignificant - MS are primarily a software and services company, hardware always plays second fiddle no matter how good or popular it is because it’s merely a vehicle for their software and services. They’ve pivoted after their colossal Xbox One fuckup - which they tried to correct with the One X.

          The One X was just too late in the cycle for it to make a massive impact but I don’t think MS care too much - most had already picked your console for this generation. But remember in the previous generation the PS3 was the underdog and Xbox seemed untouchable. We’ll have to see what happens next year but I wouldn’t write MS off. And as a PC player - with all the bullshit about store exclusives, inflated digital distribution pricing, increasing hardware costs, and Nvidia frequently releasing drivers that break things like they’re mid-2000s ATI, I might just put my PC away sooner rather than later.

    Spencer: I go into Best Buy and happen to come out with a PlayStation.

    News flash! Xbox chief prefers PlayStation to Xbox! Film at 11...

    the dominant console changed every generation, the previous gens winner becomes complacent and the underdog overdelivers, it's pretty much been this way for ages. I like Sony over xbox mostly because I HATE the xbox UI, i cant stand using it (I understand why people don't like sony's but I like the simplicity of it), but it plays games fine.

    I am planning to build a new pc soon, so I really appreciate that I can play xbox games there (the gamepass is a super great idea), and I hope cross play becomes a thing, but I suspect xbox will stop pushing for it when they get back on top.

    So far Sony have clearly been slacking off at the end of this gen and I suspect the ps5 will suffer for that, but I still think that they are SLAYING it with their first party games.... I just hope they don't think that is all they need and just stop trying again

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