Gaming

Xbox's Phil Spencer: 'We're not driven by how many consoles we sell'


The launch of the Xbox Series X this week marked the start of a new video game console generation – historically a super-exciting time for players, as better technology unlocks new dimensions for games. But despite the usual competitive crowing about teraflops, frame rates and resolutions, there’s a different dimension to the console wars this time around. The looming Netflix-ification of video games threatens to upend the whole idea of video game consoles. Amazon and Google are both working on game streaming services that let people play cutting-edge games without paying for a box that sits under the TV. And Microsoft has spent the past five years spending billions on game developers to shore up its star service: Xbox Game Pass, a monthly subscription that lets you play hundreds of games for a monthly fee.

It’s been clear for a while that Microsoft sees the future of gaming in subscriptions, streaming and services. Phil Spencer, the head of Xbox since 2014, is known to players as the guy who shows up on stage at press conferences in video-game T-shirts. Under his leadership, Microsoft has massively broadened its stable of game developers, started selling Xbox games on PC, and engineered its own streaming service to let people play on any screen, known in prototype as Project xCloud. Subs and streaming have already transformed other creative industries, with varying effects on artists – Spotify has been a disaster for musicians, where Netflix has arguably been good news for TV producers. With Microsoft already clearly committed to this direction of travel, what will its effect be on the games industry?

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Spencer claims that developing games with Xbox Game Pass in mind allows for more creative risks. He cites this year’s Tell Me Why as an example:. “I honestly don’t think we’d greenlight Tell Me Why if not for Game Pass. It’s an episodic, story-driven game – you don’t see a lot of them getting made. We knew with the 15 million subscribers we have now, that it would get played, and that people would engage in it more than they would if there was a $30 price point in front of it. Even Flight Simulator is a game we would not have green-lit if we did not see Game Pass growing. We had a million players of Battletoads! These are all examples of games that in an exclusively retail model would be more challenged.”





The new Xbox XSX and XSS consoles



The new Xbox XSX and XSS consoles. Photograph: Microsoft

Game Pass and cloud gaming are Xbox’s focus now, he says, but not to the exclusion of consoles – at least, not yet. “Hopefully, our focus supports all the models that are currently out there, from retail to free-to-play to subscriptions,” he says. “I think that diversity of business model is one of the key differences between what we’re trying to do and what happened in music, where everything shifted all at once.”

Given that 2013’s Xbox One was hugely outsold by the Sony PlayStation 4, it’s convenient for Microsoft to focus on subscriptions, attention and revenues rather than the number of consoles sold. The company stopped even reporting sales numbers for the Xbox One years ago, but analysts have estimated that it sold less than half of the PlayStation 4’s 100m+ units. Spencer knows how many Xbox Ones were sold, but he sticks to his guns and won’t tell me.

“I know it seems manipulative and I’ll apologise for that,” he says, “but I don’t want my team’s focus on [console sales]. The primary outcome of all the work that we do is how many players we see, and how often they play. That is what drives Xbox. If I start to highlight something else, both publicly and internally, it changes our focus. Things that lack backwards compatibility become less interesting. Putting our games on PC becomes a reason that somebody doesn’t have to go and buy an Xbox Series X. I’ll hold fast to this. We publicly disclose player numbers. That’s the thing I want us to be driven by, not how many individual pieces of plastic did we sell.”

And what about if the Xbox Series X/S vastly outsell the PlayStation 5? Will he start talking about console sales again if that happens? “I can promise you that I won’t do that,” he answers. “In the last year we’ve had Google and Amazon and now Facebook announcing they’re coming into our gaming space. I’m not gonna go compete with their numbers based on how many Xbox Series X I’ve sold. [Google] is never gonna talk about how many Chromecast Pros they sold. They’re gonna talk about how many players they have.

“I think the people who want to pit us against Sony based on who sold the most consoles lose the context of what gaming is about today. There are 3 billion people who play games on the planet today, but maybe [only] 200 million households that have a video game console. In a way, the console space is becoming a smaller and smaller percentage of the overall gaming pie.”

The prospect of other large, well-funded tech giants such as Amazon, Google and Facebook moving into video games has plenty of analysts worried. These companies have a history of moving in and undercutting everyone else, potentially upending the economics of the whole industry. So far Google’s streaming service, Stadia, hasn’t seen huge success, and Amazon Game Studios’ most recent game was pulled from sale and shut down after a few months – but Spencer is wary nonetheless.

“I agree that’s a risk,” he says. “I love competing with Sony and Nintendo because I know why they’re in the business, and they’ve been here for decades. And yes, we’re going to compete like crazy, but we also all understand that it is about making great games for people to play. But having extremely well-funded tech companies come in and see gaming as a $200bn top-line business, moving the deck chairs all around and then potentially disappearing … the reason we’re here is because we want to make gaming better, and see it continue to grow. The long-term investment and commitment of these companies that can come in and disrupt is something we should be watching.”





Microsoft Flight Simulator



Green-lit because of Game Pass … Microsoft Flight Simulator. Photograph: Microsoft

Of course, Microsoft once was that well-funded challenger in 2001, when the first Xbox was released. And it’s continued to throw money around since, most recently spending $7.5bn on Bethesda Softworks. This means that future Elder Scrolls and Fallout games will be released on Xbox Game Pass, quite possibly exclusively, though Phil won’t be drawn on that one way or the other. He’ll only say that Microsoft doesn’t need to sell Bethesda games on other consoles or platforms in order to recoup the investment.

As Amazon’s recent misadventures have shown, though, splashing cash is not the way to succeed in video games. Spencer maintains, slightly self-consciously, that you have to care about games creatively. “I know it’s self-serving for me to say that as the guy with the video game T-shirt on … [but] I love video games, I’ve been playing for ever,” he says. “When I took this job I thought: why is Microsoft in the gaming business? If we’re going to be in it, let’s be in it because we believe in the craft and the player. We should be able to use was Microsoft is capable of doing to help advance the gaming narrative.”

In a year where billions have been stuck inside, video games have brought us much-needed escapism, entertainment, and meaning – and where other creative industries have floundered, games have been thriving. Phil reckons it will last. “I love that the art form I love being a part of is playing an important role in the planet when people need it,” he says. “[And] from a pure business standpoint, I think what we’ve seen is an acceleration of a trend that was already happening: gaming is already the fastest-growing form of media and the largest business that’s out there. I know certain people say it’ll go back to normal, but I think what we’ve seen is new people finding video games as a great outlet for them, and that’s gonna continue for years and decades.”



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