Xbox Head Phil Spencer on Exclusivity, Acquisitions, and Game Pass

Xbox has been making a lot of waves lately and as the head of the ship, Phil Spencer is often asked “what’s next?”. In this latest interview with, Spencer speaks to future acquisitions, the power of content, the Bethesda deal, and more.

Before the first round of purchasing studios – what made you get up one morning and say; “we need more studios, we need more first-party games“?

If I think back during the early Xbox One years and even late in the 360 years, at this time we as a company didn’t invest enough in our creative capabilities with our studios, and it showed. Now, the thing with game production is that it takes a lot of time, so if you underinvest it actually doesn’t show up next year or even in the next two years. It’s maybe three, four, or five years down the road.

I had this feeling or belief that we were under-investing and I was head of first-party, so I felt it directly. I wanted to invest more, and we weren’t able to. So when I got into this job, I needed to put the business in a good space while getting the support of the company. And then we built a business model that prioritised investing in content knowing that we would have to invest early and wait a while for those investments to pay off.

But there wasn’t kind of a “one morning.” It was something that I felt, as I said through the late 360 and early Xbox One years, it just took us a little time to get into a position to find the right partners and get the support from the company. But I’m incredibly excited. Now with ZeniMax we’re coming up on 23 first-party studios and an amazing line-up. So I’m feeling very good with the support we have.

Are you content with the current line-up now, or is there a chink in the armor somewhere? A certain genre, a certain type of studio that you feel is still missing?

If we look at what people are playing on Xbox, what Game Pass subscribers are playing, I think what is missing from our portfolio is casual content with a broad appeal. E-rated content (to use an ESRB rating) is not a strength for us. We obviously have Minecraft and we have some other franchises. But when I think about expanding the creative palette that our teams have, I think that is critically important.

Teams that can build new franchises, tell new stories, those are always sought after. That’s why I’m excited about projects like Starfield and the next Compulsion game because I like teams that think about new creations. And frankly, as Game Pass continues to grow, we need to continue to feed that subscription. So, with the growth that we are seeing, I expect we will constantly be in this mode of bringing more creators into the fold.

In terms of exclusivity, how do you view it in general? Aren’t there certain perks or advantages for studios to work solely on one or two platforms, and providing value for said platforms?

In the short term, there is. But I think in the long term, that camaraderie very quickly turns into weaponising of exclusive games, of mine versus yours. And I think exclusive games for closed platforms are a marketing tool to drive adoption of those closed platforms. And do they work? There is data that says they do, and data that says they don’t. Clearly, as you said, they are good at driving excitement. Let’s take this holiday, obviously, PlayStation and Xbox are shipping new consoles. We are both going to ship as many consoles as we can, and I am going to predict that we are both going to sell every console we build in 2020. And if I had another exclusive game, all I could do would be to sell out more quickly, right.

The excitement for gaming is bigger than the excitement for exclusive games. Especially right now with Covid-19 and a high level of engagement in our business due to people being stuck at home and not physically socialising in the way they are used to. From an exclusivity standpoint, they are great marketing vehicles and they can lead to some great games. But if we take a higher-level view, is gaming better if more people get to play more of the great games in our ecosystem? I think that is true. And that is why we ship our game on Xbox, we ship our game on PC, and if you have an Android phone you can play our games too.

The fact that we sell our games on PC does undermine one of the value propositions in that it doesn’t force somebody to go buy our console. Our high-level goal inside of our team, of how we measure ourselves, is how many people are playing on Xbox. And when we say ‘playing on Xbox’ it doesn’t mean an Xbox console. It means somebody who is logging in and playing a part of our ecosystem, whether first-party or third-party. And it could be on an Android phone. It could be on a Switch. It could be on a PC. That’s how we think about it.

So the Bethesda deal was monumental and took most of us by surprise. What do you hope to gain from this long-term, and I’m talking more broadly here than simply Bethesda titles making it to Game Pass on launch day?

First of all, I would like to say that we haven’t acquired ZeniMax. We have announced our intention to acquire ZeniMax. It is going through regulatory approval and we don’t see any issues there. We expect early in 2021 the deal will close. But I say that because I want people to know, I’m not sitting down with Todd Howard and Robert Altman and planning their future. Because I’m currently not allowed to do that, that would be illegal. Your question is completely inbound, but I get a lot of questions right now: “is this game exclusive? Is this game exclusive?” And right now, that is not my job in regards to ZeniMax. My job is not to sit down and go through their portfolio and dictate what happens.

In terms of what I want long term. I want those amazing studious to create the best games they ever created. That’s when Todd and I sat down and had a discussion. Todd and I have known each other for years and years, and we talked about this partnership. We looked each other in the eyes and we said, ‘okay, what are we really gonna do here?’ And he said, ‘I wanna build the best games that I’ve ever built and I want the support of Microsoft to be able to do that.’ And I say the same thing about the studios at Arkane and id Software and Machine Games. I want them to do the most amazing work and support them in doing that.

Monetisation is becoming an increasingly important topic for consumers across the globe. With a renewed focus on strong first-party titles, is there a certain strategy you deploy for how these studios should handle monetisation?

We don’t dictate at all the business model behind the games that are built, but I will say, I think that a healthy games industry, the more business models works for video games. So I think retail is an important part of video games, I mean I’m buying my games and I want that to continue to flourish. We’ve seen growth in subscriptions like Game Pass, free-to-play is obviously a huge business model for video games. I think there’s other business models we could potentially bring into video games that could help, but the diversity of business models should be a strength for us as an industry. So for first-party, I would like us to kind of experiment with the different models, because I don’t think we want to be beholden, as an industry, to one model to rule them all, if we were everything would be free-to-play, because free-to-play is clearly the biggest business model on the planet today, not even close. But I don’t think we want one business model, I think we want gamers to have choice in how they engage and pay for the games that they’re playing.

The same can be said for games with an inherent online focus, or even Live Service titles. Do you have a certain strategy as to how many projects at any given times are strictly single-player, or strictly multiplayer, or is it more fluid than that?

Yeah, it’s totally up to each studio, and I know some people that, when they’ve looked at the model around Game Pass, have assumed that Game Pass is actually a better model, if there’s more Games-as-a-Service games in the subscription. I actually argue the opposite and believe the opposite. The last thing I want in Game Pass is that there’s one game that everybody is playing forever, that’s not a gaming content subscription, that’s a one-game subscription, that’s WoW, right? So for us, having games in the subscription that have a beginning, middle, and end, and then they go on to play the next game, maybe those are single-player narrative-driven games, I just finished Tell Me Why, an amazing game from DontNod, those games can be really strong for us in the subscription. In many ways, they’re actually better than one or two games that are soaking up all the engagement in the subscription. I want a long tail of a lot of games that people are playing, and I think the diversity of online multiplayer versus single-player, we have to support the diversity there, and that’s my goal. If anything I’d like to see more single-player games from our first-party, just because that over time we’ve kind of grown organically to be more multiplayer-driven as an organization.

In terms of consoles not being outpaced by PC development, are you planning for console life cycles to be shorter in future, or is there a value in having the same basic development pipeline for a long period of time?

It’s a trade-off, and I think you hit it. Stable platforms for longer periods of time, means developers get more familiar and comfortable with engines and the technology. It’s why we have the same core gaming platform across Series S and Series X, and frankly, we’ve moved that onto PC as well, so that developers now can look at more consistent development platforms across our devices. Because previously you built a Win32 game, if you were on PC you built something called an ERA game – so we’re bringing those technologies together in something called GameCore that can help developers build more easily across broader platforms.

I don’t think the development platform has to preclude underlying hardware from improving. We’ve seen that on PC. So, I think there’s a slight difference between, “does your development platform grow and stabilise”, and “will every individual piece of hardware underneath that platform also stabilize over years”, in order for developers to get the most out of them. I think the software layer is more important.

I don’t think we’ll get to a world where we see console life cycles mimic what we see on say graphics cards, where it seems like every year there’s something new that comes out. Because with graphics cards you’re changing one component of a device that’s in your home. Whereas a console tends to get installed into your rack, under your TV, and you just want it to work. You want it to be there, you want it to turn on. I think there will be a difference. Maybe the cycle will upgrade a little bit more than in previous years. But we are still supporting Xbox One. Frankly, we still have millions of people that log into Xbox Live on Xbox 360. We in the industry can get involved in this new, new, new, but we still have a lot of customers who are happy with their launch day Xbox One, and I want them to be happy for years to come.

Without going into too much detail, which first-party studio’s currently unannounced game are you most excited for the public to see?

I’m gonna give you two if that is okay? One of them is Compulsion. When I first saw We Happy Few, there was an art style and a setting that I thought was really unique. It’s a young studio and they are still growing and learning the craft of what they are as a team. But looking at what they’re gonna do next, I love their ability to create new worlds and unique settings. That is always something that is fun. So without saying too much that is one of them.

The other one I would say is The Initiative. Which is our studio in Santa Monica. I’ve played what they are doing next. Just the talent we have been able to bring into that studio led by Darryl Gallagher is amazing, especially when you bring such an amazing group of creators together, and create such a culture that Darryl is working to create there.

I’m incredibly excited both to be able to form a new studio, to attract the talent we have, and the game that they are working on will be fun to get to announce.

Our Take

We’ve discussed this extensively here at SG, but it’s very clear that Microsoft and Xbox are in the gaming space for the long haul and will continue to make investments into their ecosystem. There are so many studios under the Xbox Game Studios umbrella developing new titles, that we will certainly arrive at a point in the coming years where a major, first-party title releases into Game Pass every quarter (or more often). At this point, we simply can’t wait to see what comes next! Now bring on the Series X.

By Seasoned Gaming

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