Phil Spencer on the future of the Xbox

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Arthur Gies: You announced new hardware in a couple of different capacities at the show this year, and in an acknowledged sense, you're breaking with tradition. There's a 30 plus year paradigm of console hardware. Ignoring your position in the console race or resetting it or what that even means, what is the challenge that you feel that you have in making consumers and players feel as if that's in their best interest?

Phil Spencer: I think it's all about creating experiences, and the best place to play those experiences.

I really think about our E3 show in terms of layers. There's the game lineup that we had, which I think is the best game lineup that we ever had. I'm incredibly proud of what our teams have done. We have a 2016 lineup that's incredibly strong on both the indie side and our bigger games, which are I think 17 strong. But I really think first and foremost it's centered on the games we showed in our presentation. The Live features that we built to allow people further craft their online experiences the way they want to play. And I look at the platform and the hardware that run the games as the third layer in that.

"It's kind of crazy that we announced two consoles at one show"

So, when you ask about the challenge or opportunity in attracting players, I think it's about fostering the content in our box to attract the broadest set of people. And from that perspective, I felt really good about the show. Even to the point of having our team members show up on stage. I didn't come out a ton of times. I was out at the beginning and I was out at the end. I liked seeing the team members show a very strong lineup of games and I think they did a great job. I have this fundamental belief that if you're building and fostering the right games and the right content on your platform, the right things will happen.

It's kind of crazy that we announced two consoles at one show, it's kind of ridiculous. But when we looked at gaming, we're doing more work on PC now, and I see 4K and the creative opportunities there and started talking to partners about it, it was great having Todd and Patrick in our video. Because getting external influence and telling people what our plans are, this 4K proof point on PC and thinking about how we bring that to console was a real design opportunity for us with Scorpio and what we focused on.

But in the end we wanted to make sure the creators were there, and the reason we wanted to announce Scorpio at this show — which you can say from a pure run-rate of Xbox One and Xbox One S wasn't the best thing to go do — we wanted to make sure that we had creators behind what we wanted to do. And we knew that there was some public discourse about what was happening before the show, so we might as well just publicly be transparent with our partners and our customers.

AG: Was there discussion about the detrimental effect it could have, for example on the launch of Xbox One S and the holiday it could have?

PS: Absolutely. And I think if you were running the program based only on the consoles we sell, maybe somebody would make a different decision. Definitely if you were making a decision on how many consoles you'd sell in the next 12 months, maybe you'd make a different decision.

I don't know if that's actually true, though, because while people in the industry focus a lot on the power and performance of Scorpio, which I'm very proud of, I can tell you as someone who sees the numbers on what's selling, price point is the most important thing about consoles being sold. So the fact that we were able to announce Xbox One S at $299 I think will be in many ways as important if not more important to the install base of Xbox One. Both of those things are really important. I think in the industry it's really important to think "power power power," but price is very very important. Even today, we announced the original Xbox One at a promotional price of $279. And I think that's a great opportunity for people to buy it.

But yeah. We've been talking for a couple of years about our vision for Xbox, about our players playing on Xbox and Windows with Play Anywhere, to buy a game and have it available on both Windows and console, letting people play cross-network, making sure the development tools for our partners are there to make that process easier. So I felt like as a proof point for our vision, and for transparency with our customers and our creators, I wanted to talk about Scorpio here. I feel confident because Xbox One S is a great product at a great price.

AG: I think my question from there is when players hear that a console that is more than 400 percent more powerful than the Xbox One they have in their house right now is coming out, it creates a certain amount of upgrade anxiety. And while you are messaging that they don't need to worry, they are worried, if the response to the things we've published and what I've seen on Twitter are any indication. So is that something you expected to happen?

PS: We wanted to be very deliberate in our messaging around every game that gets created, that we're going to support those games on Xbox One S and Scorpio, making sure that the console experience that you and I have come to expect and have grown up with will be there, that Live experience and those accessories. I think anytime there's something new coming — let's take the other example: if we announced Scorpio as a gen 9 console, and we didn't talk about it as part of the same family, the pushback on "you cut this generation short, I just invested in Xbox One!" That's something I didn't want to happen as head of the platform. I wanted to make sure that we put customers in a place where when and if they decide they want to upgrade they can.

If you bought an Xbox One three years ago and you're still playing, we're committed to our updates that we've constantly been doing on the platform, continuing to make Live better, continuing to show up, and I love you as a customer. If you stay right there with that original Xbox One, financially you're a great customer for us, and from an experience standpoint, you're a great customer for us.

I understand that when new things come out you're always going to wonder if it's worth it or not worth it. Now we're going to be able to have a real discussion about how content's being built — do you even have a 4K television, are you on a 1080p television — there's so much more around that buying experience that's not just what console you have. So I want to make sure you're in a position that when you want to upgrade, if you want to upgrade, the experience will be a continuous one for you, rather than you having to rebuy everything. So was it expected? We built the program around recognizing and respecting the investments people have already made in Xbox One.

AG: Your job as head of Xbox over the last two years has in large part been righting a ship that was listing, we'll say, in the view of many. Do you think Scorpio is an opportunity for you as the head and architect of this plan to demonstrate what Xbox is to you?

PS: Changing some of the negative perception that came around Xbox One on its launch is a different task than planning a path forward that has a vision and a strategy that's not just inverting people's thoughts. So I think the challenge is different, in some ways higher for us. I don't think about myself as much. This is culmination of something we've been talking about for two years. After the new leadership came into place, we looked at doing a new console this year. A new One and a Half, because people have been asking me about a One and a Half.

Looking at the spec we could hit this year, I didn't see a natural inflection point for gaming capabilities that could happen this year. I didn't want something that was marginally faster than Xbox One. To me it wasn't really about percentage faster in terms of Scorpio vs Xbox One, it was more about a real point that you could look at and say "I understand the customer benefit of that."

You and I lived through the transition from standard def to high definition, and that change was obvious to people. We're doing more work on PC and I see the change to 4K resolution and some of the capabilities there, and that's what we picked, to make 4K a design point for this box. So if we can't hit true 4K this year, let's not do it, even though that would have been easier. We said let's do it next year, because it's really part of this vision of trying to create this cross-platform vision of games across Windows and console to define entry points for people. If I'm a customer with a 1080p TV, you should go buy an Xbox One. That's a great box for a 1080p television, and there's no reason to go buy something that supports 4K right now. If you got a 4K television, we've got a box coming for you. If you just play on Windows, we want to make sure we're investing in it fully if you're not on console. That vision we've been talking about in pieces.

I like this moment at E3, because it was a moment to show all of our content coming to Xbox and Windows, with Play Anywhere so you can buy once and play it wherever you are. Now we've got a console with Scorpio that has a spec that you can see and understand that you're playing 4K games on your Windows box and you'll be able to play them on your television. So this was a big moment for us, because a lot of the pieces we've been talking about in an abstract way came together, in a real tangible way that you can see.

AG: How do you message this? How do you keep people engaged and allay the fears there? Because I feel like Microsoft has a message and it seems like there's a plan, but there's a resistance or a lack of understanding of it.

PS: We're at day two of laying out the hardware roadmap. We're here talking to people to help clarify things. You're going to help us, because there is a bit of an echo chamber when you're talking to yourselves about what you're going to say. So getting the external reflection, and even frankly announcing it from the floor of the Galen Center and announcing it to fans that have been waiting overnight to see it. They'll tell us when we mess up obviously, but the excitement of the moment right there is great, and I appreciate every second of them being there.

Now that we're having the public discourse of what we're doing, you get either the PC people coming in asking their hard questions and not caring about consoles, or the other side, with people with the Xbox One wanting to know if they bought the wrong box, or PlayStation fans asking if this is somehow a threat to them as a PlayStation fan, are you jumping ahead of them? That's why I love E3 as an opportunity to talk to people about what we're doing.

We have it out there. So you talk about why now — it's much harder to have a public dialogue with our fans when we haven't disclosed what we're trying to do. So if you ask why we wanted to talk about Scorpio now, I'd say to the person who's still skeptical, we're putting everything we know about our plans in front of you. We're showing our content line-up for both 2016 and 2017, we're talking about Play Anywhere, we're talking about Live, we're talking about our hardware lineup. So we're going to hear your questions, and both react and even change our plans. We've obviously changed our plans when people give their feedback on things.

I'm just happy to be able to talk about it publicly, and try to build the plan outside of our little laboratories on our own. My two years as the head of Xbox has been about listening to what people told us, and trying to build a program that meets and exceeds the needs of our customers.

[Ed. note: This interview has been lightly edited and condensed for clarity.]