The next couple of years will define the long-term future of Xbox’s place in the video game industry. Microsoft’s games division must launch a new console, revamp its most beloved franchise, introduce cloud gaming to the mainstream, make its popular console game subscription service appealing to notoriously skeptical PC gamers, and not only compete with industry stalwarts like Nintendo and Sony, but Silicon Valley titans Google and Apple.
Despite all of that pressure, Phil Spencer looked confident as he took the stage for the company’s E3 2019. He had 60 games to show, and for the first time in the history of the the conference, his company wouldn’t have to compete with a Sony PlayStation press event — the competitor opted not to participate this year.
We had a chance to speak with Spencer, the executive vice president of gaming at Microsoft, following the press event about why he’s confident about Xbox’s trajectory on the eve of the next generation of video game hardware. Spencer spoke openly about his team’s efforts to uncover nascent genres, reach a more diverse audience, and create a safer and more open workplace.
[Ed. note: This interview has been edited for brevity and clarity.]
Xbox’s strategy for making games for everybody, not just an established audience
Polygon: I want to interrogate a thing that you repeatedly emphasized during the Xbox E3 press conference — that Microsoft wants to make games for everybody, and that these games can be played anytime and anywhere. I admire that a lot, but I still think, like you said before this interview, you’re still on the journey to achieving it.
Moving forward, how do you really get to everybody? Microsoft has shown stats claiming there are over 2 billion gamers on the planet, but a potential audience of over 7 billion people across the world. I wonder if many of those people not already playing could be put off by what mainstream games look and feel like today.
At the show, you emphasized the 60 games coming to Xbox and Windows. But the games that are still getting the most money, especially from Microsoft and Sony — the AAA and AA games — are skewing toward a certain “masculine” style.
They favor violence. They’re still largely shooters. It seems like the games for a different audience than the stereotypical gaming audience still get smaller budgets. That they’re interstitials between the big events.
Will we see these sorts of games built for large audiences with comparably large budgets? I’m wondering, where is Microsoft’s Animal Crossing?
Phil Spencer: So first I’ll just say as somebody in this industry, I think it’s awesome if you continue to push and write about this topic. Seriously. We sit at a show like E3, and as a games industry, it’s easy for us to think about us and who we are today without taking a wider aperture. Without thinking about what our possibilities are.
I think about 2 billion people playing today, and that’s awesome. But how do we get to 4 [billion], right? How do we actually continue to grow the adoption of this art form and this kind of creative capability that I love? I talked a little bit on stage about the unifying capability of games over most other art forms because it has this unique capability of bringing people together. And I think the stories that get told — we have to create stories for everyone.
Our gaming-for-everyone initiative is more of an internal thing for us. We don’t go out and do ads on it. There are three pillars to it. There’s: What is our team like? How does it feel to work on our team? We’ve got work to do there, but we want to make it a conscious focus on what means it to be on team Xbox. Does everybody feel like they can do their best work here? And how do we make sure we iterate on that?
The other thing we focus on is Microsoft’s role in the game industry. What does it mean for us to be here as a $1 trillion market cap company in this industry? We should go do things that we can go do because of our scale: to help make this a safe and inclusive place, to make gaming for everybody. And the third one is exactly what you’ve pushed on: How do we make sure our games, in subject matter and character choices [...] that we have a platform and a palette for anybody to jump in?
Now, I think it’s easy to go to some cliche examples like, “OK, where’s your pink game?” You know, “Where’s this game?” I don’t go to the creators and say, “OK, here’s the equation for going and finding a new customer.” But this discussion that you’re pushing is a discussion we have in our creative studios all the time.
I think when you look at some of the choices we make on stage — sometimes people look at some of the games and say, “I dunno if that’s core enough.” Like, I hear the feedback that our show’s not core enough. At the same time, I think it’s our job to actually create a platform for all kinds of games.
So for Project Scarlett, and moving forward, you are thinking about doing properties that are not the traditional Microsoft properties?
We think about that already, even in things like the lead for Gears 5 — which maybe you would say is an oxymoron, because you’ve got Gears of War and the female lead character in the game. But [we’re making] choices like that.
And yes, as we go forward, as our first-party capability builds, the choices we make about the indie games that we show on stage, we’re not just thinking about what can be quickly mapped to something in gaming history so that, you know, you’re going to go love this. [We’re thinking,] “What will elicit a new way of thinking and some new ideas?”
Twelve Minutes was on our stage yesterday, I thought it was fantastic. It’s a game that, when we first saw that, we said, “Hey, this is a game that we think can pull at a different creative thread.” And that’s a different kind of team for games in terms of the writers behind that game. But yes, absolutely, we’re going to continue to look to expand the kind of games that show up. I think we’re getting there.
Xbox Game Pass and Project xCloud will change how games are conceived
I want to talk about Game Pass. I think it’s the most promising project that Xbox has launched this generation.
Game Pass fits with the other discussion. Not to hijack the question, but the idea that you can allow a creator to create something that might not be instantly marketable in the traditional ways, but can now reach an audience of millions and millions of players — all of whom effectively can click and play their game [whenever they want]. That opens up new options for us.
Many times, we reference Netflix and Orange Is the New Black as a TV show that might not have been greenlit on traditional broadcast TV. And yet you’ve got this subscription service where if you have a quality show, and somebody can just click to view it, then you’re going to find an audience.
You’ve gotten right to my next question.
I look at Stadia and I wonder if they’re missing the potential of streaming as a subscription service. We’ve seen streaming destroy traditional retail models. We saw what Netflix did to the Blockbuster model. We saw Spotify change the music industry model. It feels like we’re about to see streaming have an existential impact on video games.
I was surprised by the Stadia announcement’s emphasis on the traditional retail model. Yes, you stream games, but in theory, you’re just going to buy full copies. It’s a half step toward how Netflix and Spotify work, how they lower the friction to enjoying what you want.
The reason I think it’s inevitable that streaming changes games is because it’s already done so for music, film, and TV. What people create is different because of streaming and the subscription model.
I see Game Pass and xCloud, and it seems inevitable they will come together to form a streaming subscription platform. I wonder, already, is Game Pass changing the way that you greenlight games, that your team makes games? Orange Is the New Black being the perfect example of how Netflix changed what TV gets made, right? Is there going to be that type of game for Game Pass? Is there going to be a game that is only now possible because of the service?
Absolutely. There’s no doubt. The only word I push back on is “destroy.” When you talk about the model has been “destroyed.” Because I would say that today, if we just look at television, the amount of creativity and diversity in television in my view is higher than it’s ever been.
Yeah, when I say “destroy,” I mean the stores, not the content. Blockbuster was annihilated.
Yeah, I think you’re parsing it in the same way that I do. There’s access to the content, which is more of a platform infrastructure. And then there’s, how does the content get delivered itself to an end user?
We’ve said we want to take Game Pass to anywhere that somebody wants to play. Obviously, you can look at the natural synergy with something like xCloud, and say, “Hey, we’re going to reach customers there, where $60 media purchases isn’t something that’s natural for them. A subscription like [how they] subscribe to music and video is going to be more natural.”
So absolutely, you’re kind of foreshadowing ... you can see those two things coming together and being much more synergistic. And that’s why the content that’s already on our platform becomes such a strength. The reason we put Xbox in the cloud for xCloud is because it brings the thousands of games already running on that platform to the service.
People don’t have to rebuild. Not only can new things fit into the cloud very easily, but our history, which — I’m kinda corny on this stuff. But I do think we learn a lot from the games, characters, and stories that were built before as we go forward [designing games].
What Game Pass exclusives could look like — if they were made
You mentioned Netflix. The streaming service was originally popular with die-hard movie fans. But Netflix really set itself apart and found a bigger audience when it started doing exclusives. How long will it be until we see Game Pass-exclusive games?
Yeah, it’s a good question. We’ve had teams already come and pitch the idea.
Certainly you’ll have teams come and say, “Hey, don’t you want to just put something exclusive in Game Pass because you can?” And I’m a little reticent on that because I believe the customer wants a choice. Gaming has a history of people buying their games and, frankly, having a local place to download those games so they can play them when they’re offline or whatever. And I think that’s an important point.
But it is interesting. We’re starting to see teams bring ideas [that factor Game Pass into] the actual creative of the game ... the easy one to go to is episodic games. I’m not saying episodic is new, but this isn’t an online service-based game. It’s actually a single-player narrative game where we want time to be one of the things that builds drama across the game’s arc. And we want to use a subscription model so that we always know that we have more and more people ready to engage every time [we release a new episode].
[Game Pass] is a new tool. It’s not just how many teraflops of GPU, how fast is my bandwidth connection. We now have a business model that allows for a new kind of content creation and delivery of that content.
So if we see a Game Pass exclusive, theoretically it would be because it serves a purpose for the game itself.
That’s right. And even then, I shouldn’t go into my head on this one, but I still think of that choice, right? Maybe as something plays, we’ve got an opportunity to bring that game to somebody who wants to buy it. But I’m not against us coming up with an idea that works in Game Pass and maybe doesn’t work at retail. And if it’s a natural thing, that I don’t feel like we’re artificially creating an exclusivity just because we can, then I’m all-in.
I want the creators to be able to take this and run with it. And in the end, we all want better games.
You keep mentioning choice. Is that your sales pitch if we see an xCloud and Stadia showdown? Is Microsoft’s advantage that players have the choice to subscribe, stream, or download going to be the thing that separates Microsoft and Xbox from the competition?
You know, we tend to focus on our customer. We focus on what has worked for us, what we’ve learned.
When we first made the decision to ship our first-party games on Xbox and PC simultaneously, we got some backlash. It was about choice. We know there are millions of people out there who choose a PC as the place that they want to play. And why should I keep those people from playing Halo or Gears or Sea of Thieves? In the end, with 2 billion people playing games, you want to have as many options for people and creators as possible.
I think what I would start with is content. That we’ve been a gaming company for multiple decades; that we have relationships not only with all the creators, but actually all the other platform holders as well. That is the biggest strength of our platform today.
And services like Xbox Live and Game Pass improve discovery for our players. You and I, if we’re both Game Pass subscribers, we have a shared library, which is a really interesting dynamic. It’s cool that we’ve got over almost 200 games now that you and I share. So we can go try them together. We just sort the Game Pass library by [which titles have] co-op. And the cloud infrastructure that Microsoft has built with Azure is multiple billions of dollars of investment. That’s just hard for many people to go do.
Coming back to the choice point, yes, like I have learned in my time in this industry, you don’t tell gamers what’s good for me as a company. You give them choice in what they want to go do. And they will vote by playing the things that compel them.
Maybe the single most important lesson of the past eight years for the company?
It’s been a good one. You know, [laughs] I think so, right?
It’s not about us figuring out what’s best for you and telling you that. It’s about us working with creators, listening to our customers —
I want to push back on that: You said that it’s not about us figuring out what’s best for you and then telling you that. Do you believe that? Or is your goal to figure out what’s best for the customer, and then prove it, rather than telling them.
Because the customer often doesn’t know what will be best for them five years from now. Years ago, they didn’t know Xbox should invest in xCloud. Right? The customer doesn’t know what you know about the state of the industry.
Well, they know what they know; we know what we know. The merger of those two things creates magic.
Xbox Game Pass and xCloud will prioritize customer choice over exclusivity, especially on PC
Can you unpack that a little more?
I’m saying that there are [decisions] that would be, at a very thin level, better for Microsoft in gaming. In terms of our position against the competition. I could come up with the best way for us to push away the competition and make our inroads into gaming. But if it’s not good for the customer — they’re not going to do something because it’s good for us.
What’s a good example? Master Chief Collection on Steam. It’s easy for somebody to say we should’ve put Master Chief Collection only in our store, and that’s the only place that you should be able to buy our game when it comes to PC, because that’s going to help us grow our store and we need to go push the other PC store players out of the way. Because that’s how you win.
What I’ve learned is that, especially with the PC audience, [we] have to come to potential players with something that’s unique. What value are we adding? We’re not just trying to replace something that’s already there. So the value we wanted to bring was Game Pass because we’ve seen such incredible response on console. So we said we’ll bring Game Pass to PC. If you want to subscribe, we’re going to have a hundred games in there and they’re focused on a PC player. If you want to buy the games, let’s give you a choice.
And if you want backward compatibility, buy it on the Xbox Store.
That’s right. That’s right. And regardless of where you buy it, Xbox Live is everywhere, so you’re connected. If you want to buy it from Scott and Gabe at Valve, great. It’s awesome. You can buy it from us as well.
That’s an example of how, from a shortsighted view, you could argue that we should just do what’s best for us. But instead, I’ll put choice in front of you, and I’ll try to come up with unique value [propositions].
Here’s another example: I’m not going to tell you a console is bad. I like playing on console. Why would I stand here and say, “Hey, the box you have is not where you should play”? I understand why that could be good for me if I was trying to push everybody to xCloud. But what I’ve found is, gamers like their choices and they’ll find the right solution for them.
How the struggles of the Xbox One’s first-party games will influence Project Scarlett
I want to circle back to the content.
I think it was an unusual generation for Xbox first-party software. There were a lot of cancellations. I would say that maybe the core properties felt a little familiar and got a middling critical reaction.
I’m sure you are deep into the greenlighting period for Project Scarlett’s games. Were there lessons learned from this generation’s releases that have impacted how you approach both the core Xbox properties and new franchises for the future?
First, I guess this is obvious: It starts with the teams. We have to make sure that [head of Microsoft Studios] Matt Booty and our Xbox Games Studios have a great collection of creators and teams that know how to build a diverse set of great games. You’ve seen us over the year plus now adding new studios and ensuring that we have the breadth of portfolio.
The thing I loved about yesterday’s show — and this is more of a Phil view on it — was the things that we didn’t show. I got feedback on this. “Hey, where’s this? Where’s that?” We thought we were going to show everything. But I sit back and I go, OK, where was The Initiative? They weren’t on the stage. Where was Compulsion? They weren’t on stage. Where was Turn 10? They weren’t on stage. Isn’t Playground working on something else? They weren’t on stage.
I go through the list of things, and I love the fact that we can have a 90-minute show that has 60 games. And I’m actually in my head thinking about the things that we didn’t even put on stage.
Not that I’m trying to tease anybody, but I want to make sure that every year we have compelling reasons to be in our ecosystem, to play great games — that we’re delivering stories and characters to people. I love that.
In terms of things learned, having Halo at the launch of Scarlett is something, you know. Bonnie [Ross, head of 343 Industries] and I could probably write a book through Halo 4, Halo 5, the launch of Xbox One — all of the stuff that was going on there.
And I was around when we launched the original Xbox. And I think Halo at the launch of a console for us is a seminal moment. Xbox and Halo, you can’t separate those two things.
But even more than that, in terms of when we talk about games, do we announce them too early? That can set us up for situations where we cancel things that are public, which always hurts. It also constrains the creativity of teams.
Say a team’s got two years to go before they think they will be done with their game, and you start making them stand on stage and say something to the public. Not just talking about puddles. Sometimes the creative and storytelling can get locked in [by promises made on stage], limiting what a team can do.
So I think it’s important to listen to your teams about when they think they’re ready to tell their full story. Sometimes there might be some arrows that come from fans who want to see more. But in the end, shipping great games is more important than the actual rollout of those games. These are all things as I continue to learn.
I want to get specific with Halo Infinite, which is being presented as somewhat of a reboot. Is that a recognition that the franchise has been more or less the same franchise for over 15 years?
18 years. Since 2001.
Is there a sense that these core franchises need to redevelop or need to be re-assessed?
We’ll give them time. There was a stretch where I think we had four Halos in four years: Halo Anniversary, Halo 4, Master Chief Collection, Halo 5. And just the workload of the team — the ability to give them time to step back and think about where they want to go, not just in the next game, but over the long term. Where are they taking that franchise?
One part is having a larger studio organization, [which] means we don’t have to bring the same games every time. We can give them some time. I’ll mention Turn 10 again. It’s a team that wasn’t on stage this year, but it’s good! To have a breadth of portfolio, you can give teams time.
As for Halo, it’s interesting that you say it was the same. Because I can also go back and say Reach and ODST didn’t really focus on Master Chief. And then we went to Halo 5 and there were multiple groups. Now we’ve had feedback like, “Hey, I want you to bring Master Chief back.”
So I think all of it is really about the creative team finding out where they want to take the franchise over the next decade, and making sure they’re creating a good foundation for that. And I feel really good about what they’re doing with Infinite.
How Microsoft is addressing toxic culture in game development
One more question, if that’s OK. I want to go back to what you said at the very beginning about the core tenets of Xbox. You mentioned creating a great place for the Xbox team to work.
At the same time, I’m looking across the video games industry and I see a trend of sexism and misogyny. Men having a tacit advantage in taking leadership positions continues to be an issue. I’m curious if in the last two years, even just the last year, what steps you have taken as the head of Xbox to start solving these problems within your studio.
“Solve” is a big word, you know? I think the most important thing, honestly, inside of an organization of thousands of people, is opening up communication. Making sure that we’re having discussions about topics today that we would not have three or four years ago.
Because if we’re not able to talk about it, if our culture has people afraid to have a conversation about how they feel coming to work — if there are things inhibiting their ability to do their best work every day and show up as their true authentic self — then we’re never going to make progress.
Our team is capable right now of having the conversation, which, frankly, sometimes can be painful. Because some of those times, those conversations become a little more public. But I’d way rather have the conversation about how does it feel to be on our team than not.
The other thing, and you hit it, is who are the senior leaders in our organization? And when I look at our studio heads, when I look at the video for Project Scarlett, the one thing I love about that video is, that is the actual team. It opens with Rachel Card, who’s our head program manager on the Scarlett program. Liz Hamren, who runs all of our platform work. Bonnie [Ross] is obviously in there running Halo. Our biggest franchise of all is Minecraft, run by Helen Chiang. And I’m not trying to go off and tick off a bunch of boxes to make it look [good] from an external perspective. It’s not a PR thing.
What you find is that as the diversity of voices around a leadership team increases — and gender’s not the only diversity vector we should be looking at — that when you have a diversity of voices around the leadership table, the discussion changes.
Sarah Bond, coming in and running business development for us, her background is in mobile; she’s got a great new perspective on areas we go. Liz [Hamren] used to work at Oculus. She’s here and she’s giving us new pushes on things. And then you have some people who’ve been in the organization, like Ashley McKissick, who runs Game Pass. Also in the video.
I love the fact that you can have a diverse conversation about all kinds of topics. Communication is key. Who your leaders are, and making sure that they have a voice in a very safe way, is key. And making sure you’re deliberate about what you stand for.
We put out a blog last month about things that we stand for as an org. We’ve tried to be out front. And we can take some arrows for that. There’s some people that would love it if we just stayed in our lane and didn’t change the kind of games that we’re building, or who our team is. But it’s something that as a team we really care about. So we’re going to be vocal about [it].