Xbox, as a brand, is the healthiest it has been in many years. After the tumultuous launch of the Xbox One, the platform holder has been realigning its strategies and, at the same time, moving in bold new directions.
Under the leadership of Phil Spencer, the company has pioneered Xbox Game Pass, a Netflix-like subscription service that offers a large library of games for a relatively low subscription fee. It has been a success, at least in the perception around it and the genuine value it offers its customers.
Game Pass, along with its expansion to PC, a cloud gaming service in xCloud (now incorporated into Game Pass Ultimate), efforts to improve accessibility, and meaningful changes to the Xbox One experience have allowed Xbox to turn a stumble into a steady jog towards success. Now, however, with the launch of two new consoles, it feels like it’s about to break into a sprint.
Ahead of the launch of the Xbox Series X and Series S, we spoke to Spencer about the identity of Xbox and its business, potential efforts to expand its presence in Asia, the state of Halo, playing Elden Ring, and the future of Xbox as he sees it.
Note: This interview was edited for clarity and is also available to watch in full as a video.
I want to talk about is the identity of Xbox as you currently see it. I think you’ve been very candid and it’s been refreshing to see you say it was kind of a wayward time at the start of the Xbox One. And then you, along with a bunch of other people on your team, kind of started to find an identity for it. From your perspective, do you think you’ve found that identity now and how do you currently see the Xbox of today?
That’s a really good question and not one I’ve been asked recently. When I think about our identity, I do think as a team, we feel our identity. So internally, and I’ve talked previously about, after the Xbox One launch, the team was a little wayward trying to figure out, “Well what do we stand for? Are we TV, TV, TV? What are we about?” And I think what the team has really centered around is listening to our customers, putting our customers at the center. Even early decisions around user voice and doing our monthly updates with our platform. You remember all of this stuff. But it was really about what are the things that our customers want? Sometimes the customers will ask things that aren’t, in the near term, the best thing for our platform. But we think about the long-term making the customer decisions or the right decisions when we can.
On the external side, I think the identity is still something that’s evolving because we’re doing something different. We’re not doing the traditional, “Build a console, go take your old console and put it in the closet. And there are four or five new games for the new console, and you forget about the old stuff. And you only play with people who have the new thing.” We think about Xbox more as an ecosystem, as a platform, across many screens. And that can be confusing because it’s different, and it’s beholden on us to explain what this means and why it’s good for a player. It can’t just be good for us; it’s also got to be good for players. So that’s worked for us to continue to do. So on the external side, I think there’s still a journey for us.
A lot of people ascribe a plan to you–how much of that is clear in your mind and how much is it rolling with the punches and figuring out? Is it smart to have a set plan and go, “This is what we’re shooting for?” Or is it smarter in this day and age to look at the demands of the world around you, the people playing your games, and the various businesses that feed into it and then kind of roll with it as it happens?
I think it’s both, actually. I think it’s important for the team that we have a longer-term plan that we can talk about, because some of the incremental engineering decisions or even business decisions that we make have years to play out. We’re lucky that we work at a company like Microsoft that is supporting our multi-year ambitions like xCloud and will get behind those things. So you have to have a long-term vision on where you’re going, otherwise you just are kind of misguided in the decisions that you’re making.
But, every day we learn, we learn new things, and when we learn new things, we have to react to those. I can remember back in the day on the console, I’d be sitting around the leadership team as the head of first-party at the time and there was a real kind of worry that free-to-play would be the death of consoles. And you saw these big free-to-play games on PC and mobile, we can’t let those on console. That was kind of from the top down, the prevailing philosophy. And now you look at consoles and free-to-play does incredibly well on console. It hasn’t been the death of the console. If anything, you could say it’s helped grow. And that’s because players were playing and eventually you can’t ignore what players are doing. In fact, you should embrace what players want to do, and I think that’s pretty critical. So it’s a little bit of both-like long-term navigation and near term, having your eyes open and listening and watching.
One of the big discussion points around the Series X and Series S is the launch lineup. And you’ve indicated previously that Game Pass is basically your big launch lineup thing and, given the library, it’s certainly a compelling one. But is there a worry that there’s no big showpiece for what the console can do?
Clearly, in terms of the dialogue you and I would have, or the more traditional way of looking at a console launch, [that’s] one of the things that people are looking at. I think there are some great games [available] when you look at the games that are launching right now. I played all weekend playing Assassin’s Creed Valhalla and I think the team at Ubisoft had done a great job. I think about Watch Dogs: Legion, which frankly, isn’t a franchise that I played a ton of, but I really am enjoying this game. I’m playing Tetris Effect. I’m playing games. But that’s not to dissuade–we’ve been clear, I wanted a Halo game at the launch of the console. But I will say that was more emotional than business-driven.
We’re going to be sold out of consoles, come [launch day]. And that doesn’t make me happy. I wish we had more consoles. I wish we could supply all of the demand that will be out there. So I think from a PR standpoint, it would be nice because people could write about a couple of good games. From a business standpoint, I’m not overly worried about it. And frankly, when those games will come, I think it will be a good opportunity for the console when we’re really in more of a competitive battle, because there are consoles from us and Sony on the shelf. So you mentioned it, Game Pass is the thing that I really think differentiates our console platform right now. We’ve got 15 million subscribers, doing incredibly well, a great collection of games from so many partners. Our launch games go in day and date. So like Gears Tactics, these games people haven’t played before can go play. So I feel really, really good about the investment in Game Pass, and how that stands up against any competitive offering that’s out there.
And I guess the one plus side is it gives people more of an inclination to buy Yakuza, which is a fantastic franchise. Finally, on Xbox at the go.
Finally. That’s right.
The killer app launch title for Xbox.
I hope so. That would be good.
So you mentioned they will come eventually. How soon do you think it will be before we start to see those kinds of games that really leverage the S and the X architecture? And is there an urgency within the company to get there as soon as possible or is it very much a case of, “Take your time, do it right. We’ve got Game Pass, we can ride the benefits of that for a while to give you the space you need?”
Yeah. I’ll start with the differentiation. We’ve said for a while that this generation’s leap is going to be more about feel than look, and I believe that, and that’s something that doesn’t show up on a video. It’s hard to give people a sense of, “Well, what does 60fps feel like compared to 30fps? What does 120fps feel like compared to 60fps?” What do these load times really mean, in terms of the instant access to the games that you want to go play are nearly instant access to the games that you want to play? You’ve used the console, so you get a feel for it over time, but we’ve talked about that actually for a couple of years, that they feel as good as games have looked, because an Xbox One X has done a really good job allowing developers to put amazing looking games on screen.
So I think the leap will be gradual, as it is in most generations because developers will get used to the tools, but at the same time, we’ve seen some really great work on PC so people know what these high graphical bar games are going to look like when they come to console. Games like Microsoft Flight Sim, which will come to console. When that comes [to] the Xbox Series X, it’s going to look fantastic. I’ve been very focused on how things play and how they feel and I love the work that Moon Studios has done with Ori, and The Coalition’s done with Gears. In terms of pressure on the teams, there’s always pressure on the teams, but it’s more self-inflicted. As you said, we have Game Pass, we’ve got a lot of support from the company. I don’t need to push half-done games out. I can make sure that we get to the point where we really believe in where we are with the game, and some of those games will continue to grow after they launch, and [I] feel good about that. So we definitely want to make sure we get the games right more than hit an individual date.
I think the growth that we’ve seen in the last, call it six months, is something that will persist … I think we’ve accelerated a natural transition from what we see on our platform of people using other non-interactive media to entertain themselves to gaming, and I think that’s going to continue.
That leads as a perfect segue into Halo. You mentioned it earlier, you wanted it there from the start as an emotional thing. And not having it is obviously a big loss. What is your view on that franchise as it stands? Do you still feel like it is the juggernaut in entertainment that it was in the Xbox 360 days?
I definitely think it has the potential for that power. I think there’s something iconic about Bungie’s creation originally, about Master Chief. I teasingly call him John Wayne in space but this iconic character, hero character that I think people are drawn to. When I look at how well Master Chief Collection has done as it’s gone to PC and as 343 continues to evolve it, even now for Xbox Series X and Series S, there’s a high level of interest. With a high level of interest comes a lot of pressure on the team, comes a lot of emotion when we don’t hit a date that we wanted to hit. I take all of that emotion and feel that I have as a positive sign for the franchise.
That said, there are a lot more big franchises now in gaming than there were back when Halo 2 and 3 launched, and I think that’s a good thing for our industry and a good thing for Xbox. The fact that we can have a diversity of franchises and what those mean. So I don’t think a platform has to define–[or we get to define]–who’s your iconic character on our platform. I think you are the iconic character on our platform. It’s not any one of our individual franchises. And I think that’s a strength, but I have a ton of belief in Halo and 343 and where we’re going. I’ve played quite a bit of Infinite and I’m looking forward to other people getting to play.
Okay. When you said “you are the iconic mascot” I thought you were talking to me and I got very confused there for a second.
Oh, okay. It is me. Awesome. Sweet, sweet.
It feels almost like [Halo’s] existence and the way its health is, is almost tied to the way Xbox is. In the time when Xbox was struggling to find its identity, the same seemed to have happened to Halo in the post-Bungie days–they kind of run parallel together. Now that Xbox seems to be on a more steady footing, [based on] what you’re seeing in Halo Infinite, does it look like Halo is also starting to get on steady footing and build up momentum to be back in that good space?
I definitely think 343 has a clear vision for what they want the franchise to be and where it goes. And it’s an interesting spot when you have such a franchise with tens of millions of customers, fans who just love the franchise, and yet the state-of-the-art in gaming continues to move on. So you’re in this interesting world of wanting to balance the old and the new, but yeah, I feel really good about the team and the vision that they have for where Halo can go. I think one of the things that this was, I’ll put this on me because I’m the head of the business. I think there were certain people that were looking for Halo Infinite to be this lifelike gritty real-world looking game when we first showed it. And for those of us that have been around Halo for a long time, that’s never been Halo. It’s always had a certain palette and a certain look and I actually think there’s more games in the industry now that are, it’s less about how realistic or how M-[Rated] can I make a game and more about the fun and engagement that games have. And that’s where I really think that Infinite is going to shine.
I really love the Halo franchise and I’ve enjoyed aspects of [modern games]. But when I think about it, my intense love of Halo is still very much rooted in [Halo] 1, 2, 3, ODST, and Reach. So for me, it’s starting to kind of feel like a make or break moment for the franchise. Do you think that’s fair to say, and what do you and 343 see as the stakes for Infinite?
Well, it’s interesting even going back, let me just go in, because I’m right now playing through Reach on Legendary with a friend. We’re playing through co-op and four of us just did this with ODST and I was here when Reach and ODST launched. I think it’s fair to say they were not universally embraced when they launched for the people who had 2 and then 3, because they were a little bit different. Where’s Master Chief as the central character? In the case of ODST, who are these orbital drop shock troopers and where are my Spartans? And now when you go back, like you mentioned them in the same breath with 1, 2, 3, you instantly go to Reach and ODST. And I even start to feel that about [Halo 4], like I’ll get some commentary now that people love the story in four, they wanted multiplayer to be better. Then when they go to [Halo 5], many people say five was the best multiplayer in the franchise–they wanted the story to be better. When they first come out, there are certain expectations, but then over time, I think certain games and especially in the Halo franchise become beloved, even if they weren’t universally embraced when they come out.
So I don’t look at any one of these individual launches, Infinite included, and say there’s some kind of make or break because I just don’t think entertainment works that way. Do I think Master Chief and the challenge that we put him in, in the games, has an enduring quality and something that will be around for [a] decade plus? Absolutely. Is it beholding on us to treat that franchise and the stories and the characters the right way? Yes. And listen to our customers? Absolutely. But I think Halo is around for a long time kind of and Infinite will be a great beat in the Halo lore.
I’d like to make a request on behalf of all Halo fans. Can we get a reversible cover for Halo Infinite when it comes out with Craig on the other side? I know everyone loves Master Chief, but I think the new era of Halo is tied up in Craig.
We actually have these t-shirts, I didn’t wear it today, which is Craig’s face. I love that the team embraced that, it was just so funny. Yeah. I think Craig will be around for many, many decades in the Halo lore. You’ll find his pictures all over the place. Yeah. Probably in games somewhere.
I can only hope. The other thing about Halo is there’s been a level of staff turnover and change that 343 this year. And obviously when people see that, you get armchair analysts and you get various people starting to worry. Can you give us a status update on the game and the team there, and is the turnover something that we should be worried about?
Yeah. I think this has been a long project and I think we’ve added people to the team, when I think about [head of publishing Pierre Hintze] and [project lead Joseph Staten] coming onto the team. Sometimes what hits the press or when certain things get announced internally have actually happened months before. It’s not always accurate when these things line up–we did take the feedback coming out of the July showcase event seriously, both on the date and what people were expecting from the game. It was a miss on our part, on my part, to open our July showcase with Halo Infinite and then a couple of weeks later have to move the date. Like that, I don’t take the sentiment and the emotion of our fans and our customers lightly and when we get into a situation where we set an expectation that here, this is something you’re going to have at launch and then we have to change that expectation not too much after our showing–that’s a mistake. And that’s something that we really can’t do.
So I really have a lot of faith in Bonnie [Ross] and the team there having Joe and Pierre join, which they did late in the summer–I feel good about where we are on that team. But as an industry, we’re always going to see turnover. I don’t have any specific concern about 343. I actually think in the long run, turnover is a healthy thing because we want people who are really motivated by the things that they’re working on.
Broadly looking at your portfolio, how much of a push for diversity is there in the genres that you are tackling right now? You’ve got a bunch of studios, but obviously, I have less insight than you do, but they kind of are in a shooter mold and in the RPG mold, a lot of them. And I think back to the days of having Viva Pinata alongside Perfect Dark, alongside Kameo, alongside all these kinds of various different styles of games. Do you think you’re moving towards that now with the kind of acquisitions that you’ve made and is that something that you want, or is it a case of just make what you’re good at?
Well, I do want people to make what they’re good at. So then the question is, as we think about how we grow studios with Matt Booty and I, do we look for teams that are different, that are good at things that are different than what our current stable of studios have as skills. And I think you point out something that’s right. That when we looked even at the ZeniMax acquisition, which obviously we’ve announced that, it’s not closed. We didn’t look at that and say, “Okay, this diversifies our portfolio from like a color tone or a rating standpoint,” but I thought it was some really, really talented teams that we wanted to go work with. When I think about going forward, I do think we need different genres, different color palettes, different stories, different game ratings coming from different parts of the world. I think that’s an important next step for us when we look at opportunities.
Now, some of the opportunities are inbound. Some of us are us reaching out, so you don’t always get to pick exactly the game that’s coming. I’m excited about games like Psychonauts and what Double Fine’s going to go do beyond even what Psychonauts is. But it’s unfair to put all the weight on one studio to say, “Okay, you’re our non-M-rated studio.”
So yeah, I think you point out a good issue for us and something it’s an opportunity, whether it’s through third-party partnerships or whether it’s through things that we can do in our first party to make sure we have a diverse set of games for all kinds of people. That is one area where I think Game Pass really works. When I sit in Game Pass and I look at the portfolio of games and I think about Game Pass as just a part of our platform. So when you become a member of Xbox, so many of those people join Game Pass. And when we think about the portfolio of games that we’re adding to Game Pass, I’m really pleased by the diversity of stories, characters, color palettes, ratings that I see. And that’s something that we’ll continue to push for.
You mentioned new opportunities before and your first party. There was a report recently from Bloomberg, which said that several Japan-based devs have been approached about acquisition [by Microsoft]. Is there any truth to that?
I don’t think so. I say, I don’t think so… I mean, I’m not in every meeting that every team has, but I’ll say not from me. Most of the opportunities that we’ve had to date have been a long-lasting relationship, and so, I don’t think we’re out there with our business card, throwing them out on the corner, trying to find people. I’ve talked about my affinity for Japanese studios and thinking back in the day when we had more games that were created in Japan as part of our first party, I’m excited when the deal closes to get to spend more time with Tango [Gameworks] and the work that they’re doing. So it’s an area that I’m interested in, but no, I don’t think it’s… I think that’s not accurate.
Going off of that, sticking with Japan a bit or just the region, how valuable is the Asian market to you, and what does Xbox look like there? Do you see any value there, if any?
Absolutely. Yeah. And I’m glad you say the Asian market. And when I talk about the Asian market from a gaming standpoint, the major markets in Asia are actually very, very different from one another. If you look at the Japanese market, it’s very different than the Korean market, very different from the Chinese market and the Southeast Asian market. In the case of Korea, we’ve launched xCloud there and a majority of the people that are part of Game Pass right now are actually xCloud members in Korea. They’re not people who are playing on PC or playing on console, they’re actually members of Game Pass through the cloud. And I think that’s an interesting inroad in certain markets, same thing with our PC focus and Game Pass on PC and our first-party games that are there.
I also have an affinity for all the amazing creators that are in Japan and I spent a lot of time there and I want to make sure those creators see Xbox as a great place for their games. And when I think about things like Kingdom Hearts and Yakuza and other games that we’ve been able to see come to the platform this generation it’s both a third-party focus and a first party focus. And the different Asian markets are different and we will approach them differently, but absolutely they are important. I will say I don’t think I’m going to go into Japan and outsell the Japanese console makers with Xbox. I would hope to, I would like to, but it’s not in the plan that I’ve written down, but we’re going to work really hard to have the best generation that we’ve ever had in Japan and the same thing in Korea and China. I feel good about our opportunity there. And especially when I think about fans of our platform, outside of those markets, who want to play games that come from those countries. That’s a commitment I want to make as well.
Does it feel like to you, that you’re in a better position to do that in Japan and Asia? Because when the Xbox One launched, it was all entertainment-focused. It was this giant chunky console that takes up a lot of space and it was a very certain type of person that wanted it and it didn’t jive with Japan, right? And now you have this console that’s, well, at least you have one console that’s very small. The other one, it doesn’t have a massive footprint either. And also, cloud gaming is hooked into xCloud. Do you feel compelled to take another big shot at it even if history has shown that Xbox doesn’t have a huge foothold in Asia and Japan?
Well, I was just thinking that our tagline for the Xbox One, when we launched it was “big, chunky console.”
I mean, the thing to remember about the launch of Xbox One is we actually didn’t launch in those markets when we launched in the US and the UK and other markets and fans and customers of ours there saw that, and it clearly showed a lack of appreciation and support for those markets for our platform. So starting from, let’s make sure that we’re launching in all the markets where we want to have the console kind of globally at the same time, just to show respect for the customers there. That was important. I absolutely feel like we’re going to continue to make a good… I feel like we’ve got the best opportunity we’ve ever had in a generation to do well in those markets.
Our preorder in Japan sold out almost instantly. Our preorder numbers exceeded our Xbox One sales for the previous year. That was our preorder on that one day, so when you just think about the volume and the interest that’s there, and that’s specific to Japan. And like I said, when I think about xCloud and how that’s doing in Korea, when I think about the China market with PC and other things that we’re doing, I feel like we are better positioned because we’re less reliant on any one specific device.
And as you mentioned, even in the console space we have Series S, which I think clearly has a design and form factor and the price point that we believe can do well. It’s going to be about the games, which is why we continue to spend time in Japan with our partners there and getting games like Phantasy Star, Yakuza, and other games coming to the platform. More work to do there, we’ll never be done with that, but I feel good about the opportunity ahead. Absolutely.
As someone who loves Japanese games and is also heavily invested in Xbox, I think the thing that I see is it feels like Japanese developers, because of the global market, are more valuable outside of the country than Xbox might be within it. Namely, bringing their games to us is perhaps more valuable than trying to force a presence in that area. And it definitely feels like you’re doing that with stuff like PSO–bringing that over was a big deal. Which leads me to my next question: What are the chances we’ll get a Lost Odyssey 2 from Mistwalker? Because I’m desperate. We need it.
[Laughs] You know, Mistwalker is in a much different place. I think if we were ever going to go back and do something with LO–I worked on the first Lost Odyssey, fantastic game–we’d have to almost recreate all that, but I actually just love, and I think about Blue Dragon, Lost Odyssey, past games that we’ve built, it’s not lost on me that Tetris Effect is one of our launch games with us now. And it’s Mizoguchi that we’re working with and we’ve worked with for many, many years. The relationships we have there are things that we’ve had to rekindle over the last few years and build trust. To your point about our console success, I’ll say this as somebody who goes and plays a lot of games with my friends there and stuff, in Japan. The fact that nobody owned an Xbox, this last generation, meaning the people working on the games, was a challenge for me. Because it was out of sight, out of mind.
So when I see things like preorders going well, I want to be part of the gaming consciousness in Japan even if we don’t win or whatever that means, I need to be part of the consciousness. I need to be innovative. I need to do things that engage those developers. I need them to find success globally with the franchises that we’re building. And that’s the area I’ve been most proud of the teams work on the ground there. It [hasn’t] always been easy being part of team Xbox sitting in Japan. It hasn’t been over the last decade or so, but I feel good about the progress that we’re making. I think it shows. When you look at our last E3 shows, Miyazaki is showing his games on our stage and somebody who’s just an incredible creator. The work with Sega, the work with Capcom, Bandai Namco that we’ve had, work with Square Enix. It’s been really good and really gratifying to see the progress.
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