Making a hit game is hard. Making a game company is hard. Really hard. It’s a moonshot. The studios who make it are winners, and a lot of the people in those studios are winners. Today, We’ll be celebrating Phil Spencer, current head of Xbox. Phil has been with Xbox since its inception, and has taken leadership to shepherd the company through tough times to its position today.
Spencer’s professional history
Phil Spencer joined Microsoft in 1988 as an intern during college. He joined the software development department full time after college. Microsoft was not yet in the games business. Spencer was a gamer at the time. He joined the Microsoft Studios team in 2002, a year after the Xbox launch. He worked his way up from a junior role to a management one in 2008. He moved up again the next year to become a VP. In 2014, he became the head of all things Xbox. We’ll see later some of the changes he made in that role. Just this year, Spencer was promoted again to be the CEO of Microsoft Gaming, in line with the shift away from Xbox as the sole focus for gaming at Microsoft.
A brief history of Xbox
Microsoft waited a while to get into the console space. Before the original Xbox came out, both Sony and Nintendo, Microsoft’s modern competition for the console space, had consoles under their belt. Microsoft came up with the DirectX Box, a PC running Windows 2000 with console features. Thankfully, they settled on the name Xbox, and released it in 2001. Xbox was meant to compete with PS2 for control of the TV. Microsoft saw the PS2 as a threat to the PC as an entertainment device. The Xbox took a lot of the features of the PC and put them in a console, so that Microsoft could retain control of the living room.
The Xbox lost that battle. They lost $4 billion on the Xbox. It outsold the Nintendo GameCube, just barely, but did not come close to the PlayStation 2. At the time, Phil Spencer was not in charge of Xbox. Microsoft still saw Xbox as being worth the investment, so they continued the Xbox line.
Spencer’s leadership at Xbox
Since Spencer has led at Xbox, he has pushed the platform forward, and has made some interesting choices.
The Dark Era: Xbox One
Phil Spencer took over Xbox after the disastrous launch of the Xbox One. The early part of his tenure looked like the worst period in Xbox’s history since the first Xbox. The Xbox One marked one of many turning points in the Xbox brand. After the Xbox 360 was very successful, Microsoft decided to pivot and focus the Xbox One as an overall entertainment device. Hence, calling it the all in One Xbox. Yeah. This did not work as intended, and so the previous boss, Marc Whitten left.
Spencer doesn’t see the need to focus on sales numbers.
Back in 2015, Spencer pushed for the Xbox team to stop reporting the numbers because he didn’t want his team focused on console sales, but instead on player numbers. (At the time, it seemed like it was a good way to spin a failed console). This was about six years ahead of the curve, and now Xbox is in the best position of the console makers to deal with the surge in gamers from COVID and the console shortages.
No More Exclusives
One thing the Xbox One was widely panned for was its lack of exclusives. Xbox fell behind its competition in Sony and Nintendo. So, the pivot that Spencer had Xbox do was to get rid of exclusives. Microsoft decided to put all of their first-party games on PC as well as on Xbox, and to offer a cross-buy program where you can buy a game on Xbox and get it on PC as well. They continued moving in that direction with Xbox Game Pass. They created a subscription service, like Netflix, for games, and they offered it absurdly cheap: $10 a month. Game Pass was and is also available on PC (on the same subscription). Game subscriptions were not new, but what was new was the amount of games you could get for a low price. Game Pass now sits on roughly 25 million subscribers. Phil Spencer led the way on the push for Game Pass. He toyed with the idea as early as 2013, and he saw it as a way to reinvent the Xbox.
Spencer made Xbox a winner
The Xbox had stumbled with the Xbox One, but Phil course corrected as he took over more of the company latter into the generation. He then started the process of moving away from selling consoles to building the Xbox brand, and he moved Xbox games onto PC as well.
He got ahead of the curve with Game Pass and Xbox Cloud Gaming, and now, Xbox is doing well again. Recently, Xbox has performed well in earnings. Xbox cloud gaming is doing quite well: they saw a 1800% increase in playtime. They have not hurt financially from moving away from traditional exclusives. According to Sarah Bond, head of gaming ecosystems at Microsoft, “Something like 75 per cent of a game’s revenue used to be made in the first two months of release. Nowadays it’s spread over two years.”
The move away from being console-focused has paid dividends for the Xbox brand. Xbox Game Pass is doing well, but not only on the Xbox. It is also doing well on PC. Xbox Cloud Gaming is also available on PC, and Logitech is working on a handheld device to use it. Spencer pushed these moves years ago, and now the other parts of the industry are following. PlayStation just moved to push PlayStation Plus as a legitimate competitor to Xbox. Individual publishers have been trying it, like EA with EA Play. Xbox is ahead of the curve.
These later decisions were all risky. They took Xbox away from where the rest of the industry was going. The outlook for Xbox was bleak just a few years ago. It was looking like they didn’t have any way to compete with Sony and Nintendo. As it turns out, Spencer doesn’t see them as his competition. Spencer and Microsoft have their eyes on much bigger competition, which I will be talking about in another article.
It takes a lot to be a winner
Phil Spencer is one of the greatest winners in gaming history. He made hard choices to move Xbox away from strictly hardware or even a focus on first-party games, to being a more holistic gaming brand. He deserves his place as one of the biggest winners in gaming.
Making that hit game is a moonshot. Deploying it shouldn’t be. Let us help with that.