Xbox couldn’t have imagined it would be where it is right now when it first laid out its roadmap for the current generation. Led by Xbox Game Pass and massive acquisitions, the Xbox Series X|S was supposed to reverse Microsoft’s dire fortunes from the previous generation while changing how we play games. But while the Xbox Series X|S has certainly been a marked improvement, other factors have made this generation more than a struggle for Xbox than expected.
Speaking with IGN in a brand-new interview following this week’s Developer Direct, Xbox CEO Phil Spencer addressed many of those troubles, including recent layoffs and the uncertain status of 343 Industries. He also acknowledged Xbox’s disappointing 2022, which saw virtually no major releases compared to its competitors.
“Our commitment to our fans is that we need to have a steady release of great games that people can play on our platform, and we didn’t do enough of that in 2022, there’s no doubt,” Spencer told IGN. “And fundamentally, that’s on me. I’m the head of the business.”
During the interview Spencer also looked ahead to 2023, saying that it was “important to show games, to show dates” in the recent Developer_Direct, and talked more about Xbox’s summer showcase plans, though he won’t say one way or another whether Xbox will participate in the show. And he talked about the ongoing battle around Xbox’s Activision Blizzard acquisition, which he describes as a “learning experience.”
Asked whether 2023 is a critical year for Xbox, Spencer said in his typically cagey way “every year is critical.” Nevertheless, he also said he feels “good” about Xbox’s momentum.
“When I think about the rest of the work that we’re doing this year, it’s going to be an exciting year. From a production standpoint, we’re coming out of all of the COVID at home, and I think we’ve got a better working rhythm as an industry and things that are going on, and I’m excited,” Spencer said.
Read on for our full interview with Phil Spencer, and for more info check out our recap of everything announced at this week’s Developer Direct.
IGN: Hi-Fi Rush has been getting a lot of really positive buzz on social media, not the least because it was a shadow drop, which I found pretty interesting. And I’m just wondering is this something we can expect from Xbox going forward?
Phil Spencer, Microsoft Gaming CEO: Yeah, the shadow drop, it seems like it worked really well this time. It’s not a thing we’ve done a ton of. This was an idea from the team. They’d been playing the game, felt good about their launch date and some of the early signals on quality, and said, “Hey, it would just be fun. It would just be fun to be able to launch this during the Developer Direct and say, ‘Play it now.'” So we rolled with that. We’re always learning, always listening, and it seems like the community’s responding well, which I think is a good signal.
IGN: When I was watching the stream, I thought to myself, “Wow, Hi-Fi Rush looks fantastic. I absolutely love the art. It’s really popping out to me. I’m going to keep a note on when this comes out.” And then they said, “No, you could actually play it right now.” And instantly, it made me want to just go and download it, and I think a lot of people agreed with me.
Phil Spencer: I love Hi-Fi Rush, I love the way it looks, I love the music. One of the games I’d always wanted to get, we weren’t able to land it in our backward compatibility program, was Jet Set Radio Future. I thought it would be fantastic to be able to have that game back, and definitely, it’s a different kind of game, but some of the same vibe.
So when looking at [Tango Gameworks]…just watching as it evolved over the last couple of years, I’m really happy with where it came out. They were able to get some good licensed tracks in the game. The gameplay is really fun and unique, and I think the look is just striking. It was a good mix. I was happy with the diversity of all the games, the content that we had, the great games that we had in the Developer Direct, and I think Hi-Fi Rush is definitely showing itself to be one of the highlights of the show, which is nice.
IGN: How much pressure was Xbox under to establish positive momentum for 2023 coming off 2022, where there weren’t a lot of releases?
Phil Spencer: I think it’s a little different internally, because we obviously know that we have a Developer Direct, we know what content we’re building, we know already what we’re we’re going to be doing in June in our showcase. But our commitment to our fans is that we need to have a steady release of great games that people can play on our platform, and we didn’t do enough of that in 2022, there’s no doubt. And fundamentally, that’s on me. I’m the head of the business.
The commitment we have to our customers to continue to deliver great games is something that I take seriously, the teams take seriously, and 2022 was too light on games. So we’re excited about getting to roll into 2023, have the Developer Direct. I felt really good about the games that we were showing. And then also knowing that Starfield is a game that we’d be able to highlight in its own show and then just start off 2023 with good momentum, and like you said, I think we needed that.
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IGN: You’re releasing Redfall this year, you’re releasing Starfield this year, Forza is coming out somewhat later in the year, and it feels like go time. It feels like this is the moment for Xbox.
Phil Spencer: I hesitate to get ahead of the launches, just because I know there’s some, and rightfully, some fatigue in the community about us saying, “Hey, just wait until, just wait until.” So that was one of the reasons it was nice to be able to launch Hi-Fi Rush during the show to show that we can launch. And I look at things like Pentiment, which came out in November, as a really high quality game, but there has to be more. And when I look at Minecraft Legends, when I look at Redfall, I look at the work that we’re doing at Forza Motorsport, one of my favorite franchises, Elder Scrolls Online, the things that we showed, I think it was important for us to show games, to show dates.
I know there were some questions on the date on Forza Motorsport, because we just revealed the year. Everybody should know just the quality that Turn 10 puts into Motorsport, if you look historically, is going to be there in this game. That’s the thing that, first and foremost, is most important, and we will come out with a date, no doubt when we’re a little bit closer. But we just wanted to reaffirm to people that this is a 2023 game.
So as you said, showing great games, showing gameplay for those games, and giving solid dates I thought was important this early in the year.
IGN: When I look at Hi-Fi, and I’m glad you mentioned Pentiment, I see those games as being kind of a pair, because they’re smaller projects but from large developers. And I’m just wondering how successful have these projects been for you, and where do you see them fitting in the Xbox ecosystem?
Phil Spencer: Well, for me, I look at the success in a couple of ways. One, internally, I think about our teams and our creators and giving them a creative outlet to go do some things that maybe if they were just on their own…and sales was the only way of gauging success, they might not get to go do those games. So I like when we can create opportunity for teams to do some unique things that are maybe outside of what they’ve normally done, then really find either new customers for the studios or find just people that really enjoy the work that they’re doing. So internally, I think it’s a great creative outlet to give teams and creators that opportunity.
I think one of the benefits of Game Pass, not to turn into an ad for it, is that the risk as a gamer that you think you’re taking if you buy a game that maybe is outside of the things that you normally play…it’s pretty easy to click now to download and you click now to play, and then you can decide through your own choice, “Is this something I want to invest my time in?”
I think that the creative diversity expands for us when we have different ways for people to kind of pay for the games that they’re playing, and the subscription definitely helps there.
IGN: I’m glad you mentioned Game Pass, because in the most recent round of earnings, I believe there was a 12% reduction in services and content spending, despite the fact that Game Pass reached new highs. And there’s an increasing sense that Game Pass is maybe being a little slower to reach the potential that was touted six years ago when it was first launched as this transformational service. I’m kind of curious what your reaction is to that.
Phil Spencer: Well, one thing with Game Pass is we’re kind of in unchartered territory in doing what we’re doing with Game Pass in the industry. So it’s harder for us to go out there and look at examples to help us gauge how fast we should be growing. We’re at an all-time high for paid subscribers, and Game Pass, it continues to grow. I’m happy with the growth. We set high internal targets, and people see sometimes we miss those targets, sometimes we hit them, but I’ll always be ambitious about what we’re trying to do.
I’d say the quarter numbers that you’re talking about with software and services…one of the things to remember is that’s a year-over-year comparison. Last year in that quarter, we had Age of Empires, we had Forza Horizon 5, we had Halo Infinite. All of those did really well for us, and as we pointed out, we didn’t have that big release in that same quarter of this year.
So the year-over-year comparisons did go down, and that’s not something that we aspire to in running the business. It’s not our goal, but there is some timing in that. I’ll also just say that when we look at where the economy is and where the industry is going, given that the year prior we were still kind of a little bit into a COVID lockdown, some of the year-over-year comparisons for our industry, I think, will show some of those trends. But our goal is to be a growing healthy business. It’s our commitment inside of Microsoft, and what we’re trying to do. And shipping great games in a regular cadence is important to that.
IGN: How critical do you see Starfield and Redfall as being to kind of getting Game Pass where it needs to be as a service?
Phil Spencer: Redfall and Starfield are really important games, every first-party game that we’re building is. In terms of the growth of Game Pass, it’s been steady. And as we’re adding new games and sequels to games, we see the continued growth. Sometimes, the growth is in games that we expected, and then every so often a Vampire Survivors or now a Hi-Fi Rush comes along and creates its own excitement. So sometimes you can predict the games that are going to drive excitement, and sometimes you get surprised. And I like that about our industry — that great games can come from many different places.
For us, we obviously closed the ZeniMax acquisition a couple years ago, seeing that Bethesda, ZeniMax being the parent company, is shipping a Hi-Fi Rush, shipping Redfall, has the Elder Scrolls Online update, shipping Starfield…that these games are coming this year. And we’ve started the year off with our first launch into Xbox and PC, Game Pass. I’m just really encouraged by the strength that Bethesda’s going to show in our portfolio, and we’re starting to see it already in 2023, and that’s exciting.
IGN: Pivoting slightly, as you know, Xbox recently suffered some layoffs, and in a memo to staff, you called it a challenging time for the business. I’m wondering if you could elaborate on what you mean by challenging times and what reassurances you can give to fans and players that Xbox is on the right track?
Phil Spencer: As somebody who’s been on Xbox for an awful long time, it’s always a challenge whenever a coworker…a team member is not going to be on the journey with us going forward. I take to heart the impact on individuals. I see my commitment and my responsibility as the person who heads the business to create a safe place where people can do their best work. And obviously, we have reductions for certain people there. I haven’t succeeded at that.
My commitment is to the business, to the customers, to the teams. I think running a successful business is part of creating a stable place for our team members. The long-term vision that we have on Xbox of building our experience around the player, allowing creators to build games that can reach players on any screen that they want to go play, giving players different ways to build their library, whether it’s buying their games, subscribing to their games, looking at access like xCloud and the work that we do on PC. I’m a strong believer in that vision.
Right now, there’s some business that we’re having to work through, and part of that is making sure that we have the right resources in the right places to do the best work. Sometimes, that means we have to make some allocations, in this case, some reductions, and I don’t take that lightly, because the impact on the individuals is real. But it is, I think, important for us, for the larger organization that’s here, that I put this business in the best stable position I can for what we need to go forward, which in the end should create a better place for the great team members that are here building the things that they’re building.
IGN: As we kind of look ahead to 2023 and thinking about where we are in the current console generation, I’m just wondering if things have kind of unfolded as Xbox expected. It seems like there’s been a lot of variables so far.
Phil Spencer: Definitely, there’s been a lot going on. You think about the last few years and stuff that all of us have had to deal with. In terms of where we are as Xbox, I’m incredibly confident in the plan that we have, the strategy that we have, and the teams. Just today, we had a meeting with the entire team, and we talked about our path forward. We’re in the entertainment industry, and the entertainment industry is one that’s built on hits that aren’t always predictable. Like you said, we’re seeing that right now with Hi-Fi Rush. It’s a business that is driven by heart of people falling in love with the things that you’re building and also being persistent in being brave as an organization.
This team has done some things that maybe weren’t expected of them in terms of things like Game Pass and xCloud. When I look forward at the games that we’re building and the platform ambition that we have, it just gives me more and more confidence in where we’re going. But definitely, the games industry is not one for the faint of heart; it’s not one for teams that want to play it safe. I love the ambition that Team Xbox has, and it’s a privilege to be part of this team.
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IGN: Truly, the games industry is not for the faint of heart. I can attest to that. Focusing very briefly, specifically on 343, I think there’s been a lot of questions about its role going forward, because it’s been particularly impacted by the layoffs. They released a statement saying that they will continue to develop Halo now and in the future, but amid the cuts. We’re given to understand that support studios or additional help may be brought in. I’m just curious can you shed more light on 343’s role going forward?
Phil Spencer: Absolutely, but I’m going to start, because I think sometimes it gets a little bit lost in the discussion about Halo and 343, which will always be iconic for Xbox, is just the launch of Halo Infinite a little over a year ago and the quality of execution that that team put into the game. I thought it was fantastic. Obviously, we’re talking about the following year, and I think there are some missteps that we made as a team, absolutely. But I don’t want to take away from the fact that the team did a really good job delivering a great Halo game. I think reviewers commented on that. We definitely saw players last year playing and the success that that game had.
At the same time, when we launched that game, we know we needed to make some commitments to people about the content updates and our timing on those and the quality, and we didn’t hit our own bar for doing that. I believe in the team that’s there, Pierre and the leadership team, and the plan that they have. Obviously, [343 studio head Pierre Hintze], he’s the studio head now, has been on Halo for a long time. He’s worked on [Halo: The Master Chief Collection, he’s done some great work there. The team has a very good plan.
What we’re doing now is we want to make sure that leadership team is set up with the flexibility to build the plan that they need to go build. And Halo will remain critically important to what Xbox is doing, and 343 is critically important to the success of Halo.
In terms of support studios and other things, that’s just part of development and having other partners help us. But the heart and soul of Halo is with 343 and the team that’s there, and I have the utmost confidence in the team that’s there and leading and the plan that they have going forward.
IGN: If you don’t mind me staying on this for just one more moment, you were mentioning the plan going forward. I think there’s a lot of questions around the plan. Previously, there was a 10-year support plan for Halo Infinite, including new story content. I’m just wondering if that still in place?
Phil Spencer: I’m going to let 343 talk about the plans that they have right now, that people know they have the next season that’s coming up, and they’re excited about that. They’ve got some other things, some rumored, some announced, that they’ll be working on. They’re excited about the plan forward. I look at, say, the work that they’ve done on Forge and the amazing support we’ve had from creators there. The timeline for Halo…Halo is always going to be one of those things in my mind that is part of Xbox lore, part of the foundation of what Xbox is about.
I expect that we’ll be continuing to support and grow Halo for as long as the Xbox is a platform for people to play. So I think the timeline goes on and on in line with Xbox, and I want to make sure the team’s set up to succeed with that.
IGN: Looking ahead a little bit, the future of Xbox, or specifically this year, after the Developer Direct was complete, there was a statement that Xbox will be in Los Angeles for its annual showcase. There was some questions about whether or not that would mean that Xbox would actually be at E3, and it seems to be unclear. I’m wondering if you could give me a little clarity on that. Will Xbox be at E3?
Phil Spencer: Well, we pick our time for our showcase specifically so that we’re there. E3 is just, to me, one of the seminal moments of gaming. I love the history of going down to LA, thousands of people there, getting to see great new things…getting to see people in the industry, the fan events that we’ve had. I definitely want that to continue. Xbox is on the board of the ESA, and I think a successful and healthy ESA is critical to what we’re trying to go do. So we place our showcase, like we always have done, at a time where hopefully it’s convenient for press and even consumers that are going to the E3 event, and that’s what we’re trying to do now. We will continue to work with ESA in terms of their plans. As I said, we’re on the board, and we want to make sure that we are doing everything we can to help make the E3 successful.
IGN: And of course, there’s the ongoing Activision/Blizzard acquisition, which has turned out to be quite a fight for Xbox, especially with the FTC suing Xbox over this. And I’m just wondering how confident are you that this deal will get done compared to a year ago?
Phil Spencer: Given a year ago, for me, I didn’t know anything about the process of doing an acquisition like this. The fact that I have more insight, more knowledge about what it means to work with the different regulatory boards, I’m more confident now than I was a year ago, simply based on the information I have and the discussions that we’ve been having.
When we announced a year ago, we talked about an 18-month timeframe. We’re 12 months into that. I think we continue to stay focused on getting the deal closed. I think we can do some amazing things together with the teams at Activision-Blizzard-King on the mobile side, and collaborating them with new creative and new ways to deliver their content. And us learning a lot from the work that those teams do in mobile, which is a space that we just don’t have a lot of expertise as Xbox, but also is the largest gaming platform in the world.
So my confidence remains high. We’re actively working with the regulatory boards around the world that need to approve for this, and it’s been a learning experience for me. A lot of time spent, a lot of travel, a lot of conversations, but they’re conversations where I get to talk about our industry and the work that we do and why we do it. I think the more regulators are informed about what gaming is, how the business runs, who the players are, and what our aspiration is as Team Xbox is just a good thing for the industry itself.
IGN: Apologies for asking about one of your competitors, but I’m just wondering if you’ve been paying attention to The Last of Us on HBO?
Phil Spencer: Yeah. Well, it’s fantastic. They’ve done a great job with an adaptation of a fantastic game on the television screen, and kudos to the team, all the teams that worked on it. Obviously, the foundation of that is the work that Naughty Dog did in building the franchise. And I also think that — and he probably won’t like it that I call him out on this — but the fact that Neil himself has played a role obviously in the creation of the game and the franchise, but see him applying his creative talents in the TV space…I think is really great. It’s great for him, it’s great for the team.
But I’ll also say as an industry, where maybe — and everybody won’t agree with me — but sometimes I think we’ve looked at other media in an envious way as gaming that we felt that we were kind of outside or maybe even lesser in some ways. I’ve never felt that, but I could sense it.
The fact that you take one of the greatest creators from our industry and you can have success in creating in another medium, I just think it shows that in the games industry, you have some amazing storytellers, amazing creators across all third-party, first-party. I think it’s just a great moment to see the success that they’re having with the franchise, and congrats to all of them.
IGN: It makes me think of the Halo TV series, which debuted last year. And I’m wondering if you hope that the Halo TV series can rise to that level in season two?
Phil Spencer: I want the best for everything that we work on, Halo television series included. I think there’s some differences there, but I don’t think that the point of the question of, “Hey, Last of Us is out there, setting an incredibly high bar. Should we all aspire to reach that same bar with the work that we do in television?” Absolutely. I could say the same thing in video games. Every time I play a great game from somebody, it inspires us to do the best work that we can, to hope that next time we show up, we’re showing up with our best creative, our best ideas, and finding people who either love watching, in the case of the Halo television show, or playing, in the case of things like Hi-Fi Rush and the games that are coming out this year. We’re always getting inspired by the work around us, absolutely.
IGN: And I suppose, as we look ahead to the rest of 2023, I’m just wondering how critical do you see this year as it being for Xbox?
Phil Spencer: Every year is critical. I don’t find this year to be more or less critical. I feel good about our momentum. Obviously, we’re going through some adjustments right now that are painful, but I think necessary, but it’s really to set us up and the teams for long-term success. I look at 2023, I love the games that we have coming out. Redfall and Starfield, as you commented, will be exciting, just given the timing with Bethesda now that they’re fully integrated into the organization. When I think about the rest of the work that we’re doing this year, it’s going to be an exciting year. From a production standpoint, we’re coming out of all of the COVID at home, and I think we’ve got a better working rhythm as an industry and things that are going on, and I’m excited.
As an industry, when I think about this year, I do think about the state of production in AAA games, and games have become really big. Every year, people have bigger ideas and bigger plans for the games that we’re building. But ensuring that teams are set up for success in the games that we’re building across the industry, that do we really have kind of the necessary skills on production to make sure that when we make commitments to our customers about when games are coming, we can deliver at the quality and the timing that we expect.
I think these are good questions for us as an industry right now. We’re always learning, we’re always evaluating the tools that we have and the process we have and the creative that we put out. There were some great games in 2022. There’ll be some great games in 2023, and this industry will continue to evolve and innovate in ways that hopefully delight players.
Kat Bailey is a Senior News Editor at IGN as well as co-host of Nintendo Voice Chat. Have a tip? Send her a DM at @the_katbot.