It is apparent that those who were paying attention that the Xbox division at Microsoft has gone through ups and downs over the last few years. Consider how Microsoft’s first party game lineup was rather shaky for a couple of years. Outside of the Forza and Gears titles most of Microsoft’s games felt incomplete, rushed or unpolished. Sure, there were definitely hits like Ori, State of Decay 2 and Cuphead but many gamers did not feel these titles were enough to make up for the long spans of times they endured between releases of Microsoft’s exclusive games. A look at social media platforms like Twitter and YouTube would reveal crowds of gamers asking a single question – what is going on with Xbox? Fast forward to June of this year and Phil Spencer takes to the stage to announce that Microsoft has acquired four game studios and built a fifth one to be lead by Darryl Gallagher. Five months later Microsoft’s aquisition of Obsidian Entertainment and InXile Entertainment would be announced at the X0 event in Mexico City. In the space of five months the tech giant had more than doubled the number of internal game studios. Most of these studios are expanding too. A quick perusal of LinkedIn and other job websites is proof of that.
How did this happen? Where did the funding for seven additional game development studios come from? It turns out that the work Phil Spencer and the rest of the Xbox team has done got the attention of Microsoft’s senior executives including CEO Satya Nadella and CFO Amy Hood. After all, gaming brought in nearly 10% of Microsoft’s total revenue during the previous fiscal year and those kinds of numbers make the leadership – and investors – very happy. “Amy Hood, our CFO, she likes to tell me I’ve made ‘the spreadsheet so she’s going to pay attention,” jokes Spencer. We now live in a time when Xbox has more support from Microsoft than at any other point in history.
The Future Beckons
Why is Microsoft suddenly so focused on recruiting talented game developers and acquiring studios? The answer lies in two words – Game Pass. Microsoft is well aware that Xbox needs more content to be released in between large releases such as Halo, Gears of War and Forza in order to attract and retain Game Pass subscribers.
Game Pass is currently available on Xbox One and to some extent is on Windows 10 as well. While Microsoft is preparing to expand Game Pass on PC the company has its sights on a much more ambitious goal – to reach the 2 billion people who will be playing video games on other platforms like smartphones and tablets. Game Pass will play a large role in making that happen by combining the subscription-based program to Project xCloud, Microsoft’s upcoming game streaming service. “We’ll have multiple business models that will work with streaming, but the connection of streaming with the subscription model makes a ton of sense. You see it in music. You see it in video. So you can look at Project xCloud and you can look at something like Game Pass, and you can see there’s natural synergies,” said Spencer.
In one of my earliest columns for The Inner Circle I wrote that Xbox is more than just a box. It seems that Phil Spencer feels the same way. His vision for the future of Xbox is one that is not constrained by a single plastic box. “[…]When you think about reaching a customer with this content where their only compute device could be an Android phone, you think about, well, what are all the ways that person pays for content if they do at all today?”
