What a difference one man and 18 months can make. Before Phil Spencer took over at Xbox, the brand was in troubled waters. Questionable policy decisions had shook Xbox and mired the early days of its new console in acrimony, and even though Microsoft wisely chose to listen to concerned consumers it's been working hard to regain the momentum lost ever since. As it heads into a vital fourth quarter of 2015, the momentum has definitely returned: the broadening of the Xbox brand to PC was helped by the relatively smooth roll-out of Windows 10, the Xbox division just turned a neat profit and, while it still falls short in sales to Sony's PlayStation 4, its line-up for the remainder of the year looks significantly stronger than its opposition's.
Microsoft's showing at last week's Gamescom in Cologne was, then, a strong one, where the announcement of Halo Wars 2 for both Windows and Xbox One underlined how the company was looking to expand Xbox beyond the world of consoles, and where a succession of strong games - Scalebound, Quantum Break, Rise of the Tomb Raider and Crackdown - illustrated the breadth of exclusives due in the near future. Sony didn't have an answer. It decided to skip Gamescom for Paris Games Week, which comes later in the year. But even if it had chosen to stage a conference you sense it'd struggle to compete with what Xbox One has lined up for 2015.
So when we catch up the day after the conference, in a small room on Microsoft's business booth half-heartedly sectioned off from the noisy demo booths for its upcoming game, Phil Spencer appears happy and relaxed, and his enthusiasm for the games he's pimping seems genuine (as does his passion for the games of his competitors, which he makes sure to acknowledge). There's no obfuscated exclusivity deal to try and untangle, and no big drama overshadowing the show. All that's left is to reflect on the good job he's done since taking the helm, and the significant task that lies ahead as he continues to push Xbox forward.
Well, the most pressing question would have to be what the T-shirt you were wearing yesterday was about.
Phil Spencer: I was at ChinaJoy last week - it's actually not that interesting a story - there's a game outlet out there called Gamecore in China that made those shirts for Xbox fans, so they gave me one. I thought it was neat there was a Chinese outlet focussing on Xbox, we're obviously new in China so it's cool to get the support like that. I got the T-shirt for the first time last week, it wasn't quite Xbox green and the logo's not quite right, but that's the T-shirt, it's more a thanks to them for supporting us in China.
So there's no big reveal on it this year?
Phil Spencer: It's funny. Any time you show a game in a briefing there's always lovers and haters and everything, but it was interesting that with Crackdown I saw some people going back to Jimmy Fallon, I think, where I wore the Crackdown shirt. I made sure I got the Xbox logo in our first reveal of the Xbox dash - that's when we started to build that. It's cool - I have to think more intelligently about the breadcrumb trails that we leave.
People are obsessed with the details of your wardrobe now.
Phil Spencer: It's usually not as deep as people think it is. It's usually something pretty simple, like the Battletoads stuff. I like Battletoads, so we thought it'd be a cool thing to put them in Killer Instinct.
How do you think the conference went?
Phil Spencer: You tell me! I'm really proud of the work the teams did. We actually planned E3 and Gamescom at the same time this year. We had enough content, I think, to show at two big shows. I kind of felt that way yesterday, I looked at the Quantum Break demo, which I thought was fantastic, and that could easily have been in our E3 show and vice versa. We treated Gamescom as a top-tier show and we had 90 minutes of content I was really proud of.
It was nice to have the third party support. Just Cause looked really good, having Dark Souls in the show was great. All the teams spend so much time preparing for these shows, and many of them have games to ship this fall. The ability to juggle those things - I felt good about the show. What did you think?
It was good! It's a strong line-up - I think it's hard to argue there's another console with a more compelling line-up of exclusives this year
Phil Spencer: Is that what you're writing? I like to hear that! You guys are better spokespeople for Xbox than I am.
Well, the amount of exclusives is amazing. Sony's got quite a quiet Q4 as well. You're still lagging behind in sales, though. What's it going to take to catch up?
Phil Spencer: Honestly, I think it's about growing Xbox. Sony's had great success with PlayStation, they've earned that success over multiple decades of building a great product. Kudos to them for their market position. All I can do is focus on Xbox, and I love that. I love our fans and the partners we have. We're growing Xbox year on year, we're bigger than we were this time in the 360 generation, so generation over generation we're in a better spot, year over year we're in a better spot. We're seeing more people online, more games being sold, more consoles being sold. So generally I feel good about the trajectory we're on.
We've got more work to do in central Europe, there's no doubt about that, especially in southern Europe and areas where we've traditionally not been that strong. Coming to Gamescom is really important, to make sure we're here this year, we're doing a press briefing and showing new fresh content, working with studios here on delivering content that helps to build culturally diverse content, and having genre diversity in what's coming out is also a big focus of ours. People buy game consoles to play games, and attracting European gamers is going to be through the content - whether it's deals on things like FIFA, or games like Halo Wars which is a strategy game and that can resonate really well in Europe, to Forza, that always does well in Europe, and that team continues to deliver. It's a long-term endeavour, and it's something we're committing to.
Do you think that in one, two years you can catch up?
Phil Spencer: I honestly don't goal the team on how many units Sony sells. I think about what we're going to do, and how many Xbox customers we have across 360, Xbox One and Windows - thinking about the combined community of people on Xbox and playing those games, and that number's never been bigger.
There are ways to sell consoles by losing more money on hardware and building an unnatural business construct that I'd never want to do - at the end, when people make a commitment to Xbox and the consoles they buy, the games they buy, they want to know that Microsoft and Xbox is in it for the long run. To sacrifice the long term for any short term gain doesn't make any sense. I really focussed on our first-party investment, and you see it showing up in 2015 and 2016. Next year's line-up is pretty incredible, and we haven't even talked about all the games that are coming next year. Investments in first-party, there's more risk involved, and people can say it's more challenging building first party investments, and you could say it's easier doing third-party deals, but they're critical to our business, and we're in this for the long run.
You said recently there's an emphasis again on first-party titles. I thought it was interesting that Halo Wars 2 is a third-party partnership. How does that fit in?
Phil Spencer: Halo Wars 2, to me, is a first-party game. It's our IP, obviously. But we're funding the development of the game. Creative Assembly is obviously a Sega studio, so there's a partnership there we're working on. Sometimes we're working on first-party games with our studios, sometimes we're building first-party games like Quantum Break with third party studios that want to stay independent. I think that's fine. I don't demand that everyone who works on a first-party game have a Microsoft card key. I don't think about it that way. If we're investing in the development of a game, if it's a franchise we own we have a long-term perspective on, I think of that as first-party. Halo Wars, to me, is in every sense a first-party game. It even brings up things like Tomb Raider - Tomb Raider is not a first-party game, it's not a franchise that we own, but our partnership with Crystal Dynamics goes beyond just a marketing deal. It's a deeper relationship, talking about the creativity and the technology of that game. But it's second party, and sometimes these lines are blurred.
Going back to Halo Wars - it's kind of a poster child for what you're doing now in that it sits across Windows and Xbox One. How will that work exactly? Will they be two separate SKUs, or will they play happily together?
Phil Spencer: We haven't obviously talked about the game yet, and we'll talk more about it. I think it's a great opportunity for us to start from the beginning and say this game is going to run on Windows and on Xbox - we're not building it on one and porting it to the other. Strategy is the perfect genre to think about someone playing on console and someone playing on PC, the capabilities and what we can allow there. We'll roll out the feature set and our ideas on multiplayer as we show more of what we're doing with Creative Assembly. It's a great canvas for us - we've looked at people playing on multiple platforms, switching back and forth themselves based on time of day and where they are, or people saying they're only console or they're only PC and they want a larger community of people to play with.
There's mouse and keyboard support coming on Xbox One...
Phil Spencer: We haven't launched it yet. Keyboard works on a dev kit, obviously, and we have it on our roadmap, but we haven't announced when it's coming.
Would that work with Halo Wars on Xbox One?
Phil Spencer: Those two announcements aren't related, but it makes sense to me that this is a time when we turn that on. We haven't gone back to do the planning on how these things tie together. Obviously we're going to want people to play strategy games the way they want to play it, and to give them choices.
Obviously Halo Wars makes perfect sense for PC. Would it make sense for a mainline Halo to come to PC as well?
Phil Spencer: Well, we're doing Halo Online. Some of it's around the business model - it's just different than console - some of it's about control, and other things are creative. If you think of Team Fortress or going back to Half-Life, which obviously had great success on PC and would make complete sense on console as well. We have a lot of franchises that would make sense on PC, and allowing people to choose where they play those games make sense. But it also makes sense to think about the games from the beginning, like with Halo Wars we're designing with those things in mind, to make sure we're getting the best out of both platforms.
You announced the Halo Championships yesterday. The eSports scene around this has been a thing for quite a while - why are you stepping in now?
Phil Spencer: We knew with Halo 4, which sold really well and we were proud of 343's work, that we could have done better with multiplayer. When you think of multiplayer on console, eSports isn't the only proving ground, but it's great to bring eSports professionals in to play our game to get their feedback on what these arena-based eSports like games, whether it's for eSport or perfecting the multiplayer in the game, it's been incredibly valuable and we've had a lot of success with eSports in Halo - to continue to push that is a great way to continue to make the brand relevant. The same time we're doing things like Warzone, which isn't really an eSports mode - it's a large-scale, you and I with mates hanging out, and I'm not saying there wouldn't be eSports in it, but there's a different focus for us. We knew we wanted to focus on multiplayer as well as the single-player campaign. We knew we had some improvements to make to Halo 4 - if you're relevant in that space you're probably doing something right.
A lot of big names have come into this area - Activision with Call of Duty, for example - but they're finding it hard to topple Counter-Strike. What can you do take that on?
Phil Spencer: Well, I love Counter-Strike, and most people playing it are playing on Windows! I don't really think abut taking it down - you have eSports professionals that decide that Counter-Strike's more their game than Call of Duty or Halo. People move around. As we think about Xbox Live, and our capability as a service and a first-party to make the viewing of the eSport as compelling as playing, we're learning a lot of Halo 5. Its also with Minecraft - the viewing of Minecraft in some ways is as big as the people playing. Making sure we have the best service for people to view eSports will benefit Halo, and it'll benefit Xbox Live and it'll benefit all of the other games that want to be eSport on Xbox. It's a real symbiotic relationship between the first-party studio 343 and Live, and making eSports something more relevant on Live.
Moving on to another of your big games yesterday, Quantum Break.
Phil Spencer: What did you think of it?
I thought the gameplay looked really good. I'm not sure about the TV element. That seems like a holdover from when you had your own original TV department. How's the game evolved since that department's gone?
Phil Spencer: It's not evolved in any unnatural way in regards to television. It's evolved as much as Remedy's spent the time in building the game to the point where I'm proud of what we showed.
I look at it and try to take the hat off as someone who's seen it for quite a while, and think that's a game that's compelling to me. The gameplay mechanic at the beginning of the demo and then the think piece at the end so you've got a deeper experience than wave after wave of bad guys. To see the evolution of the television, the video side of it... We're a game studio first, so that's the area we had more learning to do. The nice thing about Remedy is they've been a great storytelling studio for a while, and giving them the outlet to use live-action to tell parts of the story was a great opportunity.
I think it's really come together in a tight package, such that we can stand on stage and announce the date. Being able to open with Quantum, Scalebound and Crackdown - two of them new IP, all of them exclusive, going into that and then into 2016 and saying this is long-term, and it's not just 15 that's strong for us. Really being a content-led platform is something I want to lean into.
It seems a lot calmer this year - with Tomb Raider last year it was a bit more heated. Given that we now know the exclusivity window, was it worth it - however much you paid to have Tomb Raider for that time?
Phil Spencer: Well, no doubt. The opportunity to work with Crystal and Square on bringing that game to our platform - I don't know if you're seen the longer demo - it's really going to be a fantastic game. I learnt some things last year about how we announced it, the words we chose and what they meant. There was some sentiment after, there was no doubt about that, and I tried to be as clear as I could after the presentation last year, and this year, in how we've talked about it. Definitely it was a good learning experience last year.
Overall, having that game on our platform - we don't have a game like that in our first-party portfolio. We have a long-term relationship with Crystal - more than just on this game, and that's not always exposed. Every time I'm down there in the Bay Area I go in and they give me the controller and let me play. It'll be good for Rise of the Tomb Raider, and I'm looking forward to continue to build the relationship with that studio and that franchise. It's good for us.
Do you think exclusive games are necessary to sell hardware? It traditionally would seem that way, but if that's the case, surely more people would have the Wii U, as that's got the best exclusives out there.
Phil Spencer: On the Wii U, I think people downplay how many units they've sold. I've got a Wii U, I think there's some great games on there. I think Splatoon's a really nice game and I don't think there's a first-party out there that has the strength of IP that Nintendo has. They're always a beacon to me when I look at what it means to build a first-party portfolio of products, they've done a great job.
For us, having exclusives, especially on the platform side as we continue to innovate, being able to have studios that push the envelope of what's possible, and partnering them with a platform and the hardware teams, I think it's a magical equation for coming up with things that aren't possible. We sit around, the Xbox leadership team, I've got Kudo, Shannon Loftis and Bonnie with Halo, the whole Xbox platform leadership team and we all think about the opportunities of moving hardware and service and content together. Really, the only way to have that in such a tight loop, I think, is to have a strong first-party portfolio to try things to push. It's not only critical from a sales perspective, but also for innovation for what our platform's about. I love sitting at that platform, and the ideas that come out of anywhere and seeing the different franchises grabbing on to something and say yeah, we should try to go do this in Forza, we should try do this in Minecraft. It's a great opportunity.
Moving on to Scalebound, which is coming from one of the best studios around. I heard Kamiya has a stamp and he's blocking people.
Phil Spencer: Kamiya-san, he's great. I heard he's going to get a line of people who want to be unblocked. He's great - I thought the game showed well. I know people were commenting about frame-rate, but I'd encourage you to have a look. It's obviously got more time - it's not shipping tomorrow. But from a scale of game that Platinum's building - it's nice to see them expanding what they've traditionally built as a Platinum Game, and having him on stage was an exciting opportunity.
It's a big game from a big Japanese studio. You're skipping TGS for the first time in a while. Is Japan a lost cause now? It's tough out there not just for you but Sony too.
Phil Spencer: Honestly the decision around TGS is more around bandwidth for all the teams - you know this, you've been in the same haul I've been through. E3 was a little bit later, Gamescom was a little bit earlier and in-between we had Minecon and Comic-Con, and eventually teams just get to the point where they need to go and build their games. The shows, while they're a great opportunity, we've got to give the teams time to go and do what they have to do. I love going to Tokyo - I have a lot of friends there and a lot of studios - and I don't think I would equate it to our commitment to working with Japanese developers at all. We showed Bloodstained on our stage. It's more around bandwidth of shows, and making sure that teams are building what we need to get built.
One thing that didn't feature yesterday was VR. I know you've got a partnership with Oculus. Is that ever going to come to Xbox One? A lot of people assume the console wouldn't be able to run VR at the required frame-rate. Is that a fair assumption to make?
Phil Spencer: I like the fact that the industry's innovating with VR - and I include Morpheus in that, I applaud Sony for the work they're doing. Where we are in the adoption of VR, Windows is just a better platform. You've got 100s of VR games in development, it's an open platform, somebody can download Windows and get their C compiler and start doing work. We're early enough that getting hundreds of different creative minds thinking about what's happening - whether it's on Oculus or Valve's VR - is really what the industry needs. Linking it to a closed platform this early, and a handful of games that any dedicated platform is going to go fund, I don't think VR is at that point. I think the openness of Windows is the right way to approach it - which is why we spent time with Oculus and Valve in making sure Windows is a great platform for VR. As I said, I applaud what Sony is doing with Morpheus. For me and where we are as a team, we look at Windows as the best place to incubate. Whether we ever get to the point where you're sitting in front of your TV and you want to put goggles on, I don't know. It feels to me that VR's more of a PC experience, obviously Sony's taking a different approach, but when you look at what Oculus and Valve are doing it's a more natural fit for VR at this point.
Would it ever make sense on Xbox One?
Phil Spencer: I'll let consumers choose. If they say that VR plugged into a console is the way they want to adopt VR... I love the fact we're working with the companies of VR, and our work on HoloLens is an extension of that, there's no 'VR is a bad thing'. We're just choosing to focus our efforts in the PC space. But if people want to adopt VR on a console platform, we wouldn't have any problem to keep that as an option.
Speaking of HoloLens - how far away exactly is that technology?
Phil Spencer: I look at it two ways - how long since you andI heard about VR. I'm not talking back to the 90s - even if you think about Oculus and the time it's been incubated, it's been a while. What we know with HoloLens is we need to get it into the hands of developers, that's where you're going to get the best feedback early on. I don't think we're far away from that - I'm not announcing dates- but we're not far from that. In terms of it being too good to be true - the technology will evolve. It's got multiple years of innovation from hardware and platform to make it even better. I'd say the same thing about VR - I was playing it two years ago and it had issues, I play it now and it has less of those issues. We'll go through the same evolution that we go through with phones, that we went through with PCs and consoles - HoloLens will go through the same thresholds.
Another peripheral that's been uncoupled now - Kinect - is that done and dusted now?
Phil Spencer: We spent a lot of effort supporting Kinect on Xbox. As we were going through the UI refresh, making sure the voice commands are there and that a tool for developers, whether it's Just Dance or other games using Kinect, we want to make sure it's a vibrant part of the platform as developers choose it. My focus, and I think you know this, is giving developers and consumers choice. If people say they want Kinect they go buy Kinect, developers can make games for Kinect - I embrace that, and I love that. But I'm not going to force consumers to buy it if it's something they don't want. We know - and you might chuckle at this - when we do our customer satisfaction, our happiest customers are Kinect owners. And that's great - they love the voice commands, they love what it enables. When I look at just making Xbox owners happier, having Kinect as an available option, whether it's for the games or entertainment features or the voice, the people are doing to be happier with Xbox, that's great. I have to give them a choice.
18 months ago Xbox was in choppy waters - which is great for you, but there's no drama for us - how do you assess those 18 months, and where do you see the next 18 months taking you?
Phil Spencer: I see nothing but opportunity in front of us. The console space is so healthy right now - and that's also not a terminal point you can write about anymore, the death of the console! - it's nice to see Sony doing well, PlayStation 4 and Xbox is selling more than we've ever sold before. That health is great. I really think about us coming, more about putting the gamer at the centre of our decisions over the next 12 months, and less centred on specific ties to any platform that those people want to play on. It's such a huge opportunity. We have a unique position being both the Windows company and the Xbox company, that allows us to go do more.
The thing that causes me the choppy water angst is the amount of things in front that you can go do, and prioritising whether it's about mouse support on the Xbox, or you look at the other side and think when are we going to increase our game portfolio on PC, making sure the Xbox Live ecosystem is full up, we have to finish all the back compete games we want to do. I feel really good about where our team is, but there's so much opportunity in front as we move from a dedicated device focus with Xbox and more about gamers and where they are, and we're going to learn a tonne as we move forward, around business model around creative opportunities and about partnerships. Even something like bringing on Minecraft in the past year - I don't know if anyone really owns Minecraft, it's a living game you participate in and we're the shepherds of it. Growing more properties like that, that have those same sensibilities, will be fantastic for us.