Recently, Microsoft launched two new consoles: Xbox Series X and Xbox Series S. As it is not unusual for companies to offer different tiers of products, but it is surely unusual to release two new gaming boxes at the same time, especially when the world is in grips of a vicious health crisis, COVID-19 pandemic. Thus, Microsoft’s executive vice president of Gaming Phil Spencer sat down with Nilay Patel of The Verge to discuss the reasons behind the launch, the gaming industry during the prevailing health crisis, the streaming industry, and more.
The Xbox Series X is the high-end model retailing for $499 and Xbox Series S is the more affordable console retailing for $299. Both next-generation consoles have received positive reviews claims that Microsoft has managed to deliver a PC gaming experience in a console. Series X console runs on a more powerful CPU, has SSD storage, 120Hz display support, and new games. On the other hand, the Series S console supports gaming on 1440p at 60fps games.
Microsoft’s Phil Spencer discusses the Xbox consoles and the future of Streaming
Acknowledging the current fragile economic stability due to the COVID-19 pandemic, Patel asked Spencer why did the company decide to launch two new Xbox models. Spencer explained that the decision, although a tough one, was taken to deliver next-gen experiences at two price points because $499 is a big price tag despite the pandemic.
“Now we didn’t know when we made those plans that we’d be sitting here, [but] even regardless of COVID, $499 is a lot of money. Can we build an accessible console that will deliver a great next-gen experience, clearly different, but a next-gen experience at a more accessible price point?
It really centered on that. How many people can we impact with everything that we do?”
He also added that the launch of PlayStation 5 by Sony was a compelling argument put out against the decision.
“We didn’t think that they were going to do it. I’ve said it before, I have a ton of respect for what Sony does. It’s not to say what they’re doing is wrong. [But] if it’s, we’re going to go compete with one hardware competitor and we just want to make it as easy as possible to compare our one product to their one product, that was the thought process that would have you push to say, no, just do one thing.”
Discussing the changing dynamics of the gaming industry, Spencer said that streaming platforms like YouTube, Twitch, Discord have created more engagement by giving players a space to play, watch, and talk about games. Thus, streaming has had treated acceleration than consoles.
“I say the acceleration — and I don’t know if I’m accurate in my timeline — but I feel like it’s a little more gradual for us in gaming because we’ve already been so far along using community and virality as a way for people to get into gaming. But we’ve definitely seen a surge. And I don’t think it’s something that’s going to reverse. I think we’ve just become more and more a part of the way people entertain and connect.
Whether you’re someone on YouTube, or somebody building a social following on TikTok or on Twitter or whatever, or you’re someone building games, we’ve really democratized people’s ability to create their own content and get that to millions of customers fairly easily. The consoles all support that now, obviously Steam has supported that for a long time.”
The stay at home lifestyle since March this year has seen an exceptional increase in engagement on gaming apps. Although people are forced to maintain social distance from family and friends, they are still connected virtually and the gaming industry is playing an important role in keeping that interaction entertaining which has also been beneficial for Microsoft.
During the C-19 pandemic, people staying at home, we’ve really seen a rise in gaming. I think we’ve seen the acceleration of some of the timelines and trends in gaming over the last six months. We’ve definitely accelerated maybe a year or two in terms of adoption of some of this. I think gaming has always been building towards this moment of being a real unifier.”
Microsoft’s working relationship with Apple is a tricky one, Spencer accepts. Since the iPhone maker offers a competitive gaming zone in Apple Arcade on iOS, therefore, Microsoft is okay with the availability of Xbox games on Safari.
We have this avenue of a browser that works for us that we will go and build out, which gives us access, frankly, to a lot of devices.
If the device is capable of running a capable web browser, we’re going to be able to bring games to it, which is pretty cool. You’ll be able to bring all of your saved games and your friends and everything comes with you. It’s just Xbox on this new screen with the games. Apple does remain open in the conversations that we have on this topic.
I can understand their perspective from their position. I don’t say I agree with it, but they have a competitive product in Apple Arcade that is competitive with Xbox Game Pass. I’m sure they like having Apple Arcade as the only game content subscription on their phone. We want access to at-scale compute devices that we think should have open access to services customers want.
Discussing the alleged limitations of Safari by Apple to push developers to the App Store’s commission ecosystem, Spencer clarified that his company has not experienced any such issues until now. The difference is between how platforms advertise services.
“There’s a capability of, can our service run on Safari or Chrome? Then there’s also just the promotion capability that those platforms have. Anytime I try to go to Game Pass, do I end up at Stadia? Those are things that aren’t happening today, I’m not accusing anybody of things. That’s just one of the positions we’re in, not being a platform holder.
I think when computing platforms really get to scale, like an Android, or an iOS, or Windows, there’s a responsibility for us to keep those open and allow for competition on them. I do fundamentally believe that. I’ve seen it work on Windows—”
However, Spencer does not agree with Apple’s and Google’s app stores’ commission fee. He said that gaming consoles are sold at a loss because they have very limited use which only to play games but smartphones are a very different commodity. Firstly, there are over a billion mobile phones in use and the companies keep on generating revenue via subscription services and in-app purchases. Therefore, the justification to charge a 30% commission like Xbox and PS5 is unfair.
I think there are 200 million game consoles that are sold in a generation across all of our platforms. That’s less than a year of phone sales. It’s just not even close. People say, well, the scale shouldn’t matter. It actually does. When you start looking at how we look at open platforms and access, those things do matter. From a legal perspective, they matter. We know that at Microsoft. We had our DOJ time. I think as platforms get to scale, there’s a responsibility there, absolutely.
When questioned about the pressures to change the games’ design to achieve more engagement like Apple Arcade-style subscription-based gaming, Spencer said that his company’s focus is one expanding creative chances via different delivery methods either xCloud, epsidoic or themes, especially on the new Xbox Series X and Xbox Series S consoles’ Game Pass.
The business model allows us to try new delivery methods, whether [it’s] episodic or new themes. It doesn’t all have to be the known genres; let’s go push on some genres that have either fallen by the wayside, or people are making new things. Those are the areas where I see us unlocking capability. I will say, and this is a healthy thing for Game Pass — it’s true, it sounds like, of Apple Arcade as well — the No. 1 metric that we see that drives success of Game Pass is hours played. It’s not catalog size.
It’s not actually even the retail price of the games that are included in the subscription. We’ve run the math from all different angles. I love the fact that if people’s happiness with the subscription is in line with how often they use it and play it, that seems like a pretty good thing to me.
Talking passionately about the future and social responsibility of the gaming industry, if not only Microsoft, Spencer shared that his company believes in creating a healthy gamer culture for all ages. As most of the interaction is online which is difficult to monitor and regulate sometimes, it is the need of the hour to ensure that gaming platforms are safe and secure virtual places for players, especially the younger ones, to learn good norms rather than bullying and negativity.
I absolutely think, as an industry, it’s our responsibility to use both the interactive nature of our medium as well, as you say, the audience that comes into gaming to help build social norms that are durable across the physical and the digital space in gaming and non-gaming scenarios. I think we have that opportunity as an industry. We had tons of learning and growing and mistakes in our past as a company, as an industry. I say “as a company” as in, is Xbox learning on this every day?
We think very, very carefully [about] both the social norms and the safety and security. If I’m a parent and my kid is online, I know that they’re as safe as they are upstairs playing in their bedroom. That’s a goal for us. These are our real opportunities. I could have said challenges, but I see them as opportunities for us, as an industry. I’m actually motivated by the accessibility and all the work that this industry takes on and tries to go tackle. That’s a Sony comment, a Nintendo comment, a Steam comment, an Xbox comment. It’s not a competitive thing. It’s something for us as an industry.
The duo talks about Game Pass, Cloud gaming, and more in detail. Read the complete interview here.