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Post Arcade exclusive: Xbox chief Phil Spencer talks shop at X019 in London

Post Arcade exclusive: Xbox chief Phil Spencer talks shop at X019 in London

The sprawling arena is packed with rows of play pods featuring dozens of games, most of which aren’t yet available, from Doom Eternal to Microsoft Flight Simulator. Fans from around the world are descending on the space this weekend for a chance to play.

Before the event officially began, Post Arcade had a chance to visit the show floor and sit down with Xbox chief Phil Spencer to talk about what’s coming next for his company. It was largely a discussion about change within both Xbox and the industry, as Microsoft’s game division moves towards creating more original content within its 15 first-party studios and embraces new technologies and ways of doing business, such as the Game Pass subscription service and Project xCloud, a new game streaming service set to arrive in Canada in early 2020.

What follows is a transcription of our chat.


The X019 event floor at the Copper Box Arena, Queen Elizabeth Olympic Park, London.

Chad Sapieha

Post Arcade: The industry seems to be gradually transitioning from enormous shows like E3 to more focused events like X019. How is this helping Microsoft better connect with Xbox fans?

Phil Spencer: I think “fans” is what these events are about. We can build an event where Xbox fans feel like it’s curated for them. We have more gameplay stations out on the floor than we do at E3 or Gamescom. This is a massive festival, a gamer community coming together, and I love that.

You mentioned prior to the event that Xbox is transitioning from acquisition towards execution. Can you unpack that?

Creation capability doesn’t always line up with platform transitions. One of the nice things about where we’re going is that Xbox One games will play on Project Scarlett (the code name for Microsoft’s next console, set to launch next fall).

Moving from acquisition to execution is really just a term we use because we’ve acquired a lot of studios over the last two years, and in some ways we see there was this tendency for the news to become about the acquisition more than the games.

It’s great to have a show like this where you’re starting to see our studios’ output. I think most of the news we’re going to start making with our first party studios is going to be more about shipping and announcing games, and less about putting a studio logo up on a slide and talking about how this team just became part of Xbox Game Studios.

Xbox’s Game Pass subscription service seems very successful. Do you have any numbers that you can share regarding subscribers?

We haven’t announced the actual subscriber number, but we’ve more than doubled the number of subscribers in the last year, and I will say we have millions and millions of subscribers.

We just don’t want it to become about counting numbers. For us it’s about creating a community of gamers that are finding great games to play — both games that they love and new games they would have never tried. It’s also about the creative community reaching gamers that they wouldn’t have reached otherwise.

Is Game Pass cannibalizing sales of first-party games by making them free with the subscription on day one?

When we ship an Xbox game, we don’t ship it on all platforms. We know our first-party content is there to help define what it means to be an Xbox customer. It’s the same thing when we put our first-party games in Game Pass. They’re also available to buy, and it’s critical to us that that’s a choice gamers can make.

It’s really about growing the options that customers have. They’ve told us that having our first party games in game pass is a critical feature and something that they love about the service.

When we visited Rare last year prior to the launch of Sea of Thieves, one of the first major first-party games to come to Game Pass, studio staff made some nervous jokes about how being part of Game Pass meant that there wasn’t going to be the sort of launch day sales enjoyed by most big budget games.

That’s a great point. I’d say from an organization culture standpoint one of the things I’ve been very proud of in this generation is how the team has really transformed from being motivated by what we can do and how we do it to who we do it for and why we do it.

It used to be that you would ship a game and then you’d watch revenue on day one and you’d say, okay, that’s what it means to be a successful game. Now we’re interested in whether it’s been a good journey, and the teams are really embracing it.

It’s really about how many players are playing the game, do they like the game, do they continue to play the game, and do they finish the game. The sort of information we get from something like Game Pass provides assistance as these games are being built. The creative canvas should be as broad as it possibly can be, even as our internal teams talk to studios about what success means. It’s really about how many players we reach. That’s the thing we’re focused on now: How many people are enjoying the game and playing it.


A disassembled Xbox One Elite Series 2 controller, as seen at X019 in London, November 14, 2019.

Chad Sapieha

You’ve got some fantastic Japanese content coming to Game Pass, with multiple entries from both Yakuza and Final Fantasy. These are clearly games Westerners crave, but is it also a strategy to try to grow your business in Japan, where Xbox has always been a hard sell?

Clearly, having more content from Japanese creators on our platform can only help us in Japan.

But it is a global effort. There are over two and a half billion gamers on the planet and there’s a bunch of unique communities. I get on that Delta flight every so often to go to Tokyo and I really think about bringing these games to the Xbox community. I’d obviously love to see more and more Xbox sales in Japan, but I’d also love to see more Xbox sales in every country. A community of creators that didn’t have their content on Xbox now does, and I I think that means something to our customers.

And I’m also really proud those games are showing up in Game Pass. For Xbox customers who have heard of these franchises and maybe never played them, there’s now a very easy way for them to try them and see if these are franchises that they love.

Xbox’s new streaming service Project xCloud is really interesting…

Have you had a chance to try it?

Not yet. The preview is coming to Canada sometime in 2020, right?

Yeah. Early 2020, I’ll tell you that.

So what are some of the biggest obstacles with game streaming, and how do we overcome them? You’ve said it will take years to perfect streaming technology.

Our approach with Project xCloud is a bit different. We haven’t talked about it replacing your console or your PC. We’ve said it’s a technology that’s additive to what you do today on your Xbox or PC. Console and PC will be better, higher fidelity, lower latency experiences than you’ll get through Project xCloud, and we’re not ashamed of that. I mean, the speed of light is a thing that exists. It does take time for the pixels to go from a data centre to your phone, or any device that you’re using.

The work that we can do to reduce latency is in AI. It’s predictive work. I’ve used this technology, I’ve seen it in action and it does help. It tries to model what it thinks you would have done if an input is missed, and then it will make that move for you. It will think, okay, there was an input I expected to get here because the frame just rendered, but there was no input. What was the player most likely trying to do? It uses some reinforcement learning technology that we’ve been building, and it can help smooth out latency. It isn’t the same as you playing, but it does help with latency. I’m not trying to tell anybody that this is going to replace their Xbox One in their family room for the best experience that they can have.

So is the reason why Project xCloud is being rolled out a bit more slowly than a lot of other Xbox services a matter of infrastructure?

It’s definitely true that the infrastructure to support streaming is significant. I mean, Microsoft has spent billions and billions of dollars building Azure over many years. And we’re using our Azure infrastructure as the base, the backbone of Project xCloud. So we have an advantage over non-cloud companies.

But it’s more than just the infrastructure. We also need feedback. We’re not trying to launch saying we’ve figured out exactly what you want from cloud gaming. We’re launching it as a preview because we want the feedback. Feedback is very helpful to us in evolving the platform, so we want to start with core customers who know they’re in a preview, who know the technology is being developed with their feedback. This is something that we want to evolve with you.

I realize little has been revealed about Project Scarlett, but have you looked back at Xbox One’s rocky launch and learned any lessons about how to approach the start of the next generation?

Absolutely. Put the gamer at the centre. It’s not about what we want gamers to do, it’s about what gamers want to do. And it’s also about enabling and listening to developers early to get their input on the platform that we’re building. That’s critical.

It’s getting into this mode of being driven by the customer, whether that customer is a creator or a gamer providing feedback on our platform. It’s just been a critical lesson for the whole team, Xbox, and this generation, and I’m really proud of that.

Microsoft is nearing 20 years in the console business now, and that’s long enough for people to start feeling nostalgic. Do you have any reflections on how the industry has changed over the last two decades and what Microsoft has brought to it?

Our teams can definitely get wrapped up in all the work that they have to do today and the roadmap of work to do tomorrow. And maybe it’s just because I’m the old guy in the room that’s been at Microsoft for 31 years, but I try to push the teams to celebrate the moment they launch something. Because it’s easy to just launch something and then see the next weeks of work ahead.

I think when we look back at our career accomplishments and the impact that we’ve had on games, those moments where we launch things — regardless of whether they actually hit our goals — are remarkable and worth spending some time to think about.

And as important milestones come along we should celebrate them with our fans. I don’t want it to be about celebrating us, because the things that we do only matter if gamers find them interesting.

The preceding interview has been edited for length and clarity.

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