Phil Spencer: 'Xbox Will Exist' Even if Activision Blizzard Acquisition is Blocked - News
by William D'Angelo , posted on 01 March 2023 / 6,545 Views
Microsoft Gaming CEO Phil Spencer in an interview with The Times was asked what would happen to Xbox if regulators would block Microsoft's acquisition of Activision Blizzard.
"This is an important acquisition for us," said Spencer. "It's not some linchpin to the long term. Xbox will exist if this deal doesn’t go through."
He added, "Competition is us trying to get stronger. I don’t have great rationale for how better competition in consoles is somehow hurtful for consumers.
"Because to me, having us, Sony, and Nintendo doing well in the console market, all of us with strengths and uniqueness and content and capabilities, gives consumers more choice.
"I'd hate to see consoles go to where phones are where there are only two manufacturers. And, right now, we have three good competitors."
Microsoft's Activision Blizzard deal has been facing opposition from regulators in the US, UK, and European Union. The deal has confirmed to have been approved in Brazil, Chile, Saudi Arabia, and Serbia.
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can contact the author on Twitter @TrunksWD.
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That sounds to me like he knows what we all know, the deal is as good as dead.
If the deal does fail I think the next thing is gonna shock alot of people. Microsoft, Activision, and Sony's stock price will all skyrocket. Sony for obvious reasons,
Activision (plus two billion or so from Microsoft) because the record profits exacerbate an already undervalued stock and Microsoft because suddenly they won't be charging off a $70 billion expense meaning profits will be that much higher. If the deal looks like it's really gonna fail, and you want to make a quick investment...
MS only has themselves to blame!!! They have far more money than the other two put together, but have been terrible at running studios. You’re market share is the lowest of the three because of your terrible decisions. Why should you be able to buy your way to the top and not put the work in and earn it???
Yeah no shit Phillock, If a company is willing to invest 68 billion in a branch of the conpamy, naturally it won't cease to exist anytime soon.
To the tears of many here.
Picking here but "I'd hate to see consoles go to where phones are where there are only two manufacturers. And, right now, we have three good competitors."
Presume he means operating systems right? One which is exclusively tied to their own devices? Because as far as I am aware, there are about 10+ electronics companies making phones.
Yes, it was more a clarification based on his statement, as consoles are hardware. The OS issue with phones is a different matter but iOS is limited to iPhones. Android has a monopoly of all other devices but the devices aren't just made by Google.
The phone industry is a very different beast with it's own problems with monopolisation and control.
Also, would add Steam to their competition. He might not consider it but Steamdeck is a console tied to an economic system, much like the others. But again, being picky there. :)
THEN SPEND THAT 68 BILLION ON INVESTING IN YOUR OWN DAMN GAMES INSTEAD OF JUST BUYING STUDIOS AND IP ALL THE TIME.
There's a reason Microsoft 'needs' Activision/Blizzard to compete with Sony, and that reason is bad management. They've been falling behind since 2011/2012, absolutely floundered in 2013 with the launch of the One, never got their footing back, and even with relatively strong Series S/X sales they can't keep up. They have the means to compete with sony and Nintendo without splurging on just buying existing stuff and playing the victim. They're not the victim, they just suck at this and their only 'play' is to have more money to burn on investments.
Edit Hah, only like 30 seconds later and people are already downvoting. PREDICTABLE. Truth hurts. Let's see how low it can go.
But Ms is in industry for over 21 years now. It's more than enough to have very well invested studios. With 21 years in the Market Nintendo was releasing Wii/DS, Sony was releasing PS4. Microsoft is just incompetent
Not in the console space.
Your post makes no sense
OG XBox released on Nov. 15th 2001.
When was ps1 released.?
ps1 was released on Dec. 3rd 1994 (that is Japan, rest was in Sep. 1995.) Why do you ask? I gave the og xbox release date because you could not belive how long microsoft is in the console business already (time flies, right?).
They have only had more studios than Sony since 2021 when the Bethesda deal closed. It takes time for the studios they acquired to start putting out exclusives, some like inXile, Arkane Lyon, and Double Fine had multiplat games that were already announced which Microsoft made a commitment to fulfill as promised, Compulsion meanwhile was committed to bug fixes and DLC updates for We Happy Few for the first 2 years after Xbox acquired them, delaying development on their first Xbox exclusive, Project Midnight. On top of that, development times for games are getting longer and longer as time goes on and game graphics push higher and higher, and Covid struck as well, further slowing development. We have studios that Xbox acquired or opened since 2018 which still haven't released their first Xbox exclusive as a result of the above factors. Once all 20+ studios and 30+ teams within those studios are making Xbox exclusives, we will see much higher levels of exclusives support on Xbox, that much is pure logic.
Yes, 30+ teams. It’s a hell of a number. Your argument contradicts the innumerable arguments painting Microsoft as a victim that requires ABK to save them from big, bad Sony.
Look at it this way. Xbox may have over 30 teams between their 23 current studios, but Sony now has 22 studios, just 1 less than Xbox, and between those 22 studios, approximately 28-30 teams (Naughty Dog, Insomniac, Guerilla, Nixxes, and possibly more are multi-team studios, with some of them being 3 team studios). And that is just first party, they also have 2nd party exclusives, and these days Sony are hatting quite a few 3rd party exclusives as well (in the last 4 years or so they have have released or announced over a dozen 3rd party exclusives or timed exclusives).
So if your argument is that Xbox doesn't deserve to be allowed to acquire Activision-Blizzard because it will put them massively ahead of Sony in 1st party size, it is a silly argument, especially since it seems like Xbox doesn't plan to make very many ABK games into Xbox/PC exclusives, if any at all. Only 2 of Sony's 22 studios are multiplat moving forward, Bungie (Destiny) and Sony San Diego (MLB The Show), and those 2 aren't multiplat because Sony is "nice", Bungie was only willing to be acquired if Sony would sign a contract saying they would remain multiplat, while MLB is requiring Sony to release multiplat if they want to keep the MLB license. By comparison, if the ABK deal goes through, Xbox will end up with over 10 studios that release multiplatform games, between Zenimax Online, Mojang, Blizzard, and the multiple Activision studios that work on Call of Duty and other Activision games that are likely to remain multiplat under Xbox.
Could you link your source for Sony having 22 studios? I was confused by this high number, so I did a Google search, and the related Wikipedia page listed exactly 22 studios. This is really not an accurate number: Fabrik games is part of Firesprite; Nixxus only ports games to PC; Savage is a mobile-only developer; Valkyrie and San Mateo are support studios only; and Xdev doesn’t make its own games.
This puts Sony’s actual/realistic studio count at 16–already significantly less than MSFT before the ABK acquisition.
Well, if we're crossing out studios that don't meet certain criteria then, Xbox has their own mobile only dev, Alpha Dog, as well as what appears to be a support only studio currently, Roundhouse. Meanwhile World's Edge only collaborates with external partner studios to develop Age of Empires and Age of Mythology games, just like Sony's Xdev collabs with external partners, and it seems like the same thing is going to happen now with The Initiative collabing with Embracer Group's Crystal Dynamics on the new Perfect Dark, instead of growing into a AAA developer that handles development on their own as was originally planned.
Sony's Valkyrie meanwhile now has job listings for a strategy game which suggests they are more than just a support studio.
The point is, Xbox's first party is not that much bigger than Sony's currently, and Sony themselves have said they have plans to acquire more studios. The size of their respective 1st parties currently is not a good excuse for Xbox to not be allowed to acquire ABK, especially since it seems most ABK games will remain multiplat, just like Mojang's Minecraft games. As well as since Sony gets more 3rd party timed exclusives than Xbox does.
Sony was only 6 years old in the market when Xbox launched
Yep, was about to post this.
That's 7 years not 6 and basically 2 console generation advantage. That's alot as by that time Sony was well established in the console space. Remember when xbox came in, ps2 was the highest selling console by quite a bit and still is all time
*than
And isn't MS the one with the larger amount of studios between the 3 ?
Only since 2021 when they bought Bethesda. Prior to that they were behind
Incorrect. Sony bought 1 studio during the PS1 era. Psygnosis (Studio Liverpool). That's it.
During the 90's they opened 3 internal studios - Polyphony Digital, Sony Santa Monica and Japan Studio. For a total studio count of 4 studios.
At the exact same time, during the 90's Microsoft had Aces Game Studio, FASA Studio and Access Software - 3 studios.
Yes and even then with Psygnosis they had trouble, Psygnosis was more a Publisher than developer and were one of the dominant players in UK/ Europe during the 8/16 bit home compute era, and the problem was they still operated the same way even though they were purchased by Sony hence why Wipeout and other Psygnosis Sony games ended up on rival consoles despite Sony's disapproval. Polyphony is an interesting case it started life an internal R&D studio.
Microsoft could open new studios and put some effort into recruiting talent from competing studios. What matters is not the facilities, but the talented people to make good games. I believe that if there was a talent drain from Sony to Microsoft it would be more damaging than the acquisition of Activision Blizzard, and with at least $50 billion you guarantee that some people will leave the company.
You act is if they aren't doing that. Most of the studios they have acquired have expanded substantially since acquisition using Microsoft money. Compulsion more than doubled in size from 40 devs to 86. Obsidian shot up from about 200 to 268 currently. Playground had around 280 at acquisition, now 379 thanks to staffing up on both the racing studio and the RPG studio. Machine games is up from about 120 to 154. Ninja Theory made Hellblade 1 with just 20 devs in 3.5 years, the sequel reportedly has more like 80 devs (4x as many) on it and it will get over 4 years of development, meaning the sequel is much larger in scope. Undead Labs opened satellite studios including one focused on Animation that is meant to assist all of Xbox's other 1st party studios, and State of Decay 3 is said to be AAA unlike State of Decay 2 which was more AA. inXile opened a brand new headquarters that cost millions to build so that they would have space for expansion into a AAA studio. Rare has seen a 7% increase in headcount over the last 6 months according to LinkedIn. They have more 2nd party exclusives in development currently than they released during most of the past generation.
And that costed like 0.1% of the 69B dollar they want to put in ABK, so they can open several new studios right?
For them to spend $69B in new studios they would have to create like 100+ new studios of 500 employees with 100K annual salary and finance them for 10 years. It's simply not possible. Just the talent acquisition process would be far more detrimental to the competition and the industry than this deal is.
And even then that's not a $69B investment that's a $69B over 10 years which meanwhile you aren't actually making yourself more competitive short term.
Good comment. Look at CDPR as example. They couldn't find the talent when Cyberpunk 2077 ramped up in development and was noted in their investor call as one of the reasons for the development problems.
Try hire 50 000 game devs or acquire one large publisher. The latter is easier and less risky.
Yes, reason why Nintendo and Sony have invested much less than that and got much better results in building and expanding their studios and game availability, with the benefit of no cries on social media or regulators of "let us compete" or "we are dwarfed by PS 96 to 4 in Japan".
they cannot go back in time to change past decision so you have to use the card you have today and, as MS wants to greatly increase Xbox competitiveness short term, acquisition is the only realistic possibility.
Another, although not so realistic possibility given MS position on the issue, would be to heavily hat exclusivity and saturate 3rd parties with development contract through Xbox game studios Netflix style. Imagine MS locking every single new AA/AAA IP from 3rd party behind a 1 year exclusivity deal for a decade or more.
Also love the "no cries on social media/regulators parts" Sony went completely "please regulator protect our position" "We're so fragile that the remote possibility of losing COD in 10 years will doom US"
And how many tweets and interviews you see from Sony? MS we see a lot more routinely including ABK PR almost daily.
Yeah shame it's not actualy daily. You needs more engagement with your community MS
Number of studios: 40 (hypothetically) - currently has 23 studios
Employees per studio: 1,000
Annual Salary (US$): 110,000
Annual Payroll per studio (US$): 110,000,000
Five-year payroll per studio (US$): 550,000,000
Total Annual Payroll (US$): 4,400,000,000
Total five-year payroll (US$): 22,000,000,000
Video game release goal:
AA : 25% of the workforce/studio and release every 2 years.
-AAA / AAAA: 75% of manpower/studios and release every 5 years
Currently with 23 studios they have about 6000 employees and growing, Obviously those are already financed without the new $69B investment.
but even then you come up with 34k+ new employee which is nearly 6 times what MS is right now and 2.5 times what it would be with ABK acquisition.
Let just say 150K salary as doing so will likely increase salary across the industry.
34k 150k 10 year = $51B still $18B short.
So going this route you get:
1) A totally unrealistic number of talent to acquire
2) No short term gain revenue gain vs gaining ABK revenue stream
3) No short term gain in competitiveness and barely any mid term greatly increasing the risk of your investment.
4) No assets to make up for the investment for a long periods(what would have been instant with an acquisition ($69B worth of cash for what you value as $69B worth of assets))
5) Your still short of your investment goal over a 10 year period for what you would have liked to make in a single transaction.
6) Your investment value would get diminishing returns since your own action would raise salaries across the industry.
If 5 of those 40 studios are mobile, you can get revenue quickly. Mobile games need little development time and constant content updates. Tencent is the richest company in the gaming industry due to its focus on mobile devices.
Add low-budget game development with an average of 2 years to release, so in 5 years the studio has the possibility to release 2 low-budget games and 1 big-budget game. There are risks and opportunities in everything (ISO 9001), but there is a way to compete with an established game, and even surpass it. Grounded is an example of a successful low-budget game, so nothing stops other games of this style and with constant content.
The development of extra content for new games is also a way to generate fixed income and development is relatively short.
While ABK aquisition would have given a strong foothold For ms in the mobile market I highly doubt they want to open this business line from scratch.
And true low budget games have there place but you still need talents and a clear vision of the game you want to do. Grounded released on alpha after 2 years but it took 4 years for the full release. Pentiment is also a good exemple but those game where made by sub 15 member teams that were offshoots of well experienced and talented teams.
Ms also have this segment already pretty much covered with the ID@Xbox initiative.
All in all Good for a few 100s employee but a far cry from the 34k+ you need to hire and it does not improve your competitivness short term either.
Also interesting to note that grounded was in dev before Obsidian acquisition further supporting acquisition as a more than adequate option for MS growth.
If Grounded was released after 4 years with a team of 15 people, then with 30 people it would be released in approximately 2 years. This is what happens with COD, as it is a game that takes 5 years, but is released in less time due to the size of the team (Hh). In the end, it's all about optimizing processes and maximizing profits.
There is a way to develop mathematical algorithms to justify the success of any product or service. The company needs to do a good job of raising tangible and intangible values of a particular product or service. The Chinese and Japanese copied many American products, and over the years managed to make processes cheaper and even improve quality (nowadays the US cannot compete in many sectors with the Chinese, as there are products with good quality and cheaper) .
Microsoft is able to create an IP portraying a part of a war in the past, using the weapons of the time, telling a part of the story through a game...
- Vietnam War
- First World War
- Second World War
- Persian Gulf War
- Conflict in Afghanistan
-
Conflict in Iraq
See how many themes can be explored with the help of historians to create immersive content. There are other countries that have had conflicts like Russia with Afghanistan, so there's a lot of history to make a great game.
Not every process of game development are easy to parallelize while doubling your 3d artist will give you pretty much twice the output for a given time. Doubling the number of programmer wont. So no you cannot expect near linear reduction in development time with the scale of the team, far from it.
Cod use 3 dev team in cycle and make heavy reuse of there engine and code from a title to the next. They also have dedicated engine Teams. And more importantly they have 3000 employees working on this franchise at all time.
For the rest I could agree with you but it change nothing to the fact a $69B investment isn't possible using organic growth in this industry.
Regarding CoD release window and making dev time shorter, you aren't fully correct. The reason you get CoD every year is as EpicRandy said multiple teams working on the game at the same time so each of them will take the 3 to 5 years to develop the game, but by offsetting the releases you have a cycle where every year one of them will release the game while the others are 1y to release, 2y, etc. But yes you need to have the right team size and scope defined to release with consistency among other factors.
I disagree they want activision-blizzard so they can continue to flood game pass with so much content that it's cost-benefits ratio becomes undeniable regardless of what type of gamer you are. The more dev and studios MS has to negotiate with for their games to come to GP the harder it is for MS to run it. They basically want to turn into Netflix where they are producing so much of their own content they hardly need to reach out to anyone else for their games. They most likely want to make it so they really only negotiate with indie devs and a few major AAA third parties here and there long after release if I had to guess.
And did Netflix bought Warner, Paramount, Disney, etc to have that content there?
lol well no there approach is definitely different most likely because Netflix wasn't even big enough to take that approach to begin with. Netflix had to slowly grow to that position while MS is trying to purchase their way to the top. Not sure what there plan will be if this deal fails honestly. Which from what I'm seeing the CMA is most likely going to kill this deal.
In 2024 Sony's COD marketing deal ends. I would start by negotiating this marketing deal, then I would negotiate a bunch of XBox exclusive content. This movement alone already hurts Sony's revenues.
Eh I don't think any of that stuff matters much at all. If I was them I would just try to go after smaller devs. Capcom, Square, Sega, Ubisoft. Not sure they would be able to get any of those but at least make an attempt. They need as many studios as they can pumping out content for GP.
Better to create studios and recruit from the competition. Less government interference... Japanese studios are even more difficult, so it's better to really open studios and do a good market study of games loved by the public.
I believe that with the right talented people, you can create games that, similar to COD, Resident Evil, Silent Hill, Red Dead Redemption, GTA... it's the people who create the game that really matter, because the rest just needs good marketing ... The game having a good story, being well optimized and having good marketing, will certainly be a success.
I agree that they should do that as well but there's no harm in at least trying to get those other companies as well. Doesn't have to be an either or situation.
The gaming market is already consolidated. If Microsoft wants to gain relevance, it must invest in its autonomy and destiny, so having the approval of the FTC, CMA, EU and others can generate enormous wear and tear. I think at most try to negotiate the purchase of IPs to develop a remake.
Bit worrying to even have to say this, of course Xbox will continue to exist.
Plot twist...
Phil-just put the 69 billion into your existing 23 studios and remove AAA day & date games from Gamepass.
Put 69 billion in xbox studios, and keep adding games on gamepass
Talking about what will happen if the deal doesn't go through, not a good sign
He´s probably right though. No matter what, they can probably licence the name to refrigerator manufacturers.
Why is everybody acting like MS can't just pay for the exclusivity of these games if this deal gets blocked? Yes, it would expensive af, but it is not like they couldn't afford it if they really wanted to.
So many in here acting like the deal has officially been declined.. when all Phil did was anwser a question that was what will happen to Xbox. Did anyone actually read the article?
It existed before. But yes seems like preparation to the block. All the news, talking and pressure was already indication that it was on heavy danger.
Pretty predictable and sad replies.
“talking about what happens if the deal fails, lul not a good look”
He was asked a question and answered it.
“Spend those billions on new studios”
That’s not how investments work. MS deciding ABK is worth a huge chunk of money, doesn’t mean they’re willing to spend that money in the gaming industry on something else. It’s just like Minecraft, it’s an investment they think will pay off.
“Sony and nintendo blah blah blah”
Sony and Nintendo have been in the console industry longer than MS and have been making better decisions for a lot longer than MS. The decision makers in the Xbox division for MS have been there for almost six years now, I’m not going to hold them accountable and compare their strategies to that of decisions made by other companies in the 80’s or 90’s. The fact of the matter is given the hand dealt to them right now, acquisitions make all the sense in the world.
“but but they should grow organically!!”
I know people always make cute exceptions and excuses as to why Sony’s long history of acquisitions is different, but exactly why is it a bad thing to buy studios that are looking to be bought? ABK came to Microsoft with an offer. Bethesda was on the market. It’s funny to me that we saw decades of jokes and memes about the “Xbox war chest” in a negative manner but now that they actually use it, oh no!
Equally funny is the idea that they should take this money and build new studios up. What a colossal waste of time and effort that is, when established teams are available right now and looking to be bought. I think Sony agrees, which is why they also have been buying studios instead of opening them.
Sega was not entitled any favors when it began to lose favor during the Dreamcast days (despite having a great platform and amazing games), and nor are you, Phil and Microsoft. This is how this works. Start running or get out of the race.
Microsoft can build a team as big as Activision Blizzard with a smaller investment. I could make an investment in internal studios and open more studios, in addition, I could dedicate at least 5 studios to the development of mobile games, as they generate a lot of revenue.
- Number of studios: 40
- Employees per studio: 1,000
- Annual Salary (US$): 110,000
- Annual Payroll per studio (US$): 110,000,000
- Five-year payroll per studio (US$): 550,000,000
- Total Annual Payroll (US$): 4,400,000,000
-
Total five-year payroll (US$): 22,000,000,000
Video game release goal:
-
AA : 25% of the workforce/studio and release every 2 years.
-AAA / AAAA: 75% of manpower/studios and release every 5 years
Seems more risky than just acquiring AB. Won't be easy to hire 40 000 game devs / related employees. Also your numbers only look at payroll. With AB you get all the assets plus decades worth of marketing, customer goodwill, and deep back catalogue.
You're right, as you would need a simulation to:
- operational costs
- production costs
- research and development costs
- tax expenses
- equipment depreciation expenses
-
marketing and human resources expenses
It is quite complex to estimate costs, but what I wanted to show is that human resource costs are high for some sectors, as there are things that an AI cannot replace a human. I can say that in the games industry, human resources expenses are among the highest.
Phil is bad at interviews. Not only did he say something dumb like Xbox will still exist, he also said that right now the games industry has 3 good competitors including Xbox ???? when Xbox have been correctly arguing to regulators that they are not competitive enough.
Stick to improving Xbox Phil.
It's like Activision blizzard was 90% of the Xbox division when they haven't even acquired it yet...
Counting chickens too soon phil?
Anyone in a competive market with a company would love to have a phill spencer as his rival running things in the rival company. Imagine having 70 billion to spend and waste like 3 years trying to blow it all out in a company. In the three years since the start and the end he could have built with that money a shit ton of studios and get the best fucking devs out there to put them there but no . Not papa phill, nope, ita better trying to buy what other s created and spending his time crying in interviews and getting awards lol
Well Phil is on the role for almost 10 years, and considering the other expenses and investment he didn't had 69B, but he certainly had enough to double or triple the number of studios long ago.
If you know anything about the history of Xbox and MS since Phil took over, you will know that he was only able to make these kinds of investments since 2017. Less than a year later is when they started seriously acquiring studios. He has tripled the number of studios in that time.
Most if not all bought right? And 2017 is 5 years ago, and neither Nintendo nor Sony had any significant blank check in the period to increase their studios and they done just fine.
Most of Sony's studios are bought as well. And yes, we know Sony did their acquisitions "organically" with building relationships and nurturing over the last 25 years...yeah, we get it. It's a broken record.
There is no way to see growth/ return in the short term and long term without acquisitions. Sony knows this all too well considering they have acquired 9 studios with zero built up in those same 5 years. Some not having a long-standing relationship. I got nothing against it either.
I wasn’t aware they started this attempted acquisition before the current gen started woahh, that’s a long damn time.
Considering the time it takes for discussions like that to even go public I wouldn't be surprised that this deal have been in talk more than 2 years ao.
