Phil Spencer: 'We Lost the Worst Generation to Lose in the Xbox One Generation' - News
by William D'Angelo , posted on 02 June 2023 / 13,083 Views
Microsoft is in its fourth generation of Xbox and only once has Xbox sold nearly as well as PlayStation. This was when the Xbox 360 sold an estimated 85.73 million units, while the PlayStation 3 ended up selling 87.4 million units. Following the success of the Xbox 360, Microsoft struggled with the Xbox One with it selling a bit over 50 million units lifetime, compared to 117 million for the PlayStation 4.
Microsoft Gaming CEO Phil Spencer in an interview on the Kinda Funny Xcast said that losing the Xbox One generation was the worst one to lose as it is when everyone was building up their digital library of games.
"We're not in the business of out console-ing Sony or out console-ing Nintendo," said Spencer. There isn't really a great solution or win for us. And I know that will upset a ton of people.
"But it's just the truth of the matter is that when you're in third place in the console marketplace. And the top two players are as strong as they are and have in certain cases a very discrete focus on doing deals and other things that kind of make being Xbox hard for us as a team. That's on us, not on anybody else.
"Our vision is that everybody who's on console has to feel like they have a great experience and they're a first class citizen. They've invested a ton in our platform."
He added, "I see the commentary that if you just build great games everything will turn around. It's just not true that if we go off and build great games all of a sudden you're going to see console share shift in some dramatic way.
"We lost the worst generation to lose in the Xbox One generation, where everybody built their digital library of games. When you go and you're building on Xbox we want our Xbox community to feel awesome, but this idea that if we just focused more on great games on our console that somehow we're going to win the console race doesn't really lay into the reality of most people.
"Like 90 percent of the people every year who walk into a retailer to buy a console are already a member of one of the three ecosystems and their digital library is there. This is the first generation where the big games that they're playing were games that were available last gen, when you think about Fortnite, Roblox, and Minecraft.
"The continuity from generation to generation is so strong. I see a lot of pundits out there that want to go back to the time where we all had cartridges and discs, and every new generation was a clean slate. And you could switch the whole console share, that's just not the world that we are in today. There is no world where Starfield is an 11 out of 10 and people start selling their PS5s, that’s not going to happen.
"We have this unique vision because we see what creators wants to do. Creators want to build games that can meet players on any screen, people play with their friends regardless of what other screen they're on. The console is the core of the Xbox brand, there's no doubt. We will stay focused on making sure that console experience is awesome.
"I know some people want to hold us up of just being a better green version of what the blue guys do. I'm just going to say 'there's not a win for Xbox and staying in the wake of somebody else. We have to go off and do our own thing with Game Pass, with the stuff we do with xCloud and the way we build our games.'"
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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I've been saying this for a long time and I like that Phil understands this as well. People have built up a digital library and switching consoles now means you lose those games. BC is the standard and will most likely stay that way from here on out instead of coming and going like before. It will be tough for MS to convince people to switch but man you can maybe convince people that they should have both?
I agree it isn't overnight, but he had 10 years to change the course and you really need great games with consistency to start changing the course and gain market (and if it wasn't possible then why Satya was celebrating the quarter they outsold PS on USA?). Of course there isn't an easy way out, but delivering bad games won't help.
I mostly agree but think 10 years isn't representative of the real time he had. Spencer first jobs was to give back confidence in Xbox to MS. Until that point his hands were mostly tied. He achieved this at the end of 2017 when MS actually gave Xbox their own department and obtained approval for new acquisition/expansion.
after that the first real steps was to make acquisition which were announced at E3 2018.
So the real timeline, the one were is able to work on actually expanding Xbox with real backup to do so, is more like 5-5.5 years instead of 10.
Sure I agree that a good portion of those 10 years was extingshing the flames, saving Xbox of rumored closure and getting approval to invest. But 5 years is about a gen long so it is still a lot of time to turn the ship around, PS3 done it in less than that and Nintendo gone the hops from GC>Wii>WiiU>Switch basically on 5 years interval. Sure also games development have increased so it takes even longer to show results. But my biggest issue is that he talks more than show so it turns into a mockery.
Sure but the issue faced by MS, Sony and Nintendo were all different in nature and required vastly different solutions to resolve. It's true that 5 years is still a long time but in those years it's undeniable MS relentlessly took steps to fix their core issues.
They are now suffering from growing pain the kind throwing more money into wont fix on a per studios basis only time and support will do.
I'm hopefull that come this end of the year the narrative will change and the kinect induced blunder effects will finaly loosen its last grasp on the brand.
If they keep buying studios, like ABK, I don't think the growing pains will really close, they will enter another cycle of trying to reestructure. But I agree with you that if they give time and invest the right way on what they have their studios can florish a lot since some were already great before the purchase and increasing the head counts may allow them to make much better games.
Yes that's a per studios thing. If you acquire new studios or create new one it will continue but the difference is you'll always have less of your overall studios (in proportio) in this state.
Before he was the head of Xbox, wasnt he like the number 2 guy? Hes been there forever.
Nah, real timeline, is 10+ years. However, even if it was just like 6years (because of how long it takes to develope games), thats still a entire cycle he somehow didn't manage to manage properly (or better than he did). Hes had plenty of chances to turn things around.
If I was deciding who would lead Microsoft gaming, I think I would leave Phil there for another one to two years. We do need to see a couple of more big games launch, before we can really judge his tenure.
He was brought into a very difficult situation and asked to turn it around. He has unquestionably improved the Xbox image in the minds of gamers. Seems like he may have left some meat on the bone there, in that he could have improved it a lot more had they not missed with the couple of big games games. But, nobody is ever going to be perfect. So, I think he should get a little bit more time so that we can really see whether it's just unlucky that Redfall was a shit show and halo Infinite devs were not able to deliver content at the pace everyone thought? Or, is it a deeper issue? We just don't have enough info to say that yet.
We also have to keep in mind that just tossing out Phil doesn't fix any issues. Someone new has to come into the situation. So you have to have someone that you believe will be better suited to the job than Phil.
An exception to this would be that if things are just going so terribly that you have to shake things up just for the sake of shaking them up. But, I don't think we're quite there yet.
If the MS problems were the quality or lack of release from the studios they bought I could agree with you on some extent. But there have been plenty of blunders from studios that were with MS for those 10 years like SoT launch, Halo ever since 5 and some other visible cases of bad management of what they already had.
Okay. But, Sea of Thieves is now a big success. Halo Infinite was well received, had a pretty smooth launch, and now seems to be getting back on track. So, Phil was also there for the great SoT redemption, and (hopefully) Halo Infinite turnaround (turnaround might be too generous, but it looks like the bleeding has been stopped).
Then there is Minecraft. It is one of the biggest hits in the history of gaming, possibly THE biggest. Phil is in charge of that too, and has presided over massive growth. This is, by a very wide margin, the most important gaming property owned by Microsoft. And it is doing phenomenally well.
I do think he is, rightfully, in the hot seat. But, if we're going to stick him with the blame for every bad thing that has happened during his tenure, we also have to credit him for the good stuff.
SoT took a long time after release to correct its issue, and if MS had learnt from it as Phil say they did it wouldn't occur with other games. Halo was well received, but the announcement was a total disaster and even after the 1 year delay it was missing several parts of it so for me this shows they didn't really learn and well even their own internal studios of long date aren't well managed. I wouldn't really give credit for solving the fuckups you create yourself by lack of doing a proper work even more when it repeats itself.
The biggest portion of Minecraft was already set long before MS got involved, the new release of Minecraft which would fall into Phil control was very poor wouldn't you say?
But we certainly need to credit him for the improvements Xbox had. I believe Gears of Wars and even Forza Horizon florished with him right?
We also need to keep in mind that he was just given a big promotion last year when he moved into a the gaming CEO job. That was created just for him, and reflects his growing responsibilities. So, they certainly haven't been unhappy with his performance overall.
I agree that MS is likely still happy with the results he brought, as Epic pointed the revenue did grow quite significantly, still missing the target for GP growth by big margins isn't that positive (can be fault of people higher than him having ridiculous targets though).
Yes he was but he wasn't tasked with turning things around under the Xbox 360. You can try to blame him for the Xbox one all you want, but it serve no purpose it wont change change the fact that it happened and that MS put him in charge afterward.
- Under Spencer MS went from spinoff talk to being convinced to invest $70B in 1 aquisistion attemp.
- They went from 6 to 23 studios and trying to acquire another 15.
- When considering their games and all mediums which they are being sold through. Xbox just achieved a MAU of 120m user in january.
- They added an entire new market with gamepass which now boast ~30m users per last estimate.
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They went from $7-9B annual revenue between 2013 and 2017 to $15.5B in 2022 and a peak of $16.25B in 2021.
How all of this not considered turning things around?
I would say we don't consider it being a turnaround when people say X1 issue was the launch but even X1 was selling much closer to PS4 during the period considered bad and with Don Mattrick than after it changed to Phil.
Mattrick left in July 2023 less than 1 month after the reveal and 4 month prior to release.
Of course Xbox still have their core fan so initial sales would be ok no matter what and Ps4 was heavily stock constrained at first. creating a fake appearance of good competition first few months to a year or so.
Ok. And how would them we go to explain that Series X is tracking to be passed by X1 in the near future?
I already did : "For Series the lackluster 2022 certainly had much to do with it. By all logics this should be the last big bumps in MS roads to be more constant and impacfull with their deliveries"
But this quarter had a 30% reduction against 2022 that was the year where they had no launch, for this Q1 they had releases.
1st quarter of 2022 was supported but the high point year of 2021, first quarter of 2023 is had no such supports
Phil is wrong and we know he is wrong because the PS5 recorded something like 1/3 new users. Obviously it's not that high but it shows that Xbox can expand with compelling content. Acting like good games don't matter anymore is like accepting defeat.
You can't release stinkers and the claim you can't compete unless you can buy the industry up. Use those trillions to make something solid ffs.
"But it's just the truth of the matter is that when you're in third place in the console marketplace. And the top two players are as strong as they are and have in certain cases a very discrete focus on doing deals and other things that kind of make being Xbox hard for us as a team. That's on us, not on anybody else.
This is a very very confusing statement. To me it sound like: "Oh, oh this evil Sony making exclusive deals with 3rd parties and this bad bad Nintendo has a business strategy we can't understand and counter..." Says the guy who works for one of the richest companies in the word which just bought (or still trying) Activision Blizzard for $68.7 billion. Just stop crying!
He is saying it is much more expensive for Microsoft to make deals with third parties than for Sony so that’s not a viable way for them to compete. That’s why they are focusing on acquisitions and diversifying to PC and cloud.
I bet it is cheaper than 70B and they done it on X360 years where they had even less confidence considering PS2 bloodbath over competitors.
They could have also built their own studios internally the way Nintendo did instead of swallowing up huge swathes of the industry whole and c*ck-blocking competitors. Spending that time building goodwill with studios instead of constantly looking at them like a hungry pig looking at a trough of fresh slops might have helped too. A lot of Japanese developers didn't enjoy working with Xbox.
lol.. sounds like an semi-excuse. Be true here. When the Xbox360 was ahead, Sony stayed quiet and put in a crap ton of work into the PS3. Check out their releases during those years. This is how PS4 came out on top. Gamers know Sony deliver games. The sooner Microsoft realizes this (NOT throwing money at third party exclusives and studio acquisitions), the sooner they get in a better shape. Put in hard work into making Starfield, Fable, Perfect Dark, Gears/Halo good. Then in a generation or 2, you will see better results. Unfortunately, Microsoft probably doesn't have the patience.
Funny to see Microsoft sounding the defeat alarm when they've been hiding their sales numbers for how many years now? 3-4 years? And fanboys hyping gamepass as the next thing.
Gamepass economics simply does not work; AT ALL. Take Redfall as example. The game bombed hard. If it was a normal release, maybe it sells 2-3million even if it bombs.
1st day release on gamepass? 0 money. Subscribers aren't retained because of Redfall nor are new subscribers added because of Redfall.
So if Redfall took 200million to make, you sell 2million, you lose 80million. Redfall on Gamepass? You basically lose the whole 200million lol.
3-4 years? they stopped reporting numbers back in the early Xbox One days.
Your right about cost to develope, and games bombing, do so harder, if theres no recoupe at all. Its great for the consumers, that then save money, but probably bad on the developers that made a game that reviewed poorly, ended up on gamepass and made nothing.
The last official number was close to 10M when we get to holidays (some inflation to not be left behind PS to much). But even when they stopped giving the numbers they kept the "X1 is the fastest selling xbox ever" and done the same for Series.
I always roll my eyes when Microsoft says "x hours played."
The release of Redfall has retained Game Pass subscribers. It has been talked about for a year and a half. People have been waiting for it. Some of those people are people that would have let their subscription lapse, but they did not.
It probably doesn't do much moving forward. But it did a lot coming up to release in terms of retaining subscribers. And that's how all subscription services work. People stay subscribed because they are anticipating stuff coming in the future. That's a much bigger contributor to customer retention than content that already exists.
The other side of that, of course, is that if you get a reputation for releasing crap, people are much less enthusiastic about what you have coming in the future.
Considering the reveal of the Xbox One all that happen after that point was an effort in futility if the mentality was to win Gen 8th. Still, considering it ended up selling some 50m shows that all efforts was not for nothing.
I'm sure MS now as adopted, and have done so for some years now, a mentality where they measure success by using their self past as the marker to beat.
I can certainly commend MS on some of their efforts (including trying to carve a new market where they would have advantages against Sony/Nintendo) even if the results of that effort (like making more great games specially without taking major publishers/titles from multiplatform) aren't a 1:1 from the effort. But certainly considering where the first signs of X1 pointed it ended a lot better than I expected, still for series is the opposite it is doing a lot worse than I expected.
Well pretty much yes. For Series the lackluster 2022 certainly had much to do with it. By all logics this should be the last big bumps in MS roads to be more constant and impacfull with their deliveries
Let's hope it is true. With GP being usable on streaming and my friend being able to share it with me if there are great games on it I will benefit =]
Imho, he's right about the "worst generation to lose" and "digital library".
Still, this talk about "There is no world where Starfield is an 11 out of 10 and people start selling their PS5s, that’s not going to happen...". Kinda disappointing coming from Xbox chief. He is right, but If one great game isn't enough, make 3, or 6, or even 9 great games, convince people that XBOX games are the best! You guys have some of the best WesterRPG Studios under your belt and support from a trillion dólar big tech, stop acting like the underdog!
I think this is essentially the issue that he's trying to deflect.
High quality games will get ppl buying your consoles. Sony has proven this. It's how they attract ppl to their ecosystem.
Right now for MS, that attraction is Game Pass, and since you don't automatically own anything on GP, there's no investment from a library perspective.
Maybe he has a slight point, but look at Nintendo. Wii U to Switch, you couldnt bring anything with you.... and it still did a complete 180. Going from like 14m sales to 122m sales. People love the Switch, majority of that is just the library of games it has.
However the Wii U + 3DS was around 90m and Wii + DS was 250m so there was a huge established customer base to work with and consolidate into one format.
For Xbox to have significant growth it had to much more directly attract customers who’d previously owned a PS4. Xbox is a much less attractive option as a second device for ps5 owners too.
Still the digital library wasn't shared or transferred so Nintendo turned the table even when doing much worse than X1.
Xbox put in a lot of effort to forcing DRM, Kinect 2.0, and multimedia services while PlayStation played it safe after the expensive and less successful years of the PS3.
Xbox lost so much goodwill with the Xbox One's prelaunch and launch and started recovering it by once more putting in a lot of effort (Game Pass, Backwards Compatibility, etc.).
I truly think an Xbox One that played it pretty safe at launch with at least Xbox 360 support could've gotten pretty close globally to PS4 (which would see reduced sales overall).
Xbox One seemed like the last generation to push Xbox hardware over PC, and even that changed midway through its life.
There's almost no chance Xbox is going to be competitive globally again with PlayStation and Nintendo at the same time.
He indirectly explained why they need Activision.
Losing the digital library generation (xb1 vs ps4) meant the only way to get people to switch is by giving the (pretty much) their entire library on another console. That seems unlikely.
I’m firmly in the PS camp and don’t want the merger of the two to go ahead but watching the interview left me with the impression that whilst Phil won’t give up trying to make a success of Xbox, MSFT might. Gaming without Xbox means we all lose. It’s great seeing two companies driving innovation.
Never thought to say it but I think PlayStation should show the xbox platform some love and release some one or two of their games there as a gesture.
Much better peice this time. It actually has some of the quotes worth useing. Its a intresting take, that he believes a digital libary means no one will ever switch consoles. Also that makeing lots of Big AAA high rated games, to draw over users (out consoleing the others) isnt a viable option for xbox.
"This is the first generation where the big games that they're playing were games that were available last gen, when you think about Fortnite, Roblox, and Minecraft."
And don't forget GTA V, which was available last-gen... and the gen before that!
I’ve bought it 3times lol
Never heard of roblox, what the heck is that ?
It's a massive game/platform where users (mostly kids) build and share their own games. I'd never heard of it either until fairly recently, but then its target market is people under 16 so... yeah.
I learned about it from a series of expose videos, and I wasn't very happy with what I learned! https://www.youtube.com/watch?v=vTMF6xEiAaY Scary stuff.
Roblox is a massively popular, and reportedly incredibly exploitive, platform that's popular with kids. https://www.youtube.com/watch?v=_gXlauRB1EQ
Man when the leader admits defeat, it truly is a sad sight to see. Competition is a good thing, I didn't want to see a weak Phil Spencer like this. It just completely loses the momentum and hype not only for Xbox but gaming as a whole. People might disagree, but certain levels of fanboys and debates are needed to make it interesting. Obviously it gets annoying, terrible when people take it way too far. This feels like that moment when your rival can't keep up with you. Like Sonic and Mario in a way, perhaps The Big 3 can bring themselves together for one big project?
I would say it isn't only admitting defeat, that can be good to do, but it is more like saying they can't ever win.
He basically said they cant outconsole the others, and that isnt their way. He doesnt believe alot of strong high quality games will draw over useres from Nintendo or playstation. He sounds like he has a defeatist mentality. Either that or its playing for the gallery.... so they dont lose more cases in the merger.
I don't know, I'd be more excited for gaming if Microsoft wasn't constantly looking at game developers to buy. I prefer interesting games, not interesting business.
Microsoft could do what you said in your last sentence by going third-party and cooperating with Sony and Nintendo instead of competing with them.
What he really wants to say is that they don't want to make games, because it is costly and risky. They just want to be a gateway that everybody has to go through to get access to games. Pure and simple.
"We're not in the business of out console-ing Sony or out console-ing Nintendo," said Spencer. There isn't really a great solution or win for us. And I know that will upset a ton of people."
U did it before why cant you do it again?
Spencer thinks, digital library is too important (and services). He basically said that makes it too hard to pull people from Nintendo or Playstation. Its a wrong mentality to have, constantly high quality games will result in hardware sales, it always has.
The proof it is wrong is that Sony themselves showed some metric on the percentage of new accounts on the PS5, I think it was something between 30 and 40% of the PS5 had been bought by people getting PS for the first time.
The 50 million sold Xbox One's are a lot more than the Gamecube and Wii U sold. I'm sure when the Gamecube lost, Nintendo was thinking man that was the worst generation to lose, especially with Sega leaving the market a few years earlier. You can always come back from a bad generation. There were plenty of tv shows like South Park and The Big Bang Theory that had episodes where they had the dilemma of which console to buy between the ps4 and Xbox One at launch so all the friends could play together. No one at that time thought, the Xbox was going to sell significantly less than the PS4 at that time. Xbox may be down but are not out, especially with the number of studios they now own.
Same happened this gen.
Most people figured PlayStation was going to oursell Zone worldwide. It wasn't expected PS4 would win USA though.
Look at the Wii U to Switch.... Nintendo did a complete 180 turn. If you build a good system, and constantly release high quality games on it, it will sell..... reguardless of digital library.
Do people really buy a brand new console to play old games?
Digital or Physical? The answer is yes.
It was a big selling point with the PS2 as most consoles back then didn't carry their games forwards, that and DVD playback.
But how much does it actually matter? It didn't damage the jump from WiiU to Switch... But the Switch got all of the WiiU's good games anyway and the WiiU's sales was ultimately irrelevant.
I guess you will always have a core collection of individuals who love to bring their gaming collections forwards, but you will always have a massive customer base who ultimately don't give a crap.
From Sony internal data on the features and use, it was less than 10% of the userbase that really cared about BC.
That's why Sony dropped BC from the PS3 and didn't really pursue BC on the PS4, except through PSNow streaming. They had to untether the PS3 from the PS2 to turn the PS3 around, and then had to basically start fresh with PS4. But their strong output in the last years of the PS3 gave them the momentum they needed to launch the PS4.
Hence my point.
It is an important feature. But not for everyone.
10% of 100 million is still 10~ million users.
10% of people that cares about BC doesn't translate to 10% of sales loss or won. Or do you think since PS4 didn't had BC Xbox absorved those 12M extra sales that would put PS4 at 132M and instead made X1 like 55M (instead of 43M)?
Not once did I mention sales or a correlation of backwards compatibility to sales.
Just that for many people it's an important feature... And it absolutely is.
If it doesn't cost sales or generates profit companies will care very little for it. And the excuse of digital library being a game decider on what X1 was the worse generation to lose or justify Series not being able to compete with PS5 is totally mute.
The industry has changed since 2006. Nintendo has also had plenty of successes alongside its failures. Microsoft has flubbed three out of the four generations it's been in the market.
Even the 360 wasn't exactly a resounding victory, with Nintendo dominating early on and selling more overall, and Sony turning the PS3 around and dominating in the last years with games like The Last Of Us, which gave them strong momentum at the PS4's launch. The 360 got a huge boost from the Kinect gimmick, and Microsoft bet on that horse and lost for the X1.
Forget everything he just said. Anyone else puzzled by his insistence on using the singular form of console, even when it's clearly suppose to be plural (consoles)? Is this some kind of insider jargon? What gives?
Even as he does have a good point, as people will hardly simply abandon their digital library as it gets bigger, it's not like XBOX losing this specific generation is the reason they are behind.
XBOX lost every generation to PlayStation, every single one.
PlayStation is simply a bigger and more spread brand worldwide, that has always had more and better games, and that is the biggest reason why they are behind.
MS then go and try buy their way into the lead instead of trying to truly compete in making better games.
There were 4 mainstream console makers since I was born: Nintendo, Sega, Sony and Microsoft; I own multiple systems and games from 3 of them, and 1 is not even in the business anymore since I was a kid.
Even as my tastes are only mine and not a reason someone else should also feel exactly like me, it's pretty telling when someone as invested as I'm into gaming does not even feel compeled to buy a single console from MS.
I've never heard the previous generation be described as "The worst generation to lose in."
But I guess that makes sense considering people are now expecting their digital libraries to (mostly) carry over.
Also interesting that he bluntly uses terms like "losing" when he could have kept saying "coming in third".
I do always appreciate the honesty and the way he acknowledges the other ompanies directkly. It makes it easier to digest what he is saying, most of the time.
Is he serious…🤣. That idea that people prefer their library over another version of quality is just absolute nonsense.
He also completely contradicts the notion of the strength of Game Pass, which is where you don’t have to own anything you just rent and play.
It’s amazing this guy still gives interviews. He’s so bad at it.
Renting games has been a thing since the beginning of the industry.
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