Phil Spencer on Studio Closures: 'I Have to Run a Sustainable Business' - News
by William D'Angelo , posted on 01 July 2024 / 3,519 Views
Xbox earlier this year announced it was shutting down three studios at Bethesda - Arkane Austin, Tango Gameworks, and Alpha Dog Studios - as well as having Roundhouse Games merge with ZeniMax Online Studios.
Microsoft Gaming CEO Phil Spencer speaking with IGN spoke publicly about the closures stating he has to "make hard decisions that frankly are not decisions I love" and he has to "run a sustainable business."
"The closure of any team is hard obviously on the individuals there, hard on the team," said Spencer. "I haven't been talking publicly about this, because right now is the time for us to focus on the team and the individuals.
"It's obviously a decision that's very hard on them, and I want to make sure through severance and other things that we're doing the right thing for the individuals on the team. It's not about my PR, it's not about Xbox PR. It's about those teams.
"In the end, I've said over and over, I have to run a sustainable business inside the company and grow, and that means sometimes I have to make hard decisions that frankly are not decisions I love, but decisions that somebody needs to go make.
"We will continue to go forward. We will continue to invest in what we're trying to go do in Xbox and build the best business we can, which ensures we can continue to do shows like the one we just did."
The gaming industry has been hit with massive layoffs over the last couple of years with over 10,000 laid off in 2024 to date and around 10,500 laid off in 2023.
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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Nothing says sustainable like spending 69 billion and then putting those games on a $15 service.
I'm sure Gamepass pricing will be going up soon enough. Pretty clear that Microsoft's Chief Financial Officer, Amy Hood, is holding the Microsoft Gaming division under a microscope in the wake of that $69b acquisition. Microsoft's board is going to want to see a quick return on that $69b investment in Xbox, so they likely pushed for Xbox to trim the fat as much as possible, leading to the recent layoffs and studio closures. I'm sure they also pushed for the higher console pricing, and will soon push for Gamepass price increases.
And beyond CoD there's Crash, Spyro, Tony Hawk etc. Sekiro might be a longshot though even if ABK are publisher.
Then with Backwards Compatibility surely they can add Singularity and Prototype. Plus Hasbro are on record saying they want the old Transformers games added to Gamepass.
If that's the case then sure, you wonder why it's not but why don't they want them on Steam? Seems rather backwards. GP gives them no real income vs regular sales on steam, surely? Unless it's literally just they see the lump sum of MS $ as more tangible? Ah... not really important to the subject.
They previously said they are working on it. There are a couple of issues holding up the release of the Activision back catalog on Gamepass:
- Quite alot of the Activision back catalog hadn't been added to the backwards compatibility list, games from both OG Xbox and Xbox 360. Xbox had previously suspended their backwards compatibility porting team a few years ago, but seem to have recently revived them to work on adding more Activision back catalog games to the back compat list.
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Very few Activision-Blizzard games are currently on Microsoft's windows store, which Gamepass PC currently uses to access most games. Xbox has to take the time to port those Activision games to Windows Store, or enable Gamepass on other PC storefronts where those ABK games already exist (they recently did this to put Diablo 4 on PC Gamepass, you use the Battle.net version of Diablo 4 on PC gamepass). Presumably they are either currently very busy porting ABK back catalog titles to Windows Store, or negotiating with Valve or the owners of other PC storefronts to enable PC gamepass to work with those stores to access ABK games.
It seems like Xbox wants release timing parity on adding games to console and PC gamepass, so even though Xbox 360, Xbox One, and Xbox Series Call of Duty games could be made live on console gamepass right now (360 era CoD titles are already on the back compat list), most of them can't be made live on PC gamepass until they are either ported to Windows Store, or made accessible on some other PC storefront like Steam through Gamepass.
Microsoft will eventually turn all of their non-root platform products into subscriptions, and bump up the price as high as they can. By “root platform” I mean stuff like Windows and Xbox, which have effectively become retail hubs that you purchase so you have access to all the Microsoft subscriptions.
Right now, Microsoft is transforming their gaming center into Video Games 365. The difference is that Microsoft isn’t the standard like they are with other products (Office 365, for example), they’re the imitator. So really, as long as Sony and Nintendo remain the standard dedicated platforms, it will prevent Microsoft from branding the red ring of death on the economy of video game development.
I'm not the consumer they want either now that my 3 years of cheap game pass is expiring this month. My plan for now is to sign up for Gamepass for a month here a month there when a good game gets added to the service and cancel it after beating what I want to play.
Remember how everyone cheering for Microsoft to buy ABK thought Spencer was like Santa Claus with a bottomless budget and would get them every game in the universe on GamePass for $10/month? Pepperidge Farm remembers.
I certainly wasn’t and I think most of the userbase of this forum wasn’t. But I remember a surprising number of VGChartz user accounts in these comments sections were in favour of it all. I say “VGChartz user accounts” (rather than people) because most of them were not recognizable posters on this site. That makes their regurgitated MS PR that got heavily upvoted more than a little suspicious.
I’m not saying they’re necessarily bots, but certainly people with an agenda of going around video game sites to make Microsoft’s acquisitions look more popular than they actually were.
So how is it that these executives make poor decisions, but it is the developers that feel the pain in the end? How is there never any executive shakeup at Microsoft despite over 10 years of disappointing game software output and mismanagement after mismanagement?
The 360 was a one-time lucky fluke that owed its success more to Sony's mistakes than to anything MS was doing right. And they almost screwed that up. XSX. Xbone, and OG Xbox are more representative of the perpetual ineptitude of Microsoft in the game market.
Yeah, you spend 70 billion on AB but can't afford a tiny studio like Tango. Remember that promise you learned from shutting down Lionhead and would not make that mistake again. Oops, you lied. MS has infinite money. Can't maintain Tango with a "break-out hit" Such a POS. Nintendo has far less money and never shut down a studio. And look they are infinitely more successful in gaming.
He waited a fucking month to comment and only after his show got positive feedback so people would pat him on the back. Go fuck yourself, Phil. Someone needs to make the hard decision on you and Matt Booty, Incompetent assholes.
Xbox didn't spend $70b on ABK, MS did. MS also decide what operating budget Xbox is allowed to use and if MS reduce this budget, Xbox have no choice then to take action on it.
The current industry wide trend is caused by investor reducing their investment in video game as a result of a downward shift in growth expectation. MS, Sony, and pretty much all the industry save a few have no choice then to act accordingly. That's crappy for sure but it's the way things are.
Nintendo is currently not experiencing contraction because.
1) they didn't go on investment spree during the Covid craze
2) they maintained way higher ROI than (Xbox 12%(2022), Sony <7%(2023)) with ~20%
Closing their only asian studio is not good idea. Asian developer is booming right now. Japanese games is having renaissance, korean and chinese developer now starting to make quality console games
Gross. If you can’t protect talented Studios who win you awards and have high praise, ( more Prey than obviously Redfall ) then you’re the problem Phil Spencer, same with Matt Booty.
That a small team like Tango isn’t sustainable is complete garbage. More BS from Spencer.
Translation: "I have to run an infinitely growing business."
Guy knows nothing about a sustainable bussiness, xbox was never as unstable as it is now .
The key word in what he says being "growth". It's not enough to make a profit, they need to always make more than the year before. If it was just about being sustainable, they likely wouldn't have had to fire anyone and they still would have massive amounts of money, but that's just not enough.
Did anybody else think he seemed overgeared in the Ryan McCaffrey interview after the showcase, like either he had two glasses of champagne on an empty stomach before it, no sleep and two double shot espressi or was just full of adrenaline after how the showcase went (or a combination of these)? He also said something like "there are more Xbox console players now than ever before", can anybody factcheck that? I mean, if he does add up all people still alive that at one point in time owned an Xbox it's obviously true, but I found it hard to believe with current console sales that even with the people still using their Xbox one combined with current Xbox series users it could beat the haydays of the 360.
Everybody was happy with the Zenimax Bethesda family acquisition for a brighter future
And then the ABK acquisition for a better future...
If the better future was the chopping block,
Toys for bobs totally yetted out of there before the inevitable lol
The games where not profitable, thus we closed both of them. We only keep studios that make s profit. We take no responsibility that this game was not marketed at all btw. Ninja theory is next.
Microsoft wouldn't be one of the most valuable companies in the world if it didn't know how to manage. They know how to make money, so I won't be the one to give an opinion on what's best. Phil is the executive of one of the largest gaming divisions, he is supported by several experienced analysts.
From my point of view, I find the dismissals extremely sad, just as I find the decision of a commander to send soldiers to the front lines in a war sad, but someone has to be the villain, someone needs to generate profit or achieve goals and objectives , someone needs to devise strategies to achieve these results, as even Phil Spencer and Satya Nadella are just numbers from Microsoft's point of view, but more difficult to fire from the company.
I know you're going to hate my comment, but no company is good, no company will give up its profits in exchange for keeping jobs. We ourselves do not give up some comforts for the sake of the environment, you buy a Chinese product without knowing whether the working conditions are adequate, we purchase jewelry and other products from Africa, South America and other places without knowing whether the origin of those products is legalized, therefore, I sometimes see it as hypocrisy to make a company a villain, while others practice much worse practices.
Being good at one thing doesn't mean someone is good at everything or anything else. They've been in the video game industry for a quarter century now, and they've been floundering practically the whole time. When Microsoft runs up against real competition, they struggle. See also: their disastrous foray into the smartphone market, where they made a multi-billion dollar investment in Nokia and then lost it all less than a year later. The fact is, if it weren't for the parent company's checkbook and Microsoft's desire to impose its presence upon every facet of people's lives, Xbox would have gone the way of Sega and Atari ten years ago.
Xbox does not know what the hell it is doing. Throwing more money at the problem was never going to solve it.
You are trying to deny an entire story... no one is rich by mere coincidence, no one makes money by being completely honest... companies get rich from the misfortune of competitors and taking risks and opportunities, people get rich by taking risks and opportunities, mainly, when we deal with the stock market, because in one period the company may have its shares falling and in another period it may have its shares rising, in addition, those who were pessimistic may have sold their shares and missed a good opportunity to see them rising and bringing more dividends.
Microsoft lost the mobile sector due to two main factors:
1) Late entry into the mobile market, that is, IOS and Android were already consolidated, and even with excellent hardware there were no apps to make Windows Phone attractive. I can talk about Windows Phone, because I had two devices, and both of them fell out of my hand, one of them dived into the pool and still kept working, besides, the cameras were great for the time.
2) Lack of investment by the company. The late entry would require large investments from Microsoft, whether in the area of R&D, marketing, or the development of partnerships with app creators, in other words, would all the effort yield the expected return?
Microsoft's gaming division finally seems to be being managed... tell me about a Sony event where in the same year it announced more than 10 first party games? I'm not talking about external partnerships, I'm talking about internal studios. The Playstation was huge on the PS4, but this generation I can't see Sony appealing to me. There are many remakes, remasters, but let's be honest, it's the multiplatform games that make us use the console most of the time...
How is Xbox being managed in any way when they posted two consecutive -30% hardware revenue effectively selling -50% of what they did two years ago.
Microsoft Corp. today announced the following results for the quarter ended March 31, 2024, as compared to the corresponding period of last fiscal year:
· Revenue was $61.9 billion and increased 17%
· Operating income was $27.6 billion and increased 23%
· Net income was $21.9 billion and increased 20%
· Diluted earnings per share was $2.94 and increased 20%
Business Highlights
Revenue in Productivity and Business Processes was $19.6 billion and increased 12% (up 11% in constant currency), with the following business highlights:
· Office Commercial products and cloud services revenue increased 13% (up 12% in constant currency) driven by Office 365 Commercial revenue growth of 15%
· Office Consumer products and cloud services revenue increased 4% and Microsoft 365 Consumer subscribers grew to 80.8 million
· LinkedIn revenue increased 10% (up 9% in constant currency)
· Dynamics products and cloud services revenue increased 19% (up 17% in constant currency) driven by Dynamics 365 revenue growth of 23% (up 22% in constant currency)
Revenue in Intelligent Cloud was $26.7 billion and increased 21%, with the following business highlights:
· Server products and cloud services revenue increased 24% driven by Azure and other cloud services revenue growth of 31%
Revenue in More Personal Computing was $15.6 billion and increased 17%, with the following business highlights:
· Windows revenue increased 11% with Windows OEM revenue growth of 11% and Windows Commercial products and cloud services revenue growth of 13% (up 12% in constant currency)
· Devices revenue decreased 17% (down 16% in constant currency)
· Xbox content and services revenue increased 62% (up 61% in constant currency) driven by 61 points of net impact from the Activision acquisition
· Search and news advertising revenue excluding traffic acquisition costs increased 12%
Have you ever wondered "why" Sony has an installed base almost three times larger than the XBox and has a revenue difference of just US$10 billion? Do exclusivity and console sales matter that much?
The console market is stagnant, the PS5 is struggling to surpass the PS4 and is already in the middle of its useful life. People do not need to have an XBox console to consume an XBox division game. It's great to see percentages, but how much is 30%? What is the real number? If I sell 100/month and have a drop to 70 units, it's 30%, if I sell 1,000,000/month and have a drop to 700,000 units, it's 30%. The manipulation begins when a vehicle does not include absolute numbers and percentages, as it gives another view of the article.
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