Phil Spencer Doesn’t Want To Sell You A Games Console

Phil Spencer doesn’t want to sell me a new console. He says that and I believe him.

That charming man. That lovely fella.

When you write about Phil you’re tempted to refer to him by his first name. I wonder why that is.

Is it because he’s the E3 guy? The professionally affable, smooth talker with a gaming shirt beneath that sports jacket. Smart casual Phil. He’s one of us, right. He uses the word “gamer” a lot. He wanders the halls of the EB Expo and people want to talk to him, they stop for pictures. It baffles Phil, but he never says no.

Just before our interview he’s stopped in his tracks. A selfie or two later and we’re on a couch. A set up built for video interviews. Designed to look like a casual space where casual conversation takes place. Phil looks comfortable here. At the very least it’s a scene he recognises.

“I see the gamer at the center,” he tells me.

It’s easy to be cynical about a man like Phil Spencer. He works for Microsoft — a Microsoft in recovery. When Phil Spencer took over the top job from Don Mattrick, Xbox as a division was in a strange place — that was the perception. The Xbox One: a mainstream experiment gone awry. Kinect, always online, product decisions that were made then swiftly unmade. From the outside in the Xbox One felt like Microsoft’s version of the PlayStation 3 — a bloated reflection of a division whose mouth was bigger than its belly. A console with delusions of mainstream grandeur.

You always got the sense the vision for the Xbox One was one that stretched out from its core to something grander, something just beyond reach. But Phil Spencer’s reign has been different. One might characterise his leadership as a calculated contraction. He’s not abandoning a platform (or that expanded market) more like securing home-base. Home-base being the people that play video games. Home-base being you and me.

That’s been the story of the Xbox One over the past two years.

“We have to start from who our customer is,” explains Phil.

And that story really begins with the console itself.

The year 2016. Personalised technology. Mobile phones and tablets. The looming potential of virtual reality and augmented reality and powerful PCs and Smart TVs.

How strange that, in this environment, the video game console still exists.

To Phil it’s all about the perpetual relevance of the television.

“The way you play games today is you plug this dedicated device into your TV. I sit 10 feet away with a controller in my hand.

“That communal large screen gaming experiences that exist on the TV as it exists today has a long future.”

The success of both the PlayStation 4 and the Xbox One, believes Phil, is proof of the continuing relevance of the console as device right now. The relevances stretches towards an unknown future.

“I think it will be a part of that future for a while.Are there different ways for that content to get to my TV? Maybe. But right now the easiest way to do that is to go and for a few hundred bucks buy a games console and plug it in.”

In relation to the devices that currently dominate our modern lives, the console is something of an anomaly. In 2016 the personal device is king. The mobile phone, the tablet, the laptop — devices that belong to us and reflect our passions and interests. In that sense consoles are unique. They are stationary, they are plugged into our television and forgotten about. We personalise our controllers, they come in red and blue and every possible colour you can imagine, but the console itself? The console is designed to disappear.

“It is this device that I plug into the wall and I never really look at,” says Phil. “My phone is always in my hand, it’s always with me, the laptop is the same. But the console — it turns on, it might make a noise when it turns on but it just sits there.”

If there’s an elephant in the room it’s this: the console as multi-media device. Considering the Xbox One’s initial vision for the Xbox One, and the public backlash to that vision, there’s a statistic that Xbox One always seems reluctant to brag about: in terms of hours spent, Xbox One users spend just as much time watching (on YouTube, on Twitch, on Netflix) and they do playing.

I suggest to Phil, if that’s the case, why do people get so angry when we talk about consoles as devices for media consumption — for TV, for Music. Isn’t there a dissonance at play here? We’re quick to complain when the narrative shifts from video games, but the cold reality: there’s a 50/50 split here.

“That’s a hard one for me to answer,” admits Phil. “Our first customer is someone who is primarily going to see this device as something that plays games. I can get to YouTube from many devices. I don’t need a console to watch YouTube or Twitch.”

That’s part of the issue, Phil believes. The idea that all devices do everything and, today, the major differentiator for the Xbox One is video games.

“There’s was some question about our motivation,” says Phil, “if we still believed in gaming. I think that’s a Microsoft question. I’m really proud of the work the team has done over the last two years to answer that question. To say look, we’re going to drive this as a team putting gamers needs at the center of our decision making process. We want to know the role gaming plays in their life and build Xbox and Xbox LIVE around that.”

When designing the Xbox One, the question: how do we take a home console to that broader audience. The most successful home console ever was the PlayStation 2, which sold around 140 million units. How do we get a console to that point and beyond? That purpose explains the Xbox One’s focus in the beginning, but the goal posts have shifted and, as a result of that, so has Microsoft’s approach.

Phil Spencer calls it a ‘pivot;.

“There’s been a pivot towards Xbox LIVE when we think about numbers,” he says. “Not because I’m trying to hide from a comparison with PlayStation, but hundreds of millions of people have cell phones. That’s not gonna be true of game consoles. It’s not even true of PCs.

“We want create a service that can reach you wherever you are. We want you to choose where you want to play.”

Phil is talking about PCs, he’s talking about mobile. It speaks to a secondary Microsoft purpose — the idea of fluidity between devices. The idea that the device disappears and the service itself takes priority. Phil believes this is the philosophy that will push consoles through that glass ceiling, towards those stratospheric mainstream numbers. Then we see the domino effect of that shift. The end result: more video games and better video games.

“Instead of trying to say is there a way for everyone to need a game console — I don’t think that’s true. It’s a large market and it’s a good market, but we can’t turn consoles into something like a cell phone.

“But if we look at the people who are playing games on our service at any point. A lot of them are on consoles, a lot are on windows. More and more are coming from phone. That’s when we start to look at numbers like 200 million, 300 million.

Is this a world where the console, as a fetishised product we purchase and worship, is dead?

Not exactly, says Phil.

“The device becomes the ‘on ramp’ to where I play,” says Phil. “I want there to be multiple on ramps.”

Gaming without boundaries. That’s the tagline. That’s the marketing schtick. It’s also the end goal.

But is this a vision at odds with the fact that Microsoft announced not one, but two consoles at E3 this year?

Is this vision, the idea that the console disappears into your entertainment unit and all that’s left is the ‘service’. Does that make sense with an Xbox One S and an Xbox Scorpio releasing within (most likely) six months of each other? Does that obscure things.

No, says Phil. These consoles are merely a response. To two things: the consumer and their needs relative to the technology consoles interface with.

“I don’t need to sell you a new console every year,” laughs Phil. “In fact you could say it hurts me if you buy a new console every year!”

To be clear, the console market operates at low margins. Quite often those margins don’t exist. More often than not there’s a clear operating loss.

“Consoles are an enabler to make money with our partners,” explains Phil.

So what is the Xbox One S? Simply put it’s an attempt to redefine the original Xbox One in the face of consumer feedback. What is the Xbox Scorpio? A direct response to the increased uptake of 4k televisions and a customer base desperate for games that take advantage of those increased resolutions.

It’s essentially Phil’s job to see what’s happening out there in the wide world and respond to it quickly, efficiently and at a price point that consumers feel is palatable.

“We’ve got no set timeline on when we need to sell you the next console after Scorpio,” says Phil.

“We look and say, are there important consumer features? We looked at 4k TVs, we could see the uptake in 4K. People want to play at higher resolutions, higher frame rates — but the next thing after that? I don’t know what it is yet!

“I don’t need to give you a reason to buy a new console every year. In fact, I don’t actually want to!”

Phil Spencer has a few regrets. He’s happy to discuss them. Backwards compatibility is one. In keeping with the idea of games as a ‘service’ and the ‘without boundaries’ philosophy, he believes that backwards compatibility is something the Xbox One should have had at launch.

“From an art history perspective these games have a story to tell,” he says. “You can go back and watch old movies. Gaming has that same history. It bums me out when consoles go away and the content also goes with it.”

PC gaming is another. It’s bizarre, he says, that a company like Microsoft has had so little to do with the rapid growth of PC gaming in the last decade.

“Our customers were there and we weren’t,” he explains. “We have work to do.

“Thank goodness companies like Valve and Blizzard have done such a good job there, but I think we have something to add. I want to be part of that, so we’re doing that work.”

But where do consoles fit into that vision. Are consoles still at the centre of Microsoft’s Xbox division?

“This might feel like a PR answer, but I see the gamer at the center.

“We want to make sure we’re creating a platform that enables consumers to flow where they wanna flow. Console is critically important there, but the customer is the one at the centre. They decide.”

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