September 21, 2022 • 43 mins
Emily Chang interviews Microsoft Gaming CEO Phil Spencer in the latest Studio 1.0
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Speaker 1 (00:00):
So I think the last time we saw you talked
your son was playing minecraft. Yes, yes, minecraft, he does
do some good because of you. We have an Xbox,
but we have not graduated to minecraft on the console.
You know, because I've talked to you about my own
sort of fear of kids playing too much, and a
(00:21):
friend was try to think of it like he's it's
like a painting, like show it. Asked him to show
it to you like, like the same way you would
treat a painting. I want to see what you made. Yeah,
that's right. So make it a family thing. Hi Everyone,
and welcome to this edition of Bloomberg Studio. One point out.
I'm Emily Chang. He's in charge of one of the
top gaming consoles in the world, Microsoft xbox, a sixteen
(00:45):
billion dollar business home to minecraft, Halo and perhaps soon
call of duty if a seventy billion dollar deal to
buy act division goes through. The executive behind that deal
is Phil Spencer and if he has his way, he
helps the gaming industry will level up in the next
twenty years and be less a battle between rival consoles
(01:06):
and more a home to platforms that reach every potential
Gamer on the planet. Joining me on this edition of
Bloomberg Studio at one point. Oh, Microsoft Gaming CEO, Phil Spencer,
(01:27):
so great to see you here in person. It's great
to be here in person things. So we're gonna start
by going in the way back machine a little bit.
Uh Did some research. You worked at a computer mart
in Vancouver, Washington, where you were selling and playing a
lot of computer games in the eighties. I'm thinking like
stranger things, stranger things resonates with my definitely growing up,
(01:52):
my inner geekdom is there. was there punk hair or
weird outfits or I definitely had long hair at the time.
Drove my forward pinnow my Blue Ford Pano. Funny thing
is my my wife of thirty one years this year.
We were together in high school, so she still remembers
those days and she's like, you just haven't changed. You're
the same punky kid you were back then. I just
(02:14):
video games a little bit bigger now, but it's kind
of the same thing. I'm going to need some photographic
evidence of this. What were your most played games in
the eighties? Uh So, it's funny. When I started growing
up playing video games, most of it was going to
the arcades. Now most people won't remember these days of
like going to a store where you put quarters in play.
Robotron was one of my favorites in the arcades. I
(02:35):
would go play that and then probably more in the
seventies and the Eighties, I remember my dad bringing a
video game, the Atar, with the cartridges home, and that
was kind of the beginning of it and I just
kept playing and it's still with me. What was it
that you got from games? You know, I think at
first it was just like I was a kid who
(02:59):
read a lot of comic books, Played Dungeon Dragons, like
it was just kind of watch those movies and it
was just kind of in the in the space of it.
When I started working at Computer Mart, one of the
things I haven't talked much about this, one of the
things I did is I ran our bulletin board service,
which is where people used to dial up on the phones,
if you remember those, like the kind of whistling noise,
(03:20):
and people would log into our bulletin board service at
Computer Mart to see like what was going on with
computer games at the time and that kind of sense
of community, of people seeing this as a hobby as
much as it is just kind of entertainment. And then
seeing it grow to kind of online games and other things,
that sense of community and bringing people together. Something's always
just stuck with me about video games. You started out
(03:41):
at Microsoft as an intern Um. How would you compare
Microsoft's history on Games under Bill Gates versus Steve Baber
versus such a Nidela? Yeah, I think like many things
at Microsoft back in the eighties we started in video
(04:02):
games as much out of kind of a defensive we
were worried that other companies might be putting the home
pc in place and the avenue to get there was
through video games and game consoles. So we say, okay,
WE'RE gonna go start our own game console because if
anybody is going to build a computer for the home,
we wanted it to be Microsoft. I think through Steve's
years it was more about growing the business and how
(04:23):
do we bring kind of business leadership into this group
of rag tech people who are out there just having
fun building video games as part of Xbox. I think
with Satia, when I first took this job and I
got this job as head of xbox, about two months
after Satia Nadella became the CEO of Microsoft. Well, and
when Sata started there were activist investors targeting the company
(04:44):
stock hadn't been doing well. They were targeting xbox. Absolutely, yeah, yeah,
and somehow you convinced Sacha to double down on games
at the time. Absolutely right that there was a question
of why are we in video games? In fact, one
of his first questions to me was because he had
come from the cloud part of the business being and
(05:06):
then cloud was he didn't actually understand why we're in
video games, not as a negative, just as literally, why is?
Why is Microsoft this at the time what one trillion
dollar Market Cup company. Why are we in the video
game business? And he he challenged us like, let's go
figure out why we're in the video game space and
see if it makes sense and if it does, let's
be all in and if it doesn't, we'd make other decisions.
(05:28):
Early in that journey is when this game, which I
know you know about, is minecraft, and the opportunity to
acquire minecraft came about like months after this moment. So
I might have a kid or two that pays minecraft. Yes,
and it really caused us as a team to think about, okay,
if you're gonna go spend two and a half billion
dollars on this blocky Java base game. How does this
(05:49):
fit into the mission of this company? I'm gonna sit
in front the Board of Microsoft and explain. Here's this
game written by this one person in Stockholm, Sweden, that
we're going to go spend billions of dollars on. How
does it fit into the where Microsoft is going? Um,
and it was a great kind of because it happened
so fast. It was a great, just concentrated effort to
(06:10):
build a strategy that we saw around video games and
we're still here. Let's talk about that strategy. Was the
idea to tie gaming to the cloud? Was that the clincher?
We started from the industry itself. We said, okay, what
do we see going on in the games industry and
do we think Microsoft has a capability to play in
where gaming is going and the things that we saw
(06:31):
through minecraft wasn't there at the time, but I know,
like roadblocks is familiar in your household, is today people
play the biggest games on any device. Like if you
think about a game like minecraft or fortnite or roadblocks,
these are games that play on IPADS, they play on Xboxes, playstations, PCs.
That games were going from per device to per user
(06:53):
and cloud would be an enabler for that. But we
didn't start with how do we fit cloud into video games?
We were just kind of watching the trends of eiders
and where they were building and saw this transformation of
games being ubiquitous. How does this all, as you see it,
connect to Microsoft's future? The cool thing I see going
on now, and it does fit with the investments Microsoft's
(07:16):
making an Azure in other places, is today the world
anybody is a creator in the world. Anybody with a
camera can create content. Anybody who can record their voice
or record themselves playing an instrument can become a creator.
And Video Games are going through that same transformation where,
if I rewind to my childhood and playing video games,
I walked into like an egghead software and there was
(07:37):
a line of boxes and as a creator, if you
and I wanted to go create a game, we might
go create the best game in the world, but there
was no way for us to get it in front
of an actual person who might want to go play
because we couldn't get shelf space. All these things. Today
we see gamers on our creators on our platform from
all over the globe who can create a game that
(07:57):
can literally reach billions of people through our distribution capability
and that game sits in the lineup right next to it.
Like you take ten people in Slovakia. It's true, lute
rivers a game on our platform. Ten people in Slovakia,
they can put that game on Xbox and build an
xbox game. The game will sit right next to the
biggest budget games out there. FIFA A low call of duty.
(08:18):
It just sits there. To A to a player, a
game is a game and you can deliver that game
through the cloud to anybody who has a device that's
capable of reaching the Internet. I hear you're still an
avid gamer. How often do you play games? Like, how
many hours? I go to bed early, so I gotta
BET at ten at Seattle, at ten o'clock. People who
play with me online they tease me about how militant
(08:39):
I am. At ten o'clock I'm out. I probably play
fifteen hours a week, I'm guessing. Now my children, two daughters.
They're out of the house now. Um, my wife and I, Kelly,
have been together for a long time. She likes movies,
since I'm not a big movie watcher, so we kind
of do our things and then we we have our
places that will go. I was playing last night. I
(09:01):
was playing escape room with a friend of mine in
New York City. I hear you play at work too,
like that's totally work. UH, yeah, I mean, I, uh, it's,
as I said, like I think I've been and luck's
really not the right word, but I'm privileged enough to
end it up in a position where I get to
(09:23):
do something I really love, Um and match something I
care about and the capability that I see in games
with just who I am. You are also behind some
of Microsoft's biggest gaming deals, and you mentioned minecraft at
two and a half billion dollar acquisition. Of course, activision
we're waiting on. Talk to us about your act your
(09:45):
talk to us about your acquisition strategy. How do you
find in size up a good target? I'd say early
on we had gone through a time prior to satia
becoming CEO where we had downsized a lot of our
student yeos out of kind of business necessity. So at
first it was how do we just get more creative
(10:06):
capability inside of Xbox? So early on it was about
investing in creators that we knew who were kind of
at the forefront of thinking about some innovation once I
felt like our studios organization was back to the capability
that we needed, then we thought about unique capability to us.
(10:26):
You see creation modes in Halo. You see creation modes
and flight simulator. You see us learning from things that
we've we learned from the minecraft team when they came
in Um. One of our other acquisitions was a company
called Xenomax, which has a long history and PC gaming
and you would think Microsoft would understand windows gaming, but
we kind of lost that DNA in the organization as
(10:48):
we focused on console. So bringing in xenomax and really
hearing from a lot of teams that were kind of
native to pc gaming and what they were what they
cared about it was very, very important. So we're thinking
about new additive creative capabilities to our studios organization that
hopefully makes our platform better. As I understand that you
do your own deals. You don't necessarily need permission from
(11:10):
Sacha to do a deal. Is that true? Now? There's
there's definitely. It depends on the amount of the money
and the deal. But when we think about some of
our bigger deals, we go to the board Um and
so Sati Nadella Amy Hood, the CFO have been incredibly
supportive Um and the board has like when we go
to the board and we talk about this space, I
(11:32):
mean as Xbox were one of the biggest consumer businesses
in the company. Were a brand that makes Microsoft relevant
to a whole generation that probably doesn't think about a
lot of other Microsoft products in their day to day life. Well,
you're in the process of a potentially monster deal, seventy
billion dollar acquisition of activision. Talk to us about how
(11:53):
this deal came together when we were thinking about on
that idea of what are we capable of doing today
and where do we need to go? The biggest gaming
platform on the planet is mobile phones. UH, one and
a half billion people play on mobile phones and I guess, regretfully,
(12:13):
as Microsoft, it's not a place where we have a
native platform as gaming. Coming from console and PC, we
don't have a lot of creative capability that has built
hit mobile games. So I know it's it's not the
focus of a lot of attention on activision, blizzard king,
but I'd say that the king component of it, of
what they've done with candy crush and the learning that
(12:35):
they have around mobile. They've taken some of their biggest
call of duty and Diablo franchises to mobile and and
done well. We thought that was a really interesting capability
of what they had. The one thing about the video
game space is if you've been around, maybe too long,
you know most of the creators out there, so you
kind of know teams. That could be a good fit
(12:56):
in terms of what we were trying to do. But
we really started the discussions internally, at least on activision blizzard,
around the capability they had on mobile and then pc
with blizzard. Those are the two things that we're really
driving our interest. Big Tech is under a lot of
regulatory scrutiny. Big Tech deals are under scrutiny. What's the
status of the deal? What have your conversations with regulators
(13:18):
been like? You know, I kind of come at this
that big deals should be scrutinized right. I think that's
the role of regulators, why they're in place. I feel
good about the progress that we've been making, but I
go into the process uh supportive of people who maybe
aren't as close to the gaming industry and what the
dynamics are asking good hard questions about okay, what is
(13:43):
our intent? What does this mean? If you play it
out over five years. Is this constricting a market? Is
it growing a market and just being transparent about the
things that we care about. We care about choice. We
care about people being able to play where they want,
when they want. Clouds an important part of that. I
think about business model diversity and we brought in subscriptions
(14:03):
to a retail model. You have free to play games
that do really well. We think the multitude of business
models is an important consideration as well. So sitting down
with regulators and having discussions about our long term vision
of there are three billion people who play video games
on the planet, which is crazy. It's like half the
world's population nearly plays video games and we want games
(14:24):
that can reach all of those people under an economic model.
So you're confident the deal is going to happen. I've
never done a seventy billion dollar deal, so I don't
know what my confidence means. I will say the discussions
that we've been had, that we've been having seemed positive
and we're actively engaged in the conversations, trying to be
transparent about what our motivations are, but I feel good
(14:45):
about it. Microsoft had its time in the antitrust spotlight.
Now the spotlights on Google and Meta and apple and Amazon.
How is it that Microsoft is skirted the spotlight? Your
competitors might say it's unfair. Well, I think your point
about US having grown through that time, I might call
(15:06):
that the adolescent ears for us, as we were kind
of learning. I think it's an important consideration that we
did learn a lot as a company through that time
and what it meant, and I think that sticks with
us today. And I think the transparency of our business model,
our longevity in the market grown through our adolescent ears
and the stuff that we learned has been important and
(15:27):
how we show up, and I also know the team
does a lot of work to continue to share our
views on things and as a company and make sure
that we're public about what we stand for. You've been
a really big advocate of cross platform play and this
idea that Gamer should be allowed to play whatever games
they want on whatever platform they want. Why is that
so important to you? I think about the industry growing
(15:51):
and if I think about maybe you happen in your
household to buy an xbox and I buy a playstation
and our kids want to play together and they can't
because we bought the wrong piece of plastic to plug
into our television. It just seems that these artificial constraints
that the industry might put up for near term kind
of business dynamics in the long run. If you take
(16:13):
a business that is at three billion people, growing to
four billion people over the next decade, and saying how
do we continue to grow this business, reducing friction for
our customers has, as an industry, has to be at
the top. If I think about reducing friction, safe and secure,
so when our players are online they have the experience
that they should have and they want to have that.
(16:33):
Parents feel in control of what the of the experience
their children are having. So how far does this go?
Does this mean that activision games that call of duty
you'll be able to play on any platform and perpetuity? Yeah,
we've we've made the public commitment that we want call
of duties specifically to be playable on other platforms the
platforms it's on today. Most people specifically asked about playstation forever. Forever.
(16:57):
I don't like, I don't know what that means in forever,
like when you think about how long, and it's not
for any kind of nefarious business reason, it's just like
what do we even platforms mean ten years ago, like
I think the definition of some of these things might
change over time, but our expectation is we want more
people to play and if you look at our history
through the acquisitions that we've done, when we bought minecraft,
(17:18):
we increase the platforms it was available on. We didn't
decrease it. We added it to the switch and brought
it to other places. The other minecraft games that we've launched,
minecraft dungeons, minecraft legends, have come to the switch and
playstation like. When we have games that are on other platforms,
even kind of near term competitive platforms, we want to
support those platforms and continue to grow the user base
(17:39):
there and make those customers happy. We we haven't pulled
games away from players that are playing those games today.
And what about the reverse? Will Sony exclusives be available
on Xbox? Not a question for like that I can answer. Um,
I do think over time the idea of exclusive of
(18:00):
a game for one device is something that we're just
going to see less and less of. I mean we
made the decision a few years ago that when we
launch any of our xbox console games, they're available on
the same date on on windows, and that was kind
of blasphemous at the time of what. No, these games
are supposed to be the things that cause people to
have to go buy an xbox. Why would you make
(18:22):
them available on windows at the same time? In fact,
we went so far that if you bought the xbox version,
you got the PC version as part of the entitlement,
like you could. You could play the game on both
platforms and then cross play and cross save and things
that you were talking about Um and I think the
industry and more and more is going to go in
that direction and I think it leads to better games,
because if the business is growing and there's more users,
(18:42):
creators will take more risk, they'll try new, unique things.
So I know you're working with Sony on some things
for the benefit of gamers. Can you talk to us
about that a little bit? Where do you think your
relationship with Sony will be in a number of years,
like what are the hard things to work through and where? where?
Where do you draw a line? Where do they draw
(19:03):
a line? I think in the in the near term,
we're a big publisher on their platform. When you think
about minecraft and games that we have, death loop and
ghost wire, where Games are studio shipped that because of
contractual things, were only on playstation when we launched. So
we have we have a pretty big publishing footprint on
playstation as well as Nintendo, which means we have good
(19:25):
relationships with those platforms because we're they're a big part
of our business and we're a big part of their business.
I think our long term ambition of where we see
this industry growing is also shared. When you think about
people should be able to play games in more places,
things like accessibility, things like safety, we find a lot
of common ground. I think the area where things get
(19:46):
stuck a little bit it's in the kind of near
mid term competition. If somebody walks into a store and
they have one bill, they're probably going to walk out
with either and they want to gaming console. They're either
going to walk out with a switch, which is what
most people buy, or they're gonna walk out with a
playstation five, or they're gonna walk out with an xbox,
(20:07):
or maybe somebody will go buy gaming a windows PC.
But in that world of somebody's got to make a
decision for one platform over another in the beginning. Um,
that is where I think we we get stuck in
some of the kind of near term competition. I don't
think that's bad. It's just the dynamic of each of
us pushing each other Um to build the best product
for our customers. Now, while you've been working to make
(20:28):
the gaming industry more collaborative, the gaming industry has historically
been tough for women, for diverse voices. When you look
back on game or gate, do you think you did enough?
Do you think Microsoft did enough? I can always look
back at any incident for me and think about things that,
in hindsight, I should have done more, I should have
done better. It's just Um. I'm I'm proud of how
(20:50):
our team evolves, how our leadership team evolves, how we
do I mean there are mistakes that happened on our
own teams all the time and our our teams learned
from this and they grow. The thing I love is
the intent of the team, the intent of the team
to get better. But I think you point out their
societal issues around us. The gaming industry is not kind
(21:10):
of immune to those. Um. There's a history and video
games of, as you say, kind of being a male industry,
perceived that way and a reality of that way. People
in my position sitting there as kind of old white
guy as head of gaming platforms, not in I'm more
the norm than I should be. I talked about three
billion people who play video games and if you say
(21:31):
your cut, your audience, is three billion people, then the
demographic is the planet's demographic right there. It has to
be when you get to those kind of numbers. Three
billion people playing video games. A Gamer is a human
uh and our I want our team to reflect the
customer that we aspire to earn. I know that our
teams ship their culture with every product that they shift,
(21:52):
whether it's front and center on kind of obvious decisions
that we make or almost subconscious in what we do.
So our teams have to reflect the customers that we
want to earn, from the leadership team at Xbox all
the way through those teams. And those voices not only
have to be there, they have to be heard. They
have to feel safe where they can do their best
work and that's a journey and it's a journey that
(22:16):
we're on, I think forever more at least I will
be in terms of my career. Well, activision specifically is
facing a lot of challenges here. There have been lawsuits,
there have been employee walkouts. There have been accusations of
sexual harassment, sexual assault. How much did that concern you
when you're thinking about this deal? We had access to
data from the company before we we announced the acquisition
(22:38):
to see what the actual numbers were in terms of reports. Um,
we definitely, as a team, signed up to say, just
like we're on our own journey with Xbox, that we're
going to expand that journey if this deal closes. It's
a lot of people and a lot of people that
will feel very dedicated to and committed to to building
a great workplace environment for them. That's true of any
of our studios right but it's obviously a com versation
(23:00):
that you're going to have. You think about the board
of Microsoft and when they're thinking about the deal and
they're typing into their search engine activision, what are the
headlines that they're coming back and there were questions that
we had. We've learned from this, we will continue to
learn Um and we're committed to that that journey, not
only for the betterment of our teams but our customers,
the creators on our platform. We think it's critical to
(23:21):
our business success that we make progress here. Is Bobby
Kodak going to stay on? Yeah, I'm not in a
position to make comments about their leadership team. Were in
the regulatory phase and and how that will close, like
when the deal closes, then we have say and how
they're managed and how it goes, but until that point
I'm not really in position to say. There have been
(23:43):
very specific allegations of bobby being aware of things, uh
that happened and not reporting it to the board. What
has he communicated to you about what he knew what
he didn't know? The discussions we've had were about the
team's where they're at. Can they make the progress they
(24:04):
need to make, because the closing is a long process.
Are they putting in the work that they need to
put in two move along their journey, and I believe
they're committed to that. When I look at the work
that they're doing now. There's always more that can be done,
but I believe from the studio leaders there that I
know very well, some of them former xbox members, that
(24:27):
they're committed to this journey as a as a company,
and I applaud that. Regardless of the deal. I applaud that,
but obviously as somebody WHO's looking forward to getting to
work more closely with them. I definitely applaud it. So
what's your plan for merging these two cultures and navigating
some of these challenges? Every creative team has its own culture.
(24:49):
One of the discussions, and I think about even the
culture at Xbox, is we are a culture of cultures.
Teams reflect the creative work that they do. So if
you went from the minecraft team team to the halo team,
that those teams, those teams feel different when you walk
into the studios because they're working on different things. And
so when I think about the teams that they have,
(25:11):
teams that we've worked with at a high level, because
they all, most of them, ship on our platform, I'm
actually first interested in hearing from them and where do
they aspire to be culturally and helping support them along
our journey. I don't think there's something that they plug
into as much as let's get aligned on what our
goals are as teams and how can we bring capability,
(25:32):
our own learning and resources to help them. activision has
divisions that are unionizing. I don't know. Microsoft has said
they'll recognize those unions. What does that look like? I've
never run an organization that has unions in it. So
but what I can say, and working through this, is
we recognize workers needs to feel safe and heard and
(25:55):
and compensated fairly in order to do great work. We
definitely see a need to support the workers and what
the outcomes that they want to have. So we shared
that right. We shared it publicly, our intent Um, because
we wanted to make it clear to anybody who's looking internally,
most important thing for me are the members of those teams,
(26:17):
what our intent was post acquisition. So we thought it
was important to make a public statement on that front
for workers that are there that are making decisions about
their employment and how they want to know what that
relationship looks like to understand what it would mean if
Microsoft was able to close the deal. In general, there
are concerns within the gaming industry about crazy work hours.
(26:38):
It's the crunch, I believe it's called Um. So you
know what, if this goes farther, what if xbox employees
want to unionize, would you welcome that? And what? What
role do you think unions will play in the future
of the gaming industry in general? Yeah, I don't know
the answer to the second question, Um, and it'll it'll
(26:58):
I'm curious to learn as we grow. In terms of crunch,
I think that's an important one. I've been in this.
I've been at Microsoft, as he said, since N I
started as a software programmer. I've worked on Xbox for
twenty plus years. When I think about the environment on
any of our teams, I build from a perspective of people,
of building a workplace where people feel like they can
(27:20):
do their best work in a sustainable way and they
could see this as a long term career for themselves.
So if xbox employees decided to unionize with Microsoft support,
that we knew. We made the public statement that it was.
It wasn't that it would have a broader impact than
just the impact at what would potentially happen on the
close of activision blizzard. So let's talk about some of
the broader trends. You and I talked a lot during
(27:41):
the pandemic gameplay surge. During the pandemic we were all
stuck at home. Has that changed? It has changed. We've
seen gameplay hours come down a bit, which I will
say I think is a good thing. People should get outside,
people should moderate long term growth trajectory for the business
is incredibly durable and strong. You have adults now that
(28:02):
have grown up playing, like myself, and it's become a
more normal part of of how people entertain and how
families spend time. As the economy has has tightened for consumers,
as gas prices are higher, people are worried about what
what their home economic situation looks like, we're seeing gameplay
hours kind of stay strong because I think from a
(28:23):
value perspective, gaming is a good value for people at
a time of kind of economic constriction. People bought minecraft
that can continue to go play minecraft. What about supply chain?
What challenges are you still seeing? Are All the consoles
that you want to have made in time for the
holiday is going to be here? I still think demand
will outstrip supply for us this holiday. Specifically on our
(28:44):
consoles we have to in market. We have a series S,
which is our lower cost. That one's easier to produce,
so you can find that one in the stores, which
I see is a good thing that we've been able
to produce enough that we can get them in the stores.
The series x is the bigger one, Um and it's
more complex to build and supply chains constraints hit that
a little more. I think that one will still be
supply constrained through the holidays, but we're seeing the end
(29:07):
of it. I think we will um, we we'll see.
When we get into three you'll start to see more
that supply is catching up with demand and maybe actually
see one in the store when you walk in. And
is demand really going to hold up? I mean in
record inflation, consumers getting squeezed on gas and groceries, are
they going to want to pay up for expensive this
(29:27):
is why our strategy has never been around selling you
the next device that if you want to play minecraft
on an IPAD, we think that's great. We want to
have an experience with our consoles that if people want
to play games on their television, we think we have
a great platform for that. To that point, what's the
future of the console? I mean our console is going
to be around in ten years if even Microsoft is.
You're sort of de emphasizing. Yeah, I equate in my
(29:49):
head gaming on console the gaming on a television. The
console enables that experience on the television, but absolutely people
are playing on more screens and I think for us
as a platform, if we don't adopt that as part
of our strategy, G we're kind of pushing against what
our consumer what our customers are asking for. We talked
a bit about kids earlier and you know, as a
mom I'm always slightly terrified that my kids are playing
too much video games, are ruining their brains, they're gonna
(30:11):
be exposed to all this bad stuff. You're very pro
game for kids and I'm wondering, I wonder, how do
you support that? This will sound like such a bad answer,
but I'll start by saying as a parent, you know
what's best for your kid first. Like I'm not going
to say what's best for any individuals kids. What we
(30:31):
can say, and the research backs this up, that gaming
can be a great on ramp for kids into stem education.
As they think about, well, how are these Games built?
They'll go from I only want to play games too.
Maybe I want to create my own stuff. Maybe you're
even seeing that in your household a little bit. Of
players become creators. It's how I end up sitting here
(30:52):
as somebody who started playing games and became a computer
programmer and now I'm in this business. Not that everybody's
going to take that same that same path. I also
think the community power of gaming is something that doesn't
get talked about enough. Last night I was playing escape
room on xbox with one of my friends who lives
in New York City. Are in New York state and
(31:14):
he works in he he installs wires for for Internet
access into people's homes and I and we play together
often and I think, like what other construct on the
planet puts these two people together? And while the conversation
might start about how are we going to escape from
this room, then we're talking about his daughter who's looking
(31:36):
at colleges, and we just talk about life like people
will when they're in the same place. And that ability
for gaming, whether it's with kids or adults, to bring
people from different backgrounds, different geographies, different socio economic different religion,
different genders together and shared experiences is pretty unique out there.
(31:56):
It's and and you find that, I mean you find
net in roadblocks, you find that in Minecraft, that people
come together, and I think building those connections that video
games can enable. Maybe this is too altruistic, but there
aren't enough of those things in the world today. There's
a lot of things that put us in us in them,
but if you and I are playing destiny together and
running a strike, we're just trying to save the world
(32:17):
from the aliens again and like that's that's good stuff
and it's silly stuff, but it's also just such a
good platform for finding connection with people that you might
not normally find in your day to day life. which
brings me to the metaverse. You know, obviously Sacha came
on my show. I hope that this is the next
big thing that happens after the mobile Internet. Facebook changed
(32:40):
its name to Meta. Some gamers don't even want this
whole metaverse thing. How big do you think the metaverse
is really going to be? Gamers have been in the
metaverse for thirty years. When you're playing games, if you're
playing a world of warcraft game, you're playing in roadblocks,
you're playing in a racing game where everybody is in
a shared world, these three d shared worlds that gamers
(33:02):
have been playing in for years and years. I think
what we've found is there's more connection, as I was
talking about before, because we have shared purpose and we
meet other people. So my view is the metaverse is
kind of the enterprise world figuring out the value of
these immersive game experiences that the gamers have been playing
for years. So it's not at all surprising to me
(33:24):
that gamers might look at metaverse and think, well, I
don't really get it, because we've we've already. I already
have an Avatar of myself and I could already go
into a shared world and I can already sit there
and have voice conversations with people anywhere. But I do
think the skills that we have as game designers and
game creators make a ton of sense and a lot
(33:45):
of enterprise experiences, and this is why Sati gets excited
about it. I think about people coming in, enterprise, customers
coming to Microsoft and maybe, in addition to wanting to
meet with the office team, wanting to talk to a
halo level designer to understand the kind of human compulsion
and that we build into these online interactions because we
want those same things and meetings, we want those same
(34:06):
things in work environments and I think the metaverse in
the end will be taking a lot of the learning
that the game industry has done for many, many years
about these shared worlds and putting them in non gaming
experiences for our talent on our teams. I think that
there's value in that. Their skills are more broadly applicable.
Now it's not just in games. They can work in
other industries. What about Crypto? Play to earn is all
(34:30):
the rage right now. Play to earn specifically is something
I'm cautious about. Um, it creates a worker force out
of players for certain players to kind of monetize. Now,
to be fair for us in the game, in the
game industry, this has existed for years and years. There
have been gold farmers of people who literally just spend
(34:50):
their time doing some menial task in a game to
accrue some currency that then they could sell to some
other rich player and for real money so that that
person doesn't have to spend their time. Now you find
games that are starting to build that into the economy
of the game itself and I, like most technology, I
think technology in itself is mostly inert from a good
(35:11):
or bad perspective. The use of the technology is the
thing that, as as a platform, we have to be
cautious about. We made some comments and minecraft about how
we view N F T S in this space because
we saw people doing things that we thought were exploited
in our product and we said we don't want that.
But technology itself of somebody being able to own something
(35:33):
digitally that they feel like it's theirs and I could
give it to you or trade it to you. Um,
I think there's value in that. I don't get fixated
on the back end technology. I think sometimes it's it's
hammer looking for a nail when these technologies come up,
but the actual human use, or player use in our case,
of these technologies, Um, I think there could be some
interesting things. So let's talk about your priorities looking forward.
(35:55):
You know you're in the middle of trying to do
this really big deal. Are we going to see you
keep doing deals? Are you still on the lookout for
new studios or new geographic locations where you want to
build out Microsoft's gaming presence? Definitely, on the second part,
geographic expansion is critically in what we've hired our first
(36:16):
people in Nigeria now as part of our team. We
have teams in India, teams in South America. You know, again,
when I talk about three billion Gamers, I'll just use
Africa for a second. Like one point two billion people
in the continent. Average Age is what twenty or twenty
one when I visit there. UH, gaming culture is there
because the Internet makes any property available, any property possible,
(36:38):
and is that also talked about before. Anybody can be
a creator now, whether it's video creation, text creation or
game creation, and I think it's very, very likely that
the next big hit games that we're going to see
are not from the traditional locations, not from the traditional people,
and I think that's fantastic. So geographic expansion is critical.
(36:59):
Class what is important to that as we put our
data centers in places and we can not only distribute
the games but allow creators to use our cloud development
platforms to build games without having to have the local
hardware right there in their house or in their office
to go build. I think that is important. You know,
we we look at three billion gamers growing to four.
We're not there right now. So absolutely we're going to
(37:21):
continue to invest, continue to build Um and continue to
partner and even continue to acquire if that's the right
move for us, because our our ambition is to be
part of gaming continue to make the progress it's making.
So we're gonna do a little rapid fire. Okay, what
video games are you playing now? Cult of the lamb,
most important meeting you've ever played a game in. You're
(37:42):
trying to give me in trouble. But Games have you
just played? A game in a meeting with Sacha. It's
easier on teams calls because they can't see your screen.
You're not with people. I have played games. SATIA has
caught me playing games before. Um, and yeah, I'd say
a Satia meeting that I plead the fifth. I appreciate
your I appreciate your your somewhat honesty. Um, what's your
(38:07):
favorite thing to do when you're not gaming? Of all things?
SNOWBOARD with my family. My daughter's both snowboard. It's fun.
I like spending time with the family. It's a good thing.
Have you ever played games with Sacha? I've watched him play.
He's not a big player. He likes civilization, which is
a fantastic game, one of my favorite games. Um, I've
watched him play Fort said before it's not a big Gamer.
(38:29):
I think he admits that. You have a lot of
gaming fans. Who Do you fan over? One of the
things I love to go do is find a game
I've never heard of and go spend time with it
and then talk to the creators about it. I think
creating something, putting it out there is such a brave
thing to do. If you could see any band in
(38:49):
their prime who would it be? Wow, so I'm a
punk rock fan. Um, so I'd probably go back and
say the Ramans, if I could go like in their prime.
What's your favorite TV show? What are you watching now?
What is your wife watching now that your side watching?
(39:09):
I don't Really Watch TV. It's such a bad thing. Um,
historically I've always been a star Trek Fan. Um, it
goes to my guess, my inner Geekdom. Uh. Kelly is
my wife. She doesn't really love Star Trek. That's she.
She'll sit there and watch picard with me because to
sit together she sounds like a saint. I like her.
Best piece of advice for your twenties. When I think
(39:31):
about at least my career, and that's the only Lens
I have, there have been a number of times when
others have made bets on me that I probably didn't
think I was ready for, including the job I'm in now,
and to listen to the others around you when they
are making a bet on you, when they're pulling you
to go do things, at least for me, who was
probably reticent, maybe a Little Imposter Syndrome kicking in on
(39:52):
was I really ready for something? But understand that others
around you when they're encouraging you that at they're probably
doing it for good reason. They're probably doing it for
something that they see in you that you might not
see in yourself, because there were, you know, things that
I passed on, things I didn't think I was ready
for because I was insecure and not exactly ready. Um,
(40:15):
I can't. I love where I am now. So I'm
not a regrets person that I'd say, okay, I think
I missed something there, um. But the people around you,
who you're working with, are just people that influence you
and you respect. When they're pushing you in a direction
that might not feel right, UM, they're probably well intentioned
and they probably see something that you're missing. How do
you balance work life and play? My little fifteen minute
(40:38):
commute back and forth is my transition zone of I'm
now at work, I'm now at home, Um, and it
didn't work for me to work from home. I don't
even have a Home Office because when I'm home I'm
not at work, like it's just always been my my
thing is that segmentation with my family and what I do.
It doesn't mean I've never responded to a mail when
I'm at home, but I I'm very regimented that way
(41:02):
that I and if it means I stay at work
a little bit longer until I'm ready for that transition.
When covid happened, it didn't work and it didn't work emotionally.
It didn't work output wise, like motivation, and I was
pretty transparent about that with the people around me and
how I had to change things. I realized I can
do that because I'm later in career. There's like a
(41:24):
privilege in me being able to stand up who I
am in the company, in the industry and say those things. Um.
I would encourage anybody to try. Realize there's some naivete
and that that not everybody feels that they've got that
same capability to use your voice, Um, in that way.
The safety, I guess, Um, to go do that, but
that was that was critically important for me. Does that
(41:45):
mean you want everyone else to come back back to
the office now? People have to work in the way
that works for them and other people are a living
experience where going into the office is the work worse
thing for them. Um. And I want to create a
space where anybody can can do their best. What does
the gaming industry look like in five years? And what
does it look like in twenty years? I think the
(42:05):
power of interactivity, the power of your choice and the
consequence of that and the learning from those consequences is
just going to continue to make this medium that I'm
lucky enough to work in, an interactive entertainment slash video games,
to just continue to create such an impactful space for
telling stories through the perspectives of others, whether that's like
(42:28):
Vr or a r like. Again, I look at technology
as more of a use for a human output as
opposed to the other way around. Um, but I think
this space that we're working in today, the sense of community,
the sense of democratization of creation, which is an overused term. Uh,
we're going to see video games really gain their space
(42:49):
in telling stories that really change people's perspective on others
lived experience, and I think that's a pretty cool thing.
All right, thank you, Philip, for joining us. Ye Bloom
(43:12):
Brook Studio. One pointo is produced by Lauren Ellis and
edited by Matthew Soto, Joe Medina and Meghan Olsen. I'm
Emily Chang, your host and executive producer. Thanks for listening.
So I think the last time we saw you talked
your son was playing minecraft. Yes, yes, minecraft, he does
do some good because of you. We have an Xbox,
but we have not graduated to minecraft on the console.
You know, because I've talked to you about my own
sort of fear of kids playing too much, and a
(00:21):
friend was try to think of it like he's it's
like a painting, like show it. Asked him to show
it to you like, like the same way you would
treat a painting. I want to see what you made. Yeah,
that's right. So make it a family thing. Hi Everyone,
and welcome to this edition of Bloomberg Studio. One point out.
I'm Emily Chang. He's in charge of one of the
top gaming consoles in the world, Microsoft xbox, a sixteen
(00:45):
billion dollar business home to minecraft, Halo and perhaps soon
call of duty if a seventy billion dollar deal to
buy act division goes through. The executive behind that deal
is Phil Spencer and if he has his way, he
helps the gaming industry will level up in the next
twenty years and be less a battle between rival consoles
(01:06):
and more a home to platforms that reach every potential
Gamer on the planet. Joining me on this edition of
Bloomberg Studio at one point. Oh, Microsoft Gaming CEO, Phil Spencer,
(01:27):
so great to see you here in person. It's great
to be here in person things. So we're gonna start
by going in the way back machine a little bit.
Uh Did some research. You worked at a computer mart
in Vancouver, Washington, where you were selling and playing a
lot of computer games in the eighties. I'm thinking like
stranger things, stranger things resonates with my definitely growing up,
(01:52):
my inner geekdom is there. was there punk hair or
weird outfits or I definitely had long hair at the time.
Drove my forward pinnow my Blue Ford Pano. Funny thing
is my my wife of thirty one years this year.
We were together in high school, so she still remembers
those days and she's like, you just haven't changed. You're
the same punky kid you were back then. I just
(02:14):
video games a little bit bigger now, but it's kind
of the same thing. I'm going to need some photographic
evidence of this. What were your most played games in
the eighties? Uh So, it's funny. When I started growing
up playing video games, most of it was going to
the arcades. Now most people won't remember these days of
like going to a store where you put quarters in play.
Robotron was one of my favorites in the arcades. I
(02:35):
would go play that and then probably more in the
seventies and the Eighties, I remember my dad bringing a
video game, the Atar, with the cartridges home, and that
was kind of the beginning of it and I just
kept playing and it's still with me. What was it
that you got from games? You know, I think at
first it was just like I was a kid who
(02:59):
read a lot of comic books, Played Dungeon Dragons, like
it was just kind of watch those movies and it
was just kind of in the in the space of it.
When I started working at Computer Mart, one of the
things I haven't talked much about this, one of the
things I did is I ran our bulletin board service,
which is where people used to dial up on the phones,
if you remember those, like the kind of whistling noise,
(03:20):
and people would log into our bulletin board service at
Computer Mart to see like what was going on with
computer games at the time and that kind of sense
of community, of people seeing this as a hobby as
much as it is just kind of entertainment. And then
seeing it grow to kind of online games and other things,
that sense of community and bringing people together. Something's always
just stuck with me about video games. You started out
(03:41):
at Microsoft as an intern Um. How would you compare
Microsoft's history on Games under Bill Gates versus Steve Baber
versus such a Nidela? Yeah, I think like many things
at Microsoft back in the eighties we started in video
(04:02):
games as much out of kind of a defensive we
were worried that other companies might be putting the home
pc in place and the avenue to get there was
through video games and game consoles. So we say, okay,
WE'RE gonna go start our own game console because if
anybody is going to build a computer for the home,
we wanted it to be Microsoft. I think through Steve's
years it was more about growing the business and how
(04:23):
do we bring kind of business leadership into this group
of rag tech people who are out there just having
fun building video games as part of Xbox. I think
with Satia, when I first took this job and I
got this job as head of xbox, about two months
after Satia Nadella became the CEO of Microsoft. Well, and
when Sata started there were activist investors targeting the company
(04:44):
stock hadn't been doing well. They were targeting xbox. Absolutely, yeah, yeah,
and somehow you convinced Sacha to double down on games
at the time. Absolutely right that there was a question
of why are we in video games? In fact, one
of his first questions to me was because he had
come from the cloud part of the business being and
(05:06):
then cloud was he didn't actually understand why we're in
video games, not as a negative, just as literally, why is?
Why is Microsoft this at the time what one trillion
dollar Market Cup company. Why are we in the video
game business? And he he challenged us like, let's go
figure out why we're in the video game space and
see if it makes sense and if it does, let's
be all in and if it doesn't, we'd make other decisions.
(05:28):
Early in that journey is when this game, which I
know you know about, is minecraft, and the opportunity to
acquire minecraft came about like months after this moment. So
I might have a kid or two that pays minecraft. Yes,
and it really caused us as a team to think about, okay,
if you're gonna go spend two and a half billion
dollars on this blocky Java base game. How does this
(05:49):
fit into the mission of this company? I'm gonna sit
in front the Board of Microsoft and explain. Here's this
game written by this one person in Stockholm, Sweden, that
we're going to go spend billions of dollars on. How
does it fit into the where Microsoft is going? Um,
and it was a great kind of because it happened
so fast. It was a great, just concentrated effort to
(06:10):
build a strategy that we saw around video games and
we're still here. Let's talk about that strategy. Was the
idea to tie gaming to the cloud? Was that the clincher?
We started from the industry itself. We said, okay, what
do we see going on in the games industry and
do we think Microsoft has a capability to play in
where gaming is going and the things that we saw
(06:31):
through minecraft wasn't there at the time, but I know,
like roadblocks is familiar in your household, is today people
play the biggest games on any device. Like if you
think about a game like minecraft or fortnite or roadblocks,
these are games that play on IPADS, they play on Xboxes, playstations, PCs.
That games were going from per device to per user
(06:53):
and cloud would be an enabler for that. But we
didn't start with how do we fit cloud into video games?
We were just kind of watching the trends of eiders
and where they were building and saw this transformation of
games being ubiquitous. How does this all, as you see it,
connect to Microsoft's future? The cool thing I see going
on now, and it does fit with the investments Microsoft's
(07:16):
making an Azure in other places, is today the world
anybody is a creator in the world. Anybody with a
camera can create content. Anybody who can record their voice
or record themselves playing an instrument can become a creator.
And Video Games are going through that same transformation where,
if I rewind to my childhood and playing video games,
I walked into like an egghead software and there was
(07:37):
a line of boxes and as a creator, if you
and I wanted to go create a game, we might
go create the best game in the world, but there
was no way for us to get it in front
of an actual person who might want to go play
because we couldn't get shelf space. All these things. Today
we see gamers on our creators on our platform from
all over the globe who can create a game that
(07:57):
can literally reach billions of people through our distribution capability
and that game sits in the lineup right next to it.
Like you take ten people in Slovakia. It's true, lute
rivers a game on our platform. Ten people in Slovakia,
they can put that game on Xbox and build an
xbox game. The game will sit right next to the
biggest budget games out there. FIFA A low call of duty.
(08:18):
It just sits there. To A to a player, a
game is a game and you can deliver that game
through the cloud to anybody who has a device that's
capable of reaching the Internet. I hear you're still an
avid gamer. How often do you play games? Like, how
many hours? I go to bed early, so I gotta
BET at ten at Seattle, at ten o'clock. People who
play with me online they tease me about how militant
(08:39):
I am. At ten o'clock I'm out. I probably play
fifteen hours a week, I'm guessing. Now my children, two daughters.
They're out of the house now. Um, my wife and I, Kelly,
have been together for a long time. She likes movies,
since I'm not a big movie watcher, so we kind
of do our things and then we we have our
places that will go. I was playing last night. I
(09:01):
was playing escape room with a friend of mine in
New York City. I hear you play at work too,
like that's totally work. UH, yeah, I mean, I, uh, it's,
as I said, like I think I've been and luck's
really not the right word, but I'm privileged enough to
end it up in a position where I get to
(09:23):
do something I really love, Um and match something I
care about and the capability that I see in games
with just who I am. You are also behind some
of Microsoft's biggest gaming deals, and you mentioned minecraft at
two and a half billion dollar acquisition. Of course, activision
we're waiting on. Talk to us about your act your
(09:45):
talk to us about your acquisition strategy. How do you
find in size up a good target? I'd say early
on we had gone through a time prior to satia
becoming CEO where we had downsized a lot of our
student yeos out of kind of business necessity. So at
first it was how do we just get more creative
(10:06):
capability inside of Xbox? So early on it was about
investing in creators that we knew who were kind of
at the forefront of thinking about some innovation once I
felt like our studios organization was back to the capability
that we needed, then we thought about unique capability to us.
(10:26):
You see creation modes in Halo. You see creation modes
and flight simulator. You see us learning from things that
we've we learned from the minecraft team when they came
in Um. One of our other acquisitions was a company
called Xenomax, which has a long history and PC gaming
and you would think Microsoft would understand windows gaming, but
we kind of lost that DNA in the organization as
(10:48):
we focused on console. So bringing in xenomax and really
hearing from a lot of teams that were kind of
native to pc gaming and what they were what they
cared about it was very, very important. So we're thinking
about new additive creative capabilities to our studios organization that
hopefully makes our platform better. As I understand that you
do your own deals. You don't necessarily need permission from
(11:10):
Sacha to do a deal. Is that true? Now? There's
there's definitely. It depends on the amount of the money
and the deal. But when we think about some of
our bigger deals, we go to the board Um and
so Sati Nadella Amy Hood, the CFO have been incredibly
supportive Um and the board has like when we go
to the board and we talk about this space, I
(11:32):
mean as Xbox were one of the biggest consumer businesses
in the company. Were a brand that makes Microsoft relevant
to a whole generation that probably doesn't think about a
lot of other Microsoft products in their day to day life. Well,
you're in the process of a potentially monster deal, seventy
billion dollar acquisition of activision. Talk to us about how
(11:53):
this deal came together when we were thinking about on
that idea of what are we capable of doing today
and where do we need to go? The biggest gaming
platform on the planet is mobile phones. UH, one and
a half billion people play on mobile phones and I guess, regretfully,
(12:13):
as Microsoft, it's not a place where we have a
native platform as gaming. Coming from console and PC, we
don't have a lot of creative capability that has built
hit mobile games. So I know it's it's not the
focus of a lot of attention on activision, blizzard king,
but I'd say that the king component of it, of
what they've done with candy crush and the learning that
(12:35):
they have around mobile. They've taken some of their biggest
call of duty and Diablo franchises to mobile and and
done well. We thought that was a really interesting capability
of what they had. The one thing about the video
game space is if you've been around, maybe too long,
you know most of the creators out there, so you
kind of know teams. That could be a good fit
(12:56):
in terms of what we were trying to do. But
we really started the discussions internally, at least on activision blizzard,
around the capability they had on mobile and then pc
with blizzard. Those are the two things that we're really
driving our interest. Big Tech is under a lot of
regulatory scrutiny. Big Tech deals are under scrutiny. What's the
status of the deal? What have your conversations with regulators
(13:18):
been like? You know, I kind of come at this
that big deals should be scrutinized right. I think that's
the role of regulators, why they're in place. I feel
good about the progress that we've been making, but I
go into the process uh supportive of people who maybe
aren't as close to the gaming industry and what the
dynamics are asking good hard questions about okay, what is
(13:43):
our intent? What does this mean? If you play it
out over five years. Is this constricting a market? Is
it growing a market and just being transparent about the
things that we care about. We care about choice. We
care about people being able to play where they want,
when they want. Clouds an important part of that. I
think about business model diversity and we brought in subscriptions
(14:03):
to a retail model. You have free to play games
that do really well. We think the multitude of business
models is an important consideration as well. So sitting down
with regulators and having discussions about our long term vision
of there are three billion people who play video games
on the planet, which is crazy. It's like half the
world's population nearly plays video games and we want games
(14:24):
that can reach all of those people under an economic model.
So you're confident the deal is going to happen. I've
never done a seventy billion dollar deal, so I don't
know what my confidence means. I will say the discussions
that we've been had, that we've been having seemed positive
and we're actively engaged in the conversations, trying to be
transparent about what our motivations are, but I feel good
(14:45):
about it. Microsoft had its time in the antitrust spotlight.
Now the spotlights on Google and Meta and apple and Amazon.
How is it that Microsoft is skirted the spotlight? Your
competitors might say it's unfair. Well, I think your point
about US having grown through that time, I might call
(15:06):
that the adolescent ears for us, as we were kind
of learning. I think it's an important consideration that we
did learn a lot as a company through that time
and what it meant, and I think that sticks with
us today. And I think the transparency of our business model,
our longevity in the market grown through our adolescent ears
and the stuff that we learned has been important and
(15:27):
how we show up, and I also know the team
does a lot of work to continue to share our
views on things and as a company and make sure
that we're public about what we stand for. You've been
a really big advocate of cross platform play and this
idea that Gamer should be allowed to play whatever games
they want on whatever platform they want. Why is that
so important to you? I think about the industry growing
(15:51):
and if I think about maybe you happen in your
household to buy an xbox and I buy a playstation
and our kids want to play together and they can't
because we bought the wrong piece of plastic to plug
into our television. It just seems that these artificial constraints
that the industry might put up for near term kind
of business dynamics in the long run. If you take
(16:13):
a business that is at three billion people, growing to
four billion people over the next decade, and saying how
do we continue to grow this business, reducing friction for
our customers has, as an industry, has to be at
the top. If I think about reducing friction, safe and secure,
so when our players are online they have the experience
that they should have and they want to have that.
(16:33):
Parents feel in control of what the of the experience
their children are having. So how far does this go?
Does this mean that activision games that call of duty
you'll be able to play on any platform and perpetuity? Yeah,
we've we've made the public commitment that we want call
of duties specifically to be playable on other platforms the
platforms it's on today. Most people specifically asked about playstation forever. Forever.
(16:57):
I don't like, I don't know what that means in forever,
like when you think about how long, and it's not
for any kind of nefarious business reason, it's just like
what do we even platforms mean ten years ago, like
I think the definition of some of these things might
change over time, but our expectation is we want more
people to play and if you look at our history
through the acquisitions that we've done, when we bought minecraft,
(17:18):
we increase the platforms it was available on. We didn't
decrease it. We added it to the switch and brought
it to other places. The other minecraft games that we've launched,
minecraft dungeons, minecraft legends, have come to the switch and
playstation like. When we have games that are on other platforms,
even kind of near term competitive platforms, we want to
support those platforms and continue to grow the user base
(17:39):
there and make those customers happy. We we haven't pulled
games away from players that are playing those games today.
And what about the reverse? Will Sony exclusives be available
on Xbox? Not a question for like that I can answer. Um,
I do think over time the idea of exclusive of
(18:00):
a game for one device is something that we're just
going to see less and less of. I mean we
made the decision a few years ago that when we
launch any of our xbox console games, they're available on
the same date on on windows, and that was kind
of blasphemous at the time of what. No, these games
are supposed to be the things that cause people to
have to go buy an xbox. Why would you make
(18:22):
them available on windows at the same time? In fact,
we went so far that if you bought the xbox version,
you got the PC version as part of the entitlement,
like you could. You could play the game on both
platforms and then cross play and cross save and things
that you were talking about Um and I think the
industry and more and more is going to go in
that direction and I think it leads to better games,
because if the business is growing and there's more users,
(18:42):
creators will take more risk, they'll try new, unique things.
So I know you're working with Sony on some things
for the benefit of gamers. Can you talk to us
about that a little bit? Where do you think your
relationship with Sony will be in a number of years,
like what are the hard things to work through and where? where?
Where do you draw a line? Where do they draw
(19:03):
a line? I think in the in the near term,
we're a big publisher on their platform. When you think
about minecraft and games that we have, death loop and
ghost wire, where Games are studio shipped that because of
contractual things, were only on playstation when we launched. So
we have we have a pretty big publishing footprint on
playstation as well as Nintendo, which means we have good
(19:25):
relationships with those platforms because we're they're a big part
of our business and we're a big part of their business.
I think our long term ambition of where we see
this industry growing is also shared. When you think about
people should be able to play games in more places,
things like accessibility, things like safety, we find a lot
of common ground. I think the area where things get
(19:46):
stuck a little bit it's in the kind of near
mid term competition. If somebody walks into a store and
they have one bill, they're probably going to walk out
with either and they want to gaming console. They're either
going to walk out with a switch, which is what
most people buy, or they're gonna walk out with a
playstation five, or they're gonna walk out with an xbox,
(20:07):
or maybe somebody will go buy gaming a windows PC.
But in that world of somebody's got to make a
decision for one platform over another in the beginning. Um,
that is where I think we we get stuck in
some of the kind of near term competition. I don't
think that's bad. It's just the dynamic of each of
us pushing each other Um to build the best product
for our customers. Now, while you've been working to make
(20:28):
the gaming industry more collaborative, the gaming industry has historically
been tough for women, for diverse voices. When you look
back on game or gate, do you think you did enough?
Do you think Microsoft did enough? I can always look
back at any incident for me and think about things that,
in hindsight, I should have done more, I should have
done better. It's just Um. I'm I'm proud of how
(20:50):
our team evolves, how our leadership team evolves, how we
do I mean there are mistakes that happened on our
own teams all the time and our our teams learned
from this and they grow. The thing I love is
the intent of the team, the intent of the team
to get better. But I think you point out their
societal issues around us. The gaming industry is not kind
(21:10):
of immune to those. Um. There's a history and video
games of, as you say, kind of being a male industry,
perceived that way and a reality of that way. People
in my position sitting there as kind of old white
guy as head of gaming platforms, not in I'm more
the norm than I should be. I talked about three
billion people who play video games and if you say
(21:31):
your cut, your audience, is three billion people, then the
demographic is the planet's demographic right there. It has to
be when you get to those kind of numbers. Three
billion people playing video games. A Gamer is a human
uh and our I want our team to reflect the
customer that we aspire to earn. I know that our
teams ship their culture with every product that they shift,
(21:52):
whether it's front and center on kind of obvious decisions
that we make or almost subconscious in what we do.
So our teams have to reflect the customers that we
want to earn, from the leadership team at Xbox all
the way through those teams. And those voices not only
have to be there, they have to be heard. They
have to feel safe where they can do their best
work and that's a journey and it's a journey that
(22:16):
we're on, I think forever more at least I will
be in terms of my career. Well, activision specifically is
facing a lot of challenges here. There have been lawsuits,
there have been employee walkouts. There have been accusations of
sexual harassment, sexual assault. How much did that concern you
when you're thinking about this deal? We had access to
data from the company before we we announced the acquisition
(22:38):
to see what the actual numbers were in terms of reports. Um,
we definitely, as a team, signed up to say, just
like we're on our own journey with Xbox, that we're
going to expand that journey if this deal closes. It's
a lot of people and a lot of people that
will feel very dedicated to and committed to to building
a great workplace environment for them. That's true of any
of our studios right but it's obviously a com versation
(23:00):
that you're going to have. You think about the board
of Microsoft and when they're thinking about the deal and
they're typing into their search engine activision, what are the
headlines that they're coming back and there were questions that
we had. We've learned from this, we will continue to
learn Um and we're committed to that that journey, not
only for the betterment of our teams but our customers,
the creators on our platform. We think it's critical to
(23:21):
our business success that we make progress here. Is Bobby
Kodak going to stay on? Yeah, I'm not in a
position to make comments about their leadership team. Were in
the regulatory phase and and how that will close, like
when the deal closes, then we have say and how
they're managed and how it goes, but until that point
I'm not really in position to say. There have been
(23:43):
very specific allegations of bobby being aware of things, uh
that happened and not reporting it to the board. What
has he communicated to you about what he knew what
he didn't know? The discussions we've had were about the
team's where they're at. Can they make the progress they
(24:04):
need to make, because the closing is a long process.
Are they putting in the work that they need to
put in two move along their journey, and I believe
they're committed to that. When I look at the work
that they're doing now. There's always more that can be done,
but I believe from the studio leaders there that I
know very well, some of them former xbox members, that
(24:27):
they're committed to this journey as a as a company,
and I applaud that. Regardless of the deal. I applaud that,
but obviously as somebody WHO's looking forward to getting to
work more closely with them. I definitely applaud it. So
what's your plan for merging these two cultures and navigating
some of these challenges? Every creative team has its own culture.
(24:49):
One of the discussions, and I think about even the
culture at Xbox, is we are a culture of cultures.
Teams reflect the creative work that they do. So if
you went from the minecraft team team to the halo team,
that those teams, those teams feel different when you walk
into the studios because they're working on different things. And
so when I think about the teams that they have,
(25:11):
teams that we've worked with at a high level, because
they all, most of them, ship on our platform, I'm
actually first interested in hearing from them and where do
they aspire to be culturally and helping support them along
our journey. I don't think there's something that they plug
into as much as let's get aligned on what our
goals are as teams and how can we bring capability,
(25:32):
our own learning and resources to help them. activision has
divisions that are unionizing. I don't know. Microsoft has said
they'll recognize those unions. What does that look like? I've
never run an organization that has unions in it. So
but what I can say, and working through this, is
we recognize workers needs to feel safe and heard and
(25:55):
and compensated fairly in order to do great work. We
definitely see a need to support the workers and what
the outcomes that they want to have. So we shared
that right. We shared it publicly, our intent Um, because
we wanted to make it clear to anybody who's looking internally,
most important thing for me are the members of those teams,
(26:17):
what our intent was post acquisition. So we thought it
was important to make a public statement on that front
for workers that are there that are making decisions about
their employment and how they want to know what that
relationship looks like to understand what it would mean if
Microsoft was able to close the deal. In general, there
are concerns within the gaming industry about crazy work hours.
(26:38):
It's the crunch, I believe it's called Um. So you
know what, if this goes farther, what if xbox employees
want to unionize, would you welcome that? And what? What
role do you think unions will play in the future
of the gaming industry in general? Yeah, I don't know
the answer to the second question, Um, and it'll it'll
(26:58):
I'm curious to learn as we grow. In terms of crunch,
I think that's an important one. I've been in this.
I've been at Microsoft, as he said, since N I
started as a software programmer. I've worked on Xbox for
twenty plus years. When I think about the environment on
any of our teams, I build from a perspective of people,
of building a workplace where people feel like they can
(27:20):
do their best work in a sustainable way and they
could see this as a long term career for themselves.
So if xbox employees decided to unionize with Microsoft support,
that we knew. We made the public statement that it was.
It wasn't that it would have a broader impact than
just the impact at what would potentially happen on the
close of activision blizzard. So let's talk about some of
the broader trends. You and I talked a lot during
(27:41):
the pandemic gameplay surge. During the pandemic we were all
stuck at home. Has that changed? It has changed. We've
seen gameplay hours come down a bit, which I will
say I think is a good thing. People should get outside,
people should moderate long term growth trajectory for the business
is incredibly durable and strong. You have adults now that
(28:02):
have grown up playing, like myself, and it's become a
more normal part of of how people entertain and how
families spend time. As the economy has has tightened for consumers,
as gas prices are higher, people are worried about what
what their home economic situation looks like, we're seeing gameplay
hours kind of stay strong because I think from a
(28:23):
value perspective, gaming is a good value for people at
a time of kind of economic constriction. People bought minecraft
that can continue to go play minecraft. What about supply chain?
What challenges are you still seeing? Are All the consoles
that you want to have made in time for the
holiday is going to be here? I still think demand
will outstrip supply for us this holiday. Specifically on our
(28:44):
consoles we have to in market. We have a series S,
which is our lower cost. That one's easier to produce,
so you can find that one in the stores, which
I see is a good thing that we've been able
to produce enough that we can get them in the stores.
The series x is the bigger one, Um and it's
more complex to build and supply chains constraints hit that
a little more. I think that one will still be
supply constrained through the holidays, but we're seeing the end
(29:07):
of it. I think we will um, we we'll see.
When we get into three you'll start to see more
that supply is catching up with demand and maybe actually
see one in the store when you walk in. And
is demand really going to hold up? I mean in
record inflation, consumers getting squeezed on gas and groceries, are
they going to want to pay up for expensive this
(29:27):
is why our strategy has never been around selling you
the next device that if you want to play minecraft
on an IPAD, we think that's great. We want to
have an experience with our consoles that if people want
to play games on their television, we think we have
a great platform for that. To that point, what's the
future of the console? I mean our console is going
to be around in ten years if even Microsoft is.
You're sort of de emphasizing. Yeah, I equate in my
(29:49):
head gaming on console the gaming on a television. The
console enables that experience on the television, but absolutely people
are playing on more screens and I think for us
as a platform, if we don't adopt that as part
of our strategy, G we're kind of pushing against what
our consumer what our customers are asking for. We talked
a bit about kids earlier and you know, as a
mom I'm always slightly terrified that my kids are playing
too much video games, are ruining their brains, they're gonna
(30:11):
be exposed to all this bad stuff. You're very pro
game for kids and I'm wondering, I wonder, how do
you support that? This will sound like such a bad answer,
but I'll start by saying as a parent, you know
what's best for your kid first. Like I'm not going
to say what's best for any individuals kids. What we
(30:31):
can say, and the research backs this up, that gaming
can be a great on ramp for kids into stem education.
As they think about, well, how are these Games built?
They'll go from I only want to play games too.
Maybe I want to create my own stuff. Maybe you're
even seeing that in your household a little bit. Of
players become creators. It's how I end up sitting here
(30:52):
as somebody who started playing games and became a computer
programmer and now I'm in this business. Not that everybody's
going to take that same that same path. I also
think the community power of gaming is something that doesn't
get talked about enough. Last night I was playing escape
room on xbox with one of my friends who lives
in New York City. Are in New York state and
(31:14):
he works in he he installs wires for for Internet
access into people's homes and I and we play together
often and I think, like what other construct on the
planet puts these two people together? And while the conversation
might start about how are we going to escape from
this room, then we're talking about his daughter who's looking
(31:36):
at colleges, and we just talk about life like people
will when they're in the same place. And that ability
for gaming, whether it's with kids or adults, to bring
people from different backgrounds, different geographies, different socio economic different religion,
different genders together and shared experiences is pretty unique out there.
(31:56):
It's and and you find that, I mean you find
net in roadblocks, you find that in Minecraft, that people
come together, and I think building those connections that video
games can enable. Maybe this is too altruistic, but there
aren't enough of those things in the world today. There's
a lot of things that put us in us in them,
but if you and I are playing destiny together and
running a strike, we're just trying to save the world
(32:17):
from the aliens again and like that's that's good stuff
and it's silly stuff, but it's also just such a
good platform for finding connection with people that you might
not normally find in your day to day life. which
brings me to the metaverse. You know, obviously Sacha came
on my show. I hope that this is the next
big thing that happens after the mobile Internet. Facebook changed
(32:40):
its name to Meta. Some gamers don't even want this
whole metaverse thing. How big do you think the metaverse
is really going to be? Gamers have been in the
metaverse for thirty years. When you're playing games, if you're
playing a world of warcraft game, you're playing in roadblocks,
you're playing in a racing game where everybody is in
a shared world, these three d shared worlds that gamers
(33:02):
have been playing in for years and years. I think
what we've found is there's more connection, as I was
talking about before, because we have shared purpose and we
meet other people. So my view is the metaverse is
kind of the enterprise world figuring out the value of
these immersive game experiences that the gamers have been playing
for years. So it's not at all surprising to me
(33:24):
that gamers might look at metaverse and think, well, I
don't really get it, because we've we've already. I already
have an Avatar of myself and I could already go
into a shared world and I can already sit there
and have voice conversations with people anywhere. But I do
think the skills that we have as game designers and
game creators make a ton of sense and a lot
(33:45):
of enterprise experiences, and this is why Sati gets excited
about it. I think about people coming in, enterprise, customers
coming to Microsoft and maybe, in addition to wanting to
meet with the office team, wanting to talk to a
halo level designer to understand the kind of human compulsion
and that we build into these online interactions because we
want those same things and meetings, we want those same
(34:06):
things in work environments and I think the metaverse in
the end will be taking a lot of the learning
that the game industry has done for many, many years
about these shared worlds and putting them in non gaming
experiences for our talent on our teams. I think that
there's value in that. Their skills are more broadly applicable.
Now it's not just in games. They can work in
other industries. What about Crypto? Play to earn is all
(34:30):
the rage right now. Play to earn specifically is something
I'm cautious about. Um, it creates a worker force out
of players for certain players to kind of monetize. Now,
to be fair for us in the game, in the
game industry, this has existed for years and years. There
have been gold farmers of people who literally just spend
(34:50):
their time doing some menial task in a game to
accrue some currency that then they could sell to some
other rich player and for real money so that that
person doesn't have to spend their time. Now you find
games that are starting to build that into the economy
of the game itself and I, like most technology, I
think technology in itself is mostly inert from a good
(35:11):
or bad perspective. The use of the technology is the
thing that, as as a platform, we have to be
cautious about. We made some comments and minecraft about how
we view N F T S in this space because
we saw people doing things that we thought were exploited
in our product and we said we don't want that.
But technology itself of somebody being able to own something
(35:33):
digitally that they feel like it's theirs and I could
give it to you or trade it to you. Um,
I think there's value in that. I don't get fixated
on the back end technology. I think sometimes it's it's
hammer looking for a nail when these technologies come up,
but the actual human use, or player use in our case,
of these technologies, Um, I think there could be some
interesting things. So let's talk about your priorities looking forward.
(35:55):
You know you're in the middle of trying to do
this really big deal. Are we going to see you
keep doing deals? Are you still on the lookout for
new studios or new geographic locations where you want to
build out Microsoft's gaming presence? Definitely, on the second part,
geographic expansion is critically in what we've hired our first
(36:16):
people in Nigeria now as part of our team. We
have teams in India, teams in South America. You know, again,
when I talk about three billion Gamers, I'll just use
Africa for a second. Like one point two billion people
in the continent. Average Age is what twenty or twenty
one when I visit there. UH, gaming culture is there
because the Internet makes any property available, any property possible,
(36:38):
and is that also talked about before. Anybody can be
a creator now, whether it's video creation, text creation or
game creation, and I think it's very, very likely that
the next big hit games that we're going to see
are not from the traditional locations, not from the traditional people,
and I think that's fantastic. So geographic expansion is critical.
(36:59):
Class what is important to that as we put our
data centers in places and we can not only distribute
the games but allow creators to use our cloud development
platforms to build games without having to have the local
hardware right there in their house or in their office
to go build. I think that is important. You know,
we we look at three billion gamers growing to four.
We're not there right now. So absolutely we're going to
(37:21):
continue to invest, continue to build Um and continue to
partner and even continue to acquire if that's the right
move for us, because our our ambition is to be
part of gaming continue to make the progress it's making.
So we're gonna do a little rapid fire. Okay, what
video games are you playing now? Cult of the lamb,
most important meeting you've ever played a game in. You're
(37:42):
trying to give me in trouble. But Games have you
just played? A game in a meeting with Sacha. It's
easier on teams calls because they can't see your screen.
You're not with people. I have played games. SATIA has
caught me playing games before. Um, and yeah, I'd say
a Satia meeting that I plead the fifth. I appreciate
your I appreciate your your somewhat honesty. Um, what's your
(38:07):
favorite thing to do when you're not gaming? Of all things?
SNOWBOARD with my family. My daughter's both snowboard. It's fun.
I like spending time with the family. It's a good thing.
Have you ever played games with Sacha? I've watched him play.
He's not a big player. He likes civilization, which is
a fantastic game, one of my favorite games. Um, I've
watched him play Fort said before it's not a big Gamer.
(38:29):
I think he admits that. You have a lot of
gaming fans. Who Do you fan over? One of the
things I love to go do is find a game
I've never heard of and go spend time with it
and then talk to the creators about it. I think
creating something, putting it out there is such a brave
thing to do. If you could see any band in
(38:49):
their prime who would it be? Wow, so I'm a
punk rock fan. Um, so I'd probably go back and
say the Ramans, if I could go like in their prime.
What's your favorite TV show? What are you watching now?
What is your wife watching now that your side watching?
(39:09):
I don't Really Watch TV. It's such a bad thing. Um,
historically I've always been a star Trek Fan. Um, it
goes to my guess, my inner Geekdom. Uh. Kelly is
my wife. She doesn't really love Star Trek. That's she.
She'll sit there and watch picard with me because to
sit together she sounds like a saint. I like her.
Best piece of advice for your twenties. When I think
(39:31):
about at least my career, and that's the only Lens
I have, there have been a number of times when
others have made bets on me that I probably didn't
think I was ready for, including the job I'm in now,
and to listen to the others around you when they
are making a bet on you, when they're pulling you
to go do things, at least for me, who was
probably reticent, maybe a Little Imposter Syndrome kicking in on
(39:52):
was I really ready for something? But understand that others
around you when they're encouraging you that at they're probably
doing it for good reason. They're probably doing it for
something that they see in you that you might not
see in yourself, because there were, you know, things that
I passed on, things I didn't think I was ready
for because I was insecure and not exactly ready. Um,
(40:15):
I can't. I love where I am now. So I'm
not a regrets person that I'd say, okay, I think
I missed something there, um. But the people around you,
who you're working with, are just people that influence you
and you respect. When they're pushing you in a direction
that might not feel right, UM, they're probably well intentioned
and they probably see something that you're missing. How do
you balance work life and play? My little fifteen minute
(40:38):
commute back and forth is my transition zone of I'm
now at work, I'm now at home, Um, and it
didn't work for me to work from home. I don't
even have a Home Office because when I'm home I'm
not at work, like it's just always been my my
thing is that segmentation with my family and what I do.
It doesn't mean I've never responded to a mail when
I'm at home, but I I'm very regimented that way
(41:02):
that I and if it means I stay at work
a little bit longer until I'm ready for that transition.
When covid happened, it didn't work and it didn't work emotionally.
It didn't work output wise, like motivation, and I was
pretty transparent about that with the people around me and
how I had to change things. I realized I can
do that because I'm later in career. There's like a
(41:24):
privilege in me being able to stand up who I
am in the company, in the industry and say those things. Um.
I would encourage anybody to try. Realize there's some naivete
and that that not everybody feels that they've got that
same capability to use your voice, Um, in that way.
The safety, I guess, Um, to go do that, but
that was that was critically important for me. Does that
(41:45):
mean you want everyone else to come back back to
the office now? People have to work in the way
that works for them and other people are a living
experience where going into the office is the work worse
thing for them. Um. And I want to create a
space where anybody can can do their best. What does
the gaming industry look like in five years? And what
does it look like in twenty years? I think the
(42:05):
power of interactivity, the power of your choice and the
consequence of that and the learning from those consequences is
just going to continue to make this medium that I'm
lucky enough to work in, an interactive entertainment slash video games,
to just continue to create such an impactful space for
telling stories through the perspectives of others, whether that's like
(42:28):
Vr or a r like. Again, I look at technology
as more of a use for a human output as
opposed to the other way around. Um, but I think
this space that we're working in today, the sense of community,
the sense of democratization of creation, which is an overused term. Uh,
we're going to see video games really gain their space
(42:49):
in telling stories that really change people's perspective on others
lived experience, and I think that's a pretty cool thing.
All right, thank you, Philip, for joining us. Ye Bloom
(43:12):
Brook Studio. One pointo is produced by Lauren Ellis and
edited by Matthew Soto, Joe Medina and Meghan Olsen. I'm
Emily Chang, your host and executive producer. Thanks for listening.
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