Xbox boss Phil Spencer wants games to embrace diverse business models

When it comes to selling games, Microsoft is all-in on subscriptions. But it’s not emphasizing the Game Pass subscription service to the exclusion of other models, boss Phil Spencer said in an interview with Insomniac Games founder Ted Price for the Game Maker’s Notebook podcast. Instead, Spencer thinks the industry should explore every potential model both to make better games and to reach the most people.

While Xbox is bundling up all of its releases in Game Pass Ultimate for $15 per month, it doesn’t want or expect players to stop spending money on games in other ways.

“Our point of view at Xbox is that there’s not one business model to rule them all,” Spencer said. “We actually think it’s healthy not just from an industry standpoint, but from a creative standpoint if multiple business models will work.”

Different business models can lead to new kinds of games

During his conversation with Price, Spencer pointed to Alan Wake as an example of why different business models can lead to better games.

“When we started on Alan Wake, we wanted to make it an episodic game,” he said. “And at the end of it, we got a little scared about whether episodic was going to work. You see how the business model works. You sell X amount of units for episode 1, then [fewer] for episode 2. There are diminishing returns. We all looked at that business model and decided to bundle it up for $60. Was it better or worse? I don’t know. But the fact that we were so set in that world … it locked us into certain creative decisions.”

The Xbox overseer doesn’t want creators to feel locked in. Instead, he wants studios to have the freedom to come up with the business models that fit their vision.

“I think for us as an industry we should embrace monetization dexterity because it leads us to the most creativity,” said Spencer.

New monetization for new kinds of players

While empowering creators is important, Spencer also see a huge potential for reaching untapped audiences. He noticed a potential for this when he was in Africa in May to open some Microsoft development centers throughout that region. While traveling throughout those countries, he noticed a novel way that people pay for internet access.

“They have a model in Africa of basically earning credit they can spend to use the internet,” said Spencer. “So you might be in a taxi and watch an ad and that gives you time to now go and browse the open internet. Think of it as play to earn. And could that be a business model in games? Absolutely it could.”

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That’s already happening in mobile and hypercasual games. And for Spencer, this isn’t about finding new ways to squeeze more money out of the current Xbox audience. Instead, it’s about meeting global players where they are and finding ways to turn that into a profitable business.

“More people playing is a good thing,” said Spencer. “We have to be careful. If you view the gaming world as a fixed pie. If you say there are only 200 million people who will buy a gaming console in any gaming generation, then in order to grow the business we have to get more per user. If it’s a fixed number of players and it’s about how you monetize each minute someone is playing, I think that’s dangerous for us as an industry. I think we have to find new players and new methods of monetization to open up those player bases. And that’s a great path to growth.”

Microsoft is growing Xbox Game Studios so that it can take some necessary risks

Spencer doesn’t want to sit back and tell the industry what it needs to do to grow. Instead, he wants Xbox to make these moves itself, which it is growing its roster of internal development studios.

“We know that content is what drives engagement,” said Spencer. “People play games. They don’t play pieces of plastic plugged into their televisions. They don’t play bits flying over the internet. One of the things we can do with a larger first-party organization is take some of the risks on our own.”

As an example of past risks, Spencer pointed to initiatives like Game Pass and Xbox Play Anywhere.

“We can also push on things like cross-save and cross-progression,” said Spencer. “And those things have been great. I’ve seen the industry move forward sometime faster than us and sometime along with us. We are trying to do what we are espousing.”

But Price then got to ask the big question about Xbox’s business model: Does putting every big game on Game Pass make financial sense?

“It does. But that’s just me — some dude saying that it does,” said Spencer. “But if you play it out, you see you can get more people playing more games for more hours. I think that’s a great thing for our industry. People play more games than they’ve ever played before.”

Spencer didn’t elaborate on the economics beyond that. But he did reiterate recent talking points about players trying more genres than ever. He also noted that Game Pass is cannibalizing TV time for a lot of subscribers.

“Game Pass works today,” said Spencer. “And I think it will keep working as it continues to grow.”

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