loading . . . #362: Dank Spencer Closing out yesterday's edition, on Sony’s sudden and staggeringly daft closure of Bluepoint Games, I said this about PlayStation co-CEO Hermen Hulst:
“Like Spencer, he has only himself to blame. Like Spencer, he is one of the few people in the industry with the power to change it for the better, yet appears only to be able to make it worse. And like Spencer, I hope to see him one day fired out of a cannon — literally, ideally, but at this point I'll take what I can get. It is becoming increasingly urgent.”
A few hours later, Microsoft _announced Phil Spencer’s retirement_; his last day is on Monday. Are the people that matter finally paying heed to Hit Points? Is this the start of my #thoughtleader era? Do I need to get back on LinkedIn? God, let’s hope not. Worst website on the internet, and it’s not even close.
Spencer will be joined on his way out the door by Sarah Bond, who resigned her position as Xbox president yesterday. This is even more surprising a development than Spencer’s departure, since Bond has for years carried the air of heir apparent. It certainly seems plausible enough that Bond would resent being passed over for the top job and decide to walks, particularly since the credentials of Spencer’s replacement, Asha Sharma, seem a bit, erm, suspect. (A former VP of Meta and COO of Instacart, whatever that is, she’s only been at Microsoft for two years, serving as president of, yikes and uh-oh, CoreAI.) But who knows. People have been pointing to a _LinkedIn post from Bond_, sent a few hours before the news broke, which gave the impression things were very much business-as-usual chez Xbox. But it might have been scheduled in advance; either way I doubt Bond herself was at the keyboard for it. I certainly hope that people of this seniority, in this big and powerful a company, do not spend their days posting? Who knows. If the president of the United States can find the time for it, I suppose all bets are off.
Anyway! Hit Points has, to put it mildly, been no fan of Phil Spencer over the last few years. But as he saunters off, snowboard under one arm and sixteen of his favourite game-logo T-shirts under the other, for the final time I thought we should give him his dues before we consider where it all fell apart. Things did look pretty good for Xbox under his auspice for a while.
He did a commendable job of salvaging the wreckage of the Xbox One left by his predecessor, Don Mattrick. The Xbox One X closed the yawning power delta between the launch console and PS4, and even took a slight lead, on paper if not in practice, over PS4 Pro. The backwards-compatibility initiative rewarded platform loyalty and quietly set a new industry standard: being able to play your old games on your new console is now a basic expectation. He was a driving force in the breaking down of the industry’s old walls, striving in both public and private to make cross-platform multiplayer the norm.
Subscribe
And while, as we will discuss in a moment, Xbox’s wanton acquisition spree would ultimately set Spencer’s downfall in motion, for a while there things looked so good, so coherent, so smart. Microsoft bought Minecraft for what now looks like a song, let Mojang get on with things with minimal corporate interference, and it went from strength to strength. The purchases of, among others, Double Fine and Obsidian gave studios who were only ever one failure away from bankruptcy a financial safety net and creative freedom. Even the ZeniMax acquisition, for all the eyebrows raised at the $7.5bn pricetag — gosh, that seems quaint now — made sense for a company that was trying to build an irresistible, all-you-can-eat subscription service, and knew it could only do so with a ready supply of desirable, high-profile games.
Throughout it all, even when things went bad, Spencer clearly understood games as a medium, a profession, and a business. Having an Actual Game Guy at the top of a big gaming company is far rarer than it should be, and while there was a lot of facade to Spencer — particularly towards the end, when he used faux-candour and his gaming credentials to try to mask the godawful shitfest he had spawned — I imagine this is the aspect of him we will come to miss the most. Heartening though it is to at last see a woman in the big chair in this most historically blokey of industries, I do not see much in Asha Sharma’s track record to suggest things are about to get better. (And that’s before we get into _all the birthrater stuff_.)
So, yeah. Phil was a good bloke, and he did some good stuff. I believe his heart was in the right place right up until the end — but unfortunately for him, and the rest of us, Microsoft these days is no place for hearts. Let’s have a quick look at the three big moments where, to my mind, it all went wrong for Phil Spencer.
In fact, let’s stick a paywall in. Sorry, I hardly ever do this, but it’s Saturday and I’m working and that seems wrong somehow. It’s 50% off for your first month...
### Day One On Game Pass
This seemed like such a good idea at the time, and I recognise it was probably a necessary move if Microsoft was to achieve its Netflix-for-games ambition. But putting big firstparty games on Game Pass at launch redefined what ‘success’ for the service would look like — it meant it would only work if it amassed a userbase large enough to make more money through subscriptions than it would selling those games through traditional distribution channels — and with hindsight I think Microsoft pulled the trigger on it far too early in the service’s life. Netflix spent half a decade licensing its catalogue from thirdparties before moving into original programming. It had 25m subscribers by the time House Of Cards arrived in 2013 — the same number, as fate would have it, at which Game Pass appears to have peaked. Spencer’s Xbox jumped the gun, training a generation of players to stop buying games just as production budgets began to soar to the stratosphere. “I’ll wait for a sale” was bad enough for the industry; “I’ll wait til it’s on Game Pass” was a catastrophe. The numbers never really stacked up, and only got more rickety over time.
### Xbox Game Studios
Microsoft was scarred by its ownership, and eventual closure, of _Fable_ developer Lionhead. It knew it fucked up: that it was too heavy with the oversight, too rigid in its control of the studio’s activities, that it had sacrificed Lionhead’s evident creative talent on the altar of Microsoft’s wider business goals, particularly Kinect. Xbox leadership learned from the experience: in the 2021 documentary series _Power On: The Story Of Xbox_, Spencer explained that Microsoft’s new wave of gaming acquisitions were driven by a very different philosophy. “You acquire a studio for what they’re great at _now_ , and your job is to help them accelerate how they do what they do, not them accelerate what _you_ do.”
Very good. There’s a moment in the excellent Double Fine documentary _PsychOdyssey_ where Tim Schafer and co realise they’re going to miss a milestone and are sweating about Microsoft’s reaction; in the end they get on a video call with Xbox studios boss Matt Booty and he’s all sweetness and light. Like, relax, it’s fine. We love you, we support you, take all the time you need and let us worry about the money. It’s a great scene. Microsoft comes out of it looking great. What a terrific, healthy way to run a business.
Yet it’s hard to look at Xbox’s release schedule in the Series era and argue that it actually, y’know, _worked_. Yes, this hands-off approach unburdens studios like Double Fine, letting them focus on what they do best while leaving the money stuff to the Xbox leadership. But it has allowed others to flounder. It is hard to argue that 343 Industries, whose dreadful struggles with _Halo Infinite_ are _particularly well documented_, wouldn’t have benefited from a firmer hand. Likewise Rare, whose _Everwild_ was in development for a decade before Microsoft pulled the plug on it last year alongside another round of layoffs, and The Initiative, the studio founded at great expense in Santa Monica, whose _Perfect Dark_ reboot was stymied by poor management, a lack of creative direction, and hefty staff turnover. Spencer and team never really got a firm grip of the Xbox studio group — something that became increasingly evident, and problematic, as the group swelled through acquisitions.
The ultimate blame for all this probably lies with Booty, who has somehow come out of Spencer’s departure with a promotion rather than being, just spitballing here, drop-kicked into the sun. But the overriding philosophy was Spencer’s to lay down — and it was Spencer’s to change when it became clear it wasn’t working. The result was a software operation that always promised great things in the future, but never quite managed to deliver in the present. As Hit Points has often pointed out, it is always _next year_ with Xbox. Spencer, alas, will have no more of those.
### Activision Blizzard
The whole acquisition business seemed so easy for a while. When you work for a company of such a size, and with such resources, as Microsoft it’s probably pretty easy to spend a few billion here and there without too many questions being asked. The odd hundred million on a Ninja Theory or Double Fine? Barely a rounding error, old stick, have at it. You’re building a subscription catalogue, and this is the smart way to do it.
When you spend the thick end of $70bn on one of the game industry’s biggest companies, naturally the calculus changes, and the vibes inevitably darken overnight. Suddenly there is oversight; there are difficult questions; there is pressure. Of all the things that were dumb and wrong about the game industry’s biggest-ever buyout — and there were many of them — perhaps the biggest was the way it exposed Microsoft’s game business to scrutiny from Microsoft itself. It was no longer enough for Spencer and co to trundle along, slowly building an audience, gradually knocking an ever-growing studio operation into shape. Things had to happen, and they had to happen fast.
We know that the Activision buyout was the brainchild of Satya Nadella, Microsoft’s CEO. It would therefore be unfair to lay the blame for what has happened since at Phil Spencer’s feet. But he was surely smart enough to see the risks here. To understand that regulators were highly unlikely to let Xbox have _Call Of Duty_ et al to itself; that spending all that money would ratchet up the pressure on an Xbox division who, try as they might, just couldn’t get themselves out of last place in the console wars; that, when all was said and done, it was more likely to compromise, and perhaps even ruin, Xbox’s hardware and subscription businesses than it was to catapult them to victory.
Sure, Nadella might have wanted it to happen. But what are people in jobs like Spencer’s for, if not to understand their specific industries and markets, raise the right objections, and give the right advice to help the boss get the big decisions right? Either he didn’t see any of this coming — in which case he’s not as smart as I’d thought — or he did, but either didn’t speak up at all, or didn’t do so with enough volume. The result, as we all now know, was pretty much fatal. It turned Xbox from a hardware business with lofty ambitions, and a coherent plan on how to get there, into a muddled thirdparty publisher with a struggling hardware side-hustle that’s laid off thousands of workers, closed a hatful of studios and cancelled far too many games, and seems destined to do a lot more of it in the post-Spencer era. It is the biggest, most expensive, most tragic mistake in the whole history of games and while it might all have been Nadella’s idea it is, I am afraid, the defining moment of what we can now call Phil Spencer’s legacy.
Tip Jar
* * *
There you go! A Saturday newsletter, eh? Feels weird. I've rather dashed this off in between the usual jobs so please forgive me any typos or mangled sentences etc. I will now go off and do more weekend-appropriate things, i.e. hang out some washing, pour a beer, and settle down in front of a videogame. Lovely stuff. See you next time! https://newsletter.hitpoints.co/362-dank-spencer/
