Phil Spencer says cloud now accounts for double-digit percentage of total hours played on Xbox

Phil Spencer continues to discuss his vision of the Xbox future following the recent business update. This time, the Microsoft Gaming head opened up about the main growth areas, mass layoffs, and finding new customers outside traditional console markets.

Phil Spencer (Image credit: Xbox YouTube channel)

Stephen Totilo shared more takeaways from his interview with Phil Spencer in the Game File newsletter.

• Despite the overall slow growth of the global games market, Spencer is confident in Xbox as a business, saying that it is growing in areas like PC and the cloud.
• He believes that Microsoft needs to be “part of this industry growing,” while noting that “I don’t think we’re doing a good enough job finding new players.”
• Spencer explained that there are around “200 million global households that will play console games,” and that number hasn’t changed in the last 5-6 years. Microsoft and other companies tried to get more money per player by raising prices for AAA releases from $60 to $70, but this doesn’t really contribute to long-term growth.
• So he sees the solution in finding new customers “through new ways of delivering games to players who can’t play those games today, whether that’s device, whether that’s access, whether that’s price point of video games.”
• That’s why Microsoft continues to develop its cloud gaming business. According to Spencer, Xbox Cloud Gaming currently accounts for a double-digit percentage of total hours played in Xbox games.
• He noted that this area is growing rapidly — with demand now even exceeding supply — mainly “in markets that are never going to be console markets.” And Microsoft wants to gain a strong foothold in this segment and attract more users to its ecosystem.
• Speaking of the 1,900 layoffs made across Microsoft’s gaming division, Spencer noted that he has a “commitment to the company on the Xbox business being a profitable and growing part of Microsoft,” adding that the “cost of building the products inclusive of the people who work on them.” He said Microsoft had to make the cuts following its acquisition of Activision Blizzard, which added about 15k new workers to its business.
• “I’d say it was a combination of us looking across the full portfolio of what was working, which we have to do, and running the business, as well as areas of alignment between Activision, ZeniMax and Xbox,” he told Totilo.

More insights, including Spencer’s take on why abandoning physical distribution is not part of Xbox’s strategy, can be found in the full article.

Last week, Xbox announced that the four of its first-party games — Pentiment, Hi-Fi Rush, Sea of Thieves, and Grounded — will come out on rival consoles (likely PS5 and Nintendo Swtich). As part of the business update, Xbox president Sarah Bond also noted that Game Pass now has 34 million subscribers, while teasing Microsoft’s plans for new hardware.