Phil Spencer: the gaming industry is stagnating, the growth of game budgets is dangerous for exclusives, EGS and other stores may appear on Xbox
Polygon journalists talked with Xbox CEO Phil Spencer about what is happening in the gaming industry and the future of Microsoft's gaming business. We have collected the main points from the interview.
- Game budgets have become "astronomical" — now game development can cost $300 million. According to Spencer, this has created a tangle of problems that is difficult to untangle.
- According to Spencer, it used to be easier to set game budgets. The publisher had to guess how many copies it would be possible to sell, determine the desired income and decide at what price to sell the game. However, now when calculating the budget, many other factors must be taken into account. Games began to be sold on several platforms with different conditions, they are also added to subscription services, and all this is often accompanied by discounts on the release. In addition, for years now, games have been made by teams of hundreds or even thousands of people from all over the world.
- High budgets have led companies to take fewer risks. They need to sell millions of copies just to recoup costs, so many refuse to experiment creatively. "That's a pretty big number for a world with so many video games already. How are you going to achieve it? Are you ready to take responsibility for a new IP or a new type of game, provided that the risk of being left without profit is so high?" says Spencer.
- Exclusives, which have a smaller audience than games released on multiple platforms, are particularly affected by rising budgets. Such titles should generate additional money to cover the cost of console production.
- Spencer noted that the console market has not grown in 2023. Sales of the consoles themselves have increased, but the number of players has remained the same. The Xbox, PlayStation, and Nintendo Switch were essentially competing for the same audience.
- The gaming industry as a whole has also almost stopped growing. This led to mass layoffs. As Spencer explained, public companies must demonstrate growth to investors, so if the market stagnates, companies are forced to cut costs and reduce staff.
- Layoffs in Microsoft's gaming division are also partly explained by problems in the industry. "We are a business. I say it over and over again. I can't afford the luxury of running a non—profitable business," said the head of Xbox.
- By releasing Xbox exclusives on competitor platforms, Microsoft wants to increase sales of older games and cope with the stagnation of the market. According to Spencer, every decision he makes is for the good of Xbox, even if it may look different from the outside.
- Spencer pointed out that young people are used to the fact that the content they need is available from any device. For example, TikTok can be opened on both iPhone and Android smartphones. Therefore, he wants the Xbox ecosystem to be as wide as possible.
- Spencer does not rule out that in the future, Xbox may have app stores like Epic Games Store and itch.io . In his opinion, not only Microsoft will benefit from this, but also the players themselves, since they will have more freedom of choice.
