Former CEO of Microsoft Gaming, Microsoft Gaming
Microsoft Gives Xbox a Gaming Boost in $7.5 Billion Bethesda Deal
Sep.21 -- Microsoft Vice President of Gaming Phil Spencer discusses the company’s $7.5 billion purchase of ZeniMax Media Inc., owner of Bethesda Softworks, the company’s largest-ever video game purchase. He speaks with Bloomberg’s Emily Chang on "Bloomberg Markets: European Close."
About Phil Spencer
Phil Spencer, CEO of Microsoft Gaming, has stated that the company's primary use of AI within Xbox is for platform moderation, such as identifying and filtering offensive or spam-related content. He noted that AI is not currently used in the creative aspects of game development, saying he leaves those decisions to individual teams. Spencer also suggested AI could potentially be used in the future for game discovery and curation, acting as a personalized recommendation engine. Spencer has discussed the future of Xbox hardware, indicating that the company is working on new form factors, including a handheld device, and emphasized the importance of being able to play games locally. He stated that Xbox games will continue to appear on more platforms, including PlayStation and Nintendo Switch, saying the company wants its games to be available where people play. Spencer described this strategy as putting games first and not putting up walls around where people can engage with Xbox, while also affirming that dedicated Xbox hardware remains a fundamental part of the brand.
Transcript (16 segments)
✨ AI-enhanced transcript with speaker attribution
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Interviewer0:00
Obviously a big buy for you, Bethesda, maker of popular games like Elder Scrolls, Doom, Fallout. Talk to us about why you wanted to buy this content rather than just host it, given that Bethesda is still contractually obligated to make games for Sony.
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Phil Spencer0:14
Yeah, we view content as just being critical to our platform. We've got Game Pass growing very fast, we're over 15 million subscribers. As you mentioned, we've got consoles — we're going into pre-order for our next generation of consoles tomorrow. We've launched xCloud last week into our Game Pass subscription, so people can play our games on their mobile phones. Content is just foundational to what we do. With this move, we double the number of content creators we have inside of Xbox, which we think is a great move for the Xbox community.
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Interviewer0:46
So once inside Xbox, ultimately will Bethesda then start making games for only Xbox and PCs, and not PlayStation?
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Phil Spencer0:53
Clearly, our commitment with this move is that Xbox and PC and people playing on xCloud and Game Pass will get ZeniMax's games. So the collection of Bethesda studios will be coming to Xbox and Xbox Game Pass, and that's just a huge commitment from us. In terms of other platforms, I think we'll make a decision on a case-by-case basis. But this is really a move to just show the strong commitment to the Xbox community that great games will be coming.
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Interviewer1:20
Now, as you mentioned, gaming traffic has soared. You've now got 15 million subscribers on Game Pass. That said, some gamers have been disappointed in some of the gaming offerings. How much of this is pull-forward demand given the pandemic, and what do the quarters ahead then look like?
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Phil Spencer1:37
We see gaming as a really strong growth category. It has been for many years. Three billion people play video games on the planet — half the connected world. It's nearly a $200 billion top-line business, both of those numbers growing by double digits. So gaming is just a secular trend in entertainment — people moving from passive entertainment to active entertainment. You see it, kids everywhere playing video games, Minecraft, Fortnite. It's just a really strong place for Microsoft to make an investment with the transformations we're seeing in the business.
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Interviewer2:11
As you said, content is king, so I have to ask about the TikTok deal. Of course, it is still playing out, but how big a deal is it that Microsoft lost the TikTok deal?
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Phil Spencer2:22
You know, we're pretty public about how that played out. I don't have anything to say about how TikTok is working now. But when I look at our growth aspirations in the consumer space as Microsoft, I think our investments in gaming and reaching communities everywhere is going to be critical to our long-term success with consumers.
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Interviewer2:42
That said, the Trump administration is now pushing U.S. gaming companies on their ties to Tencent, and that means Fortnite and League of Legends, which are hugely popular on Xbox. What is Microsoft's position in this geopolitical tug of war? What if Trump starts cracking down on Fortnite and League of Legends?
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Phil Spencer3:00
We've taken a long-term approach to gaming. We think people should be able to play the games that they want to play, with the community they want to play with, on the devices that they want to play on, and that's been central to our strategy. We work with global partners to be able to do that, and we hope to continue to do that. It's really a cornerstone of our strength — reaching over three billion gamers on the planet.
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Interviewer3:23
Meantime, there's a battle royale going on between Fortnite maker Epic Games and Apple and Google. Xbox has its own situation with Apple's App Store. Do you think Apple and Google are monopolies, like Epic says?
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Phil Spencer3:38
We think gamers on general-purpose compute devices should have access to services like Game Pass, cloud streaming. We think that should be available to everyone, and we're committed to making that happen. We'll continue to work with the large mobile operators out there — we'll work with Apple, work with Google, work with Samsung. We're doing that today. And I do think gamers should have choice with the devices that they have and the content that they get to play.
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Interviewer4:02
Now, tech markets have been choppy. Microsoft has seen a pretty significant rise given the work-from-home trends, but shares have been down since losing TikTok. Shares are down a little bit today. What's your take on that reaction and the volatility that we're seeing?
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Phil Spencer4:17
I think we're always taking a long-term approach to growth opportunities for us as a company, and gaming is one of those areas. It's just a strong, growing consumer category. It's an area where we have some unique strengths relative to our tech competitors that are trying to move in. I mean, this deal is a perfect example — when you think about ZeniMax, they brought their first console game ever, Elder Scrolls, to the original Xbox. This is a relationship that's been built over nearly 20 years. So when we look at this gaming category and the strength that we have, as this category is moving from device to player control, and our ability to deliver cloud game subscription to every gamer on the planet — this is a long-term growth category for Microsoft, and we're incredibly excited to be able to continue to invest.
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Interviewer5:03
Now, you've got new consoles out, a new acquisition under your belt, and a captive audience in the middle of a pandemic. What is your outlook on the holiday season, and how this one might be different than years past?
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Phil Spencer5:15
Yeah, really good question. Our pre-orders for Xbox Series S and Series X go live tomorrow globally — we're excited about that. But you hit on a point: this is a time where accessibility of gaming is really, really important. We have the most powerful console in the market with Series X, but Series S at $299 here in the U.S. is the most affordable next-generation console. And on top of that, we have programs like Xbox All Access, which allows somebody to enter this generation of consoles for $24.99. It gives them the hardware, it gives them the gaming subscription, and all the content that they would want to play — a really accessible price point at a time of a lot of uncertainty for families.