The Verge interviews Phil Spencer - ‘The business isn’t how many consoles you sell’

Oneself

Member
Oct 26, 2017
1,040
But Phil, if you sell more of that "hardware", you get more software customers and potential service subscribers.

I mean, you know it, you actually tell two completely opposite ideas in one paragraph:
The business isn’t how many consoles you sell. The business is how many players are playing the games that they buy, how they play. So if somebody bought an original Xbox One from us on launch day, and they’re buying and playing games, I don’t need to sell them an S. I don’t need to sell them an X. If they want to stay on the Xbox One they have and stay as a great member of our community or subscribe to Game Pass, that’s a great business for us.
 

Papacheeks

Member
Oct 27, 2017
3,132
Watertown, NY
Why? Do you really think from a business strategy perspective that the leadership at MS aren't in lockstep? Xbox and Azure both represent MS at the end of the day.
And that my friend is the issue I see. The thing that has been screwing that division is it being tied or connected to Enterprise part of the company.

They seek again using gaming to advance the company and seek using the Enterprise portion to bolster Xbox.

Which all it does is water down the direction they go in.

If Xbox had more people like Phil running it without big brother having to be pleased with the roadmap and how it connects to nadellas vision I feel we would have had major changes a gen ago.
 

Savinowned

Member
Oct 25, 2017
323
Nashville, TN
This makes me wonder if we have a way to determine how much money the Xbox business makes in comparison to the Playstation business. Obviously Playstation is way more huge globally so I'm sure it makes more overall, but it would be interesting to the see the stats compared to see if Xbox is really as behind as folks tracking console sales would think.
 

Shoreu

Member
Oct 25, 2017
305
According MS gamepass leads to more sales digitally. Sony has a huge base right now so It is expected of them to have more digital sales from my understanding so it's not
Exactly. They have a huge base.

If they continue to make moves that make it likely they’ll keep that huge base, all while digital sales continue to increase relative to physical, their revenue is going to continue to increase.

Didn’t Sony’s PSN revenue eclipse the revenue of Microsoft and Nintendo’s entire game divisions just a year ago?
I'm not really sure.

What I think people find impressive, and I could be wrong is that Microsoft has increased the value of a smaller base Providing a good service. They are now incentivised to pull less out of our pockets while giving us more

Pull less per transaction*****
I'll probably have to explain this but I'll just wait for commentary to do so
 

Premium

Member
Oct 27, 2017
545
NC
Xbox had to change strategy since they cannot compete with Sony on traditional level.
Makes sense for them.
Is this a joke? They literally wiped out 50% of Sony’s sales from the PS2 to PS3 era via the X360.

Just because they failed spectacularly with X1 doesn’t discount them already beating Sony H2H when they put in the necessary effort.
 

Nuri

Member
Jan 4, 2018
181
Glad to MS finally becoming one company. MS isn't the #1 grossing company in the world because it sells so many pc's but mostly because Windows. This strategy is finally coming to the gaming division.
 
Oct 27, 2017
3,349
Is this a joke? They literally wiped out 50% of Sony’s sales from the PS2 to PS3 era via the X360.

Just because they failed spectacularly with X1 doesn’t discount them already beating Sony H2H when they put in the necessary effort.
Stop this nonsense. The PS2 sold 50m units after the 360 was released. The PS2 was on the market for more than 10 years, that's how it got to 150m. PS dropped from 100m in 5-6 years (PS2) to roughly 80m in about 7 years (PS3). Quite the drop, still impressive all things considered.
 

rokkerkory

Member
Jun 14, 2018
3,275
And that my friend is the issue I see. The thing that has been screwing that division is it being tied or connected to Enterprise part of the company.

They seek again using gaming to advance the company and seek using the Enterprise portion to bolster Xbox.

Which all it does is water down the direction they go in.

If Xbox had more people like Phil running it without big brother having to be pleased with the roadmap and how it connects to nadellas vision I feel we would have had major changes a gen ago.
Major changes take time and new leadership with Nadella is newish CEO and made Spencer part of their ELT. Then the purse opened up with crap ton of acquisitions, synergy across other areas of MS including h/w and azure. Seems like more and more the stars are aligning.
 

Papacheeks

Member
Oct 27, 2017
3,132
Watertown, NY
Is this a joke? They literally wiped out 50% of Sony’s sales from the PS2 to PS3 era via the X360.

Just because they failed spectacularly with X1 doesn’t discount them already beating Sony H2H when they put in the necessary effort.
And what happened last gen? Didn't Sony claw their way back and beat them overall hardware wise? Them supporting the system with GOTY contenders like last of us made good use of that momentum into PS4.

One gen where Sony mis priced, and marketed their box that XBox got a big lead in. But one Sony fixed some of their issues, and continued to pump out content it got back into where they were.

If you think that Xbox is going to magically have some kind of re-insurgence in WW sales boy have I got news for you.

Maybe their software with it releasing on steam/windows store. But right now with Gamepass I'm unsure of WW distribution.
 

Trup1aya

Member
Oct 25, 2017
4,731
chicken and the egg. you need to sell consoles so you can sell your games. he seems to think people will keep playing the x1s and x1x and i think thats a very limited understanding of how consoles work. gamers are used to buying new consoles. they get it. every 6 years, they know to expect a big upgrade. people will move on and it's his job to sell them on the new console.

if he is talking about cross gen games for the next few years, thats even worse. Gamers expect next gen games from next gen consoles. And if Sony first party games give them that then why would they go buy the MS next gen console playing last gen games at higher resolutions?

That said, its shocking how few hardcore gamers on this board seem to understand that cross gen games are last gen games in disguise and that they would be handicapped by jaguar CPUs in the X1s, the HDDs and the old gen GPUs. So if hardcore gamers can be misled so easily, maybe casuals wont mind cross gen games until 2023 either.
No.

His whole point is you DON'T have to focus on hardware sales in order to run a healthy software and service oriented business. He supported this argument in very clear tangible ways:

1) you can do things to make existing hardware customers stay engaged. 1 console owner who subscribes to services, buys several games a year and buys additional content is better for business 2 who just buy one game a year.

2) they DON'T have to sell consoles to sell their games/services - they now publish games all over the place. Also Xbox live and gamepass are now multiplatform. Xcloud will stream Xbox games to multiple platforms

3) he doesn't expect people will keep playing x1/x1s/x1x. He obviously knows that there is demand for new consoles... This is why they are making a new console. He's saying that the big business opportunities lie in reaching customers with via additional services- whether they buy his hardware or not.

I'm not sure why you think his endgame is perpetual cross-gen games.
 

Adamska

Member
Oct 27, 2017
4,533
Yeah, so far all they said they'd do is offer the same things Sony already offer (Remote Play, game streaming) and keep offering their game subscription through game pass. Honestly, it'll be very weird if game pass users can't use xcloud to access their subscribed collection.
 

Garrett 2U

Avenger
Oct 25, 2017
1,677
But Phil, if you sell more of that "hardware", you get more software customers and potential service subscribers.

I mean, you know it, you actually tell two completely opposite ideas in one paragraph:
The business isn’t how many consoles you sell. The business is how many players are playing the games that they buy, how they play. So if somebody bought an original Xbox One from us on launch day, and they’re buying and playing games, I don’t need to sell them an S. I don’t need to sell them an X. If they want to stay on the Xbox One they have and stay as a great member of our community or subscribe to Game Pass, that’s a great business for us.
Even in that paragraph, the focus is still on selling games and games services. One avenue of making games and services sales is through console, another is through PC, and yet another is through streaming.

It isn’t exactly a secret that console hardware doesn’t make money. And often, it’s even sold at a loss. It’s all about selling the games and services.

So by opening those games and services sales to consumers outside the console market (ie. PC and streaming), they can make a lot more money.
 
Jun 7, 2019
117
I like the value of game pass, but the games really do nothing for me. Out of the 60 games shown at MS conference, I like two. And would purchase them anyway. Not for me

Doesn’t mean the service is terrible or anything
 
Oct 27, 2017
3,546
Well all the evidence says consumers are happy enough to jump ship every generation. Obviously some people, especially among the hardcore, are less likely to do so. Do you have any evidence to the contrary?
It pretty much goes by region. The US and UK are far more fickle than Japan for example. There’s no guarantee which console will be the leader in the US next gen etc
 

AegonSnake

Member
Oct 25, 2017
4,182
No.

His whole point is you DON'T have to focus on hardware sales in order to run a healthy software and service oriented business. He supported this argument in very clear tangible ways:

1) you can do things to make existing hardware customers stay engaged. 1 console owner who subscribes to services, buys several games a year and buys additional content is better for business 2 who just buy one game a year.

2) they DON'T have to sell consoles to sell their games/services - they now publish games all over the place. Also Xbox live and gamepass are now multiplatform. Xcloud will stream Xbox games to multiple platforms

3) he doesn't expect people will keep playing x1/x1s/x1x. He obviously knows that there is demand for new consoles... This is why they are making a new console. He's saying that the big business opportunities lie in reaching customers with via additional services- whether they buy his hardware or not.

I'm not sure why you think his endgame is perpetual cross-gen games.
This is why.
I don’t need to sell any specific version of the console in order for us to reach our business goals. The business isn’t how many consoles you sell. The business is how many players are playing the games that they buy, how they play. So if somebody bought an original Xbox One from us on launch day, and they’re buying and playing games, I don’t need to sell them an S. I don’t need to sell them an X. If they want to stay on the Xbox One they have and stay as a great member of our community or subscribe to Game Pass, that’s a great business for us.
I dont disagree with any of your points, but thats not how i read his comments. There were rumors from MS insiders that they want to only sell cross gen games for the next few years. Those were the same rumors that said how MS will use multiplyers like 4x more powerful than the X which is something that turned out to be very accurate. i am just putting two and two together. if Phil doesnt need to sell people next gen consoles, he is not planning on making next gen only games.
 

Premium

Member
Oct 27, 2017
545
NC
Stop this nonsense. The PS2 sold 50m units after the 360 was released. The PS2 was on the market for more than 10 years, that's how it got to 150m. PS dropped from 100m in 5-6 years (PS2) to roughly 80m in about 7 years (PS3). Quite the drop, still impressive all things considered.
What kind of caveat is that? Nobody ever quotes the PS2 sales with the “but 50 million of those sales occurred post-PS3”.

The sales were 50% less with X360 owning the other 50%. Damage control however you wish.
 

Matt

The Terror that Flaps in the Night
Moderator
Oct 24, 2017
2,137
This makes me wonder if we have a way to determine how much money the Xbox business makes in comparison to the Playstation business. Obviously Playstation is way more huge globally so I'm sure it makes more overall, but it would be interesting to the see the stats compared to see if Xbox is really as behind as folks tracking console sales would think.
PlayStation makes roughly twice as much in revenue compared to Xbox.

Even in that paragraph, the focus is still on selling games and games services. One avenue of making games and services sales is through console, another is through PC, and yet another is through streaming.

It isn’t exactly a secret that console hardware doesn’t make money. And often, it’s even sold at a loss. It’s all about selling the games and services.

So by opening those games and services sales to consumers outside the console market (ie. PC and streaming), they can make a lot more money.
The part that gets ignored here is that owning the console means MS gets a cut of every dollar spent on it, which is not the case for them anywhere else.

If someone owns an Xbox, that person will be generating a lot more revenue for MS than someone who might buy a game they publish on Steam. It’s why Sony makes so much more than them even though Xbox tends to have higher per user spend.

People tend to jump to extremes. Console sales are not the only important metric, but they are one of them, and if MS was the leader right now they would be saying the same thing.
 

Zappy

Member
Nov 2, 2017
3,016
Isn't that more reflective of what xbox has had issues with? It should be it's own entity not beholden to the larger part of the company. They seem to not want to spend tons of money in long term investment in having it be byitself and be self sustaining on the quality of their software/brand. So they try and make that brand more watered down for a larger mass of people to consume.

It can go either way. It can go they become this giant gaming force that now is considered a big option for PC players, and has a re-insurgence of people interested in Gears, halo forze, fable, and what ever else they make.
Or they become a jack of all trades, with software that reflects that on their services.

It's one thing if the whole industry was going this direction. But even now adoption of services of games is still super low compared to dedicated software that runs locally.
There's no mobile sub out there that gives you a bunch of tensen games?

I can see more people playing Gears, halo when all of this is said and done. How many more is still to be seen, but if these new reboots for Halo, fable, and new IP's don't get people stoked, I don't know what else they can do.
I feel they should have concentrated on quality of out put first, and slowly build gamepass with those quality titles. Now it seems they are putting everyting under the sun under it. ANd that could have mixed results to be honest.
Why would MS care about a gaming brand that doesn’t align to their core business? What you’re missing is that MS is up there with the biggest. Xbox is not needed. It has to compliment their core business to exist in the MS group.

Now - I agree with some of what you say. But what I do think is that MS are doing some of the big development you talk about. It’s just that building games from scratch takes 5-6 years and they only started a year or two ago. Poor but that is where they are. Before then Xbox was in danger of going and investments were stopping.

But their streaming plans and sub plans are necessary and likely future proofed. In the here and now they might struggle for core mindshare. In a few years? Their service might be so compelling that the delays never mattered. Or not. Time will tell.
 

Decarb

Member
Oct 27, 2017
2,981
With hardware you get to put your own curated store out, and with your own store you get 30% of every 3rd party game sold. And 30% cut from 100M install base is massive, like $10B+ massive annually in case of PSN. Hardware install base is not about hardware profits anymore.
 

DangerMouse

Member
Oct 25, 2017
11,244
I agree it's a great value but that $1 is an entry point not the norm is all I'm saying. Comments like "They are giving away games for $1" make me feel like people don't know that it's not forever or they are not being genuine.

This is no different than any other strategy to get people on your service.
Yeah, it's fantastic right now as a price, but neither of those prices are going to stay. Especially when we look at, say, how Netflix is still eating cost to get people to subscribe/stay subscribed even with such great content and continually paying a ton to get more made, and that's even exclusive content, and movie and TV content is still easier and less bandwidth heavy to stream. Right now it's a great value though when people can get it this cheap.

Will be interesting to see how long this subscription model goes for without wholesale changes to the industry

Seen a few tweets from industry folks musing about how subscription services just wont work for AAA game development in the long run, without some big changes to how they charge the consumers horrible MTs in game for stuff etc.

Of course MS can afford this type of service as a platform holder for maybe the medium term but other publishers are gonna get screwed by this trend imo. I very much doubt consumers are gonna start taking out 4 or 5 subscriptions each . Devs need the 60 upfront, not a much reduced payment on a sub service model for their 150mil USD budget game.The only way to recoup is to start putting lots of MTs in imo.

Also I just dont think many people wanna stream AAA games to their phones etc. Unsure what market is getting chased here

Sorry for the slightly offtopic post, but its certainly interesting where things are going.
Great post.
 
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Oct 27, 2017
3,349
What kind of caveat is that? Nobody ever quotes the PS2 sales with the “but 50 million of those sales occurred post-PS3”.

The sales were 50% less with X360 owning the other 50%. Damage control however you wish.
Caveat? How about simple math? How could the 360 take away 50% of 150m sales when 30% of those sales occured during that gen? Man, wtf is this logic?
 
Feb 15, 2019
296
Well all the evidence says consumers are happy enough to jump ship every generation. Obviously some people, especially among the hardcore, are less likely to do so. Do you have any evidence to the contrary?
All evidence from where? North America? Because from the sales data from pretty much everywhere outside of NA, the UK and maybe a few other countries, none of those playerbases ever jumped ship and pretty much always stuck to PlayStation.
 

Lukas Taves

Member
Oct 28, 2017
4,279
Brazil
MS is offering so many choices the way you can purchase games and where you can buy. The keyword is choice. So many options and avenues where the end user can play their games. Beautiful thing to see.
It’s worth mention that he means he has no need to sell scarlett for those that already have Xbone or S. Giving yet another hint that there will be no hard break coming next gen (with xcloud likely enabling newer games that wouldn’t run on xbone)
 

Kemono

Member
Oct 27, 2017
1,571
Well all the evidence says consumers are happy enough to jump ship every generation. Obviously some people, especially among the hardcore, are less likely to do so. Do you have any evidence to the contrary?
What?

Sony won 3 out of 4 times so far. And the one time they didn't they undermined their own success, made almost every error possible and still won against the 360 (ms biggest success so far). The winner of that gen (wii) was only 10 million units ahead in the end.

Next gen will be the same again. People don't want to or simply can't accept that playstation is on another level worldwide.

If anybody jumped ship in the beginning of the 360 era they jumped right back in the end to the ps3 and stayed there for the ps4.

MS couldn't win against playstation and so they found a new way to generate profits. I love seeing them doing better but there's a reason they don't want to fight against sony in the classic hardware game.
 

GMM

Member
Oct 27, 2017
2,405
He is right, consoles are just one way of accessing games and selling the most of these consoles doesn’t mean you are the most profitable of the bunch.

Microsoft is a services company and selling the most consoles aren’t necessarily their measurement for success any more since they have multiple sources of revenue in the gaming space now across Xbox, Windows and xCloud.

This doesn’t mean the consoles are getting less important since they represent a great value in the overall ecosystem since windows and/or xCloud users might find a value in the ecosystem transferring over to other platforms.
 

Replicant

Member
Oct 25, 2017
2,811
MN
What?

Sony won 3 out of 4 times so far. And the one time they didn't they undermined their own success, made almost every error possible and still won against the 360 (ms biggest success so far). The winner of that gen (wii) was only 10 million units ahead in the end.

Next gen will be the same again. People don't want to or simply can't accept that playstation is on another level worldwide.

If anybody jumped ship in the beginning of the 360 era they jumped right back in the end to the ps3 and stayed there for the ps4.

MS couldn't win against playstation and so they found a new way to generate profits. I love seeing them doing better but there's a reason they don't want to fight against sony in the classic hardware game.
I don’t care how many PS3’s sold in the end. To say it beat 360 would be on a technicality. The 360 destroyed the ps3 in the western markets.

PS3 by no means beat Xbox that gen. Developers used Xbox as the lead platform the entire time for a reason.
 
Oct 27, 2017
3,349
Ok, this thread completely turned into "Tales from the Ass" now.
"360 destroyed PS3 in the Western markets" - am I hearing right, Europe is not part of the Western markets?
Yeah, I'm out...too much revisionist history for one day, lol.
 
Nov 11, 2017
944
But Phil, if you sell more of that "hardware", you get more software customers and potential service subscribers.

I mean, you know it, you actually tell two completely opposite ideas in one paragraph:
The business isn’t how many consoles you sell. The business is how many players are playing the games that they buy, how they play. So if somebody bought an original Xbox One from us on launch day, and they’re buying and playing games, I don’t need to sell them an S. I don’t need to sell them an X. If they want to stay on the Xbox One they have and stay as a great member of our community or subscribe to Game Pass, that’s a great business for us.
That's why steam , x cloud, gamepass, windows store and new consoles exist they don't need to lead in selling consoles , they just need to have avenues to sell software/subs which they will have.
 

Kemono

Member
Oct 27, 2017
1,571
I don’t care how many PS3’s sold in the end. To say it beat 360 would be on a technicality. The 360 destroyed the ps3 in the western markets.

PS3 by no means beat Xbox that gen. Developers used Xbox as the lead platform the entire time for a reason.
Not in the end. The 360 had a year long headstart and if you align the sales data sony ps3 outsells the 360 from day 1.

And the 360 was used as lead platform because ms did a better job with the hardware. it was easierfor the devs to port fromt he 360 and not the other way around.

As i said. Sony fucked up big time and ms used it (as they should) to get the upper hand for a few years.

And in no dimension was the 360 destroying the ps3 in the west. In the us and the uk they did better than sony but that's it. In every other country the ps3 outsold the 360 after the year long headstart.
 

ChryZ

Member
Oct 26, 2017
1,564
I still remember when the 360 cornered the North American market. MS was very eager to stress monthly NPD numbers and to make it very clear who sold the most consoles.
 
Oct 27, 2017
3,349
Nothing was made up. Sony went from selling 150 million to 70 million between PS2 to PS3.

I’m done here.
I'm in a pretty good mood, so let me help you:
1. PS3 ended up over 80m LTD
2. For whatever reason, and I guess only the most faitful console warriors will know the reasoning behind this, are you not counting
50m PS2s between 2006 and 2012 towards Sony's total hardware sales. I guess the brand was changed to Fisher Price for that period or is it because it was outdated tech from 2006 onwards? Fair enough, so by the same logic the Switch sales can't be compared to X1 + PS4 , right?
3. Ok, let's say the PS2 in it's later cycle targetted a different audience, so those 50m weren't hardcore gamers but causal people were using it for Singstar or as a cheap DVD player. So how did 360 steal 50% of the remaining PS2 100m hardcore crowd then?You could as well argue that the Wii stole a good chunk of Sony's userbase
4. there's absolutely no clear correlation between the 360 and the PS2>PS3 sales for reasons I've mentioned above - in summary: the PS2 just like the Wii was an anomaly, a one-hit wonder. Yes, the 360 took a good portion of market-share from Sony, but in no scenario was that 50%.
 

Solid

Member
Oct 27, 2017
6,374
But Phil, if you sell more of that "hardware", you get more software customers and potential service subscribers.

I mean, you know it, you actually tell two completely opposite ideas in one paragraph:
The business isn’t how many consoles you sell. The business is how many players are playing the games that they buy, how they play. So if somebody bought an original Xbox One from us on launch day, and they’re buying and playing games, I don’t need to sell them an S. I don’t need to sell them an X. If they want to stay on the Xbox One they have and stay as a great member of our community or subscribe to Game Pass, that’s a great business for us.
Microsoft and Sony are putting in work to transition to service-centric models meant to make their platforms more hardware-agnostic in a bid to expand their playerbase significantly while bringing in more revenue than ever before. Although that paragraph you quoted sure is clunky, Microsoft is making the point that game sales, engagement, and recurring revenue are how the real money is generated. Powerful dedicated hardware can facilitate that, but is becoming increasingly less necessary.
 

Trup1aya

Member
Oct 25, 2017
4,731
This is why.


I dont disagree with any of your points, but thats not how i read his comments. There were rumors from MS insiders that they want to only sell cross gen games for the next few years. Those were the same rumors that said how MS will use multiplyers like 4x more powerful than the X which is something that turned out to be very accurate. i am just putting two and two together. if Phil doesnt need to sell people next gen consoles, he is not planning on making next gen only games.
I feel like you just misread his comments. He specifically mentioned x1 hardware because they are known quantities and allow him to frame their future business in ways people can readily understand- They can still sell a lot of software and services Even if some people choose not to upgrade right away. The ability to stream games from MS servers will further reduce the reliance on consumers upgrading, because they can just upgrade their data centers

His point is that the success of their business isn't wholly or even primarily dependent on selling hardware. This, of course, doesn't mean hardware is irrelevant

As far as cross-gen. They didn't go for Zen just to be hamstrung by jaguar forever. But that doesn't mean that mean that every game that comes out next gen needs to be too demanding for xb1 to handle. Some of this generations most popular games can run on much older hardware, for example. Having some games that can scale across generations will still be financially sound decision.
 
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Bradbatross

Member
Mar 17, 2018
3,489
Microsoft and Sony are putting in work to transition to service-centric models meant to make their platforms more hardware-agnostic in a bid to expand their playerbase significantly while bringing in more revenue than ever before. Although that paragraph you quoted sure is clunky, Microsoft is making the point that game sales, engagement, and recurring revenue are how the real money is generated. Powerful dedicated hardware can facilitate that, but is becoming increasingly less necessary.
Pretty much lol.
 

Majiebeast

Member
Oct 25, 2017
1,764
I still remember when the 360 cornered the North American market. MS was very eager to stress monthly NPD numbers and to make it very clear who sold the most consoles.
You don't even have to go back that far.

https://www.gamespot.com/articles/new-xbox-one-ad-calls-it-the-best-selling-console-/1100-6444613/

Microsoft today released a new commercial for the Xbox One S titled "Xbox One: The Best-Selling Console in America." The major caveat here is that Microsoft is saying the Xbox One is the best-selling console in America from July-September 2016, not all year or life-to-date.
The video has since been deleted when PS4 became best selling in October or November again.

But here is a mirror video.
 

Solid

Member
Oct 27, 2017
6,374
You don't even have to go back that far.

https://www.gamespot.com/articles/new-xbox-one-ad-calls-it-the-best-selling-console-/1100-6444613/



The video has since been deleted when PS4 became best selling in October or November again.

But here is a mirror video.
a consumer-facing advertisement which placed emphasis on a metric more familiar and more relatable to consumers than MAU and customer engagement/retention/recurring purchase potential. a metric that, at the time, was constantly utilized by Sony toward the same end - to impress gamers who had traditionally measured success by the # of consoles sold.

I don't think this advertisement contradicts Phil's statements in this interview