How the video game industry’s most progressive exec is forging a bright future for Xbox.
December 19, 2019 at 6:40PM PST Mustache and soul patch name.
On a warm Saturday in early June, Phil Spencer, the Microsoft executive in charge of Xbox, was helping Keanu Reeves, the movie star, calm his nerves inside the Microsoft Theater green room in downtown Los Angeles. It was the unofficial start of E3 and Reeves was there to surprise the roughly 7,000 people attending Microsoft's Xbox showcase.
"I got the feeling he maybe wasn't fully prepared for what was coming," Spencer, 51, told me a few days later. Spencer, who has been participating in the showcase for close to a decade and has recently taken to hosting it, promised Reeves he had nothing to worry about. "They're going to love you," he assured him.
You can see the shock on Reeves's face as he walked onstage in the many videos that have been posted online since: the whoops and hollers took a full minute or more to die down; the shouted declarations of love even longer. It's a testament to Spencer's own celebrity in the video game industry that his arrival onstage moments later was met with the same level of riotous enthusiasm. And not just once: it happened every time Spencer was on stage that day. At one point during the showcase, someone tweeted, "Phil Spencer is literally God."
The idea of anyone idolizing a business executive is surprising in any industry, let alone one where consumers are routinely suspicious of big companies and corporate scheming. But many gamers seem to view Spencer as one of them, rather than the physical embodiment of a corporate business strategy. Spencer's public behavior does little to discourage this: he has a habit of publicly sharing his Xbox Live gamertag, for example, and inviting people--everyday, non-executive people--to play with him. His overwhelming popularity means he gets more requests than he can respond to, but there are plenty of stories floating around the internet of Xbox Live users who have managed to challenge Microsoft's executive vice-president of gaming to a Forza race or Rocket League match.
This kind of thing is unusual for someone at Spencer's level. "One of the things I've always appreciated about Phil is how, even as busy as he is, he still plays a lot of games," Geoff Keighley, the creator of the Game Awards, told me. "I'll always remember talking to him Thanksgiving weekend 2014, right as we were about to launch the Game Awards, and it was clear he had just spent the entire day playing Assassin's Creed. That stuck with me."
Spencer has worked hard to create the impression that his loyalties lie with consumers. Since taking over as head of Xbox in 2014, he has tirelessly advocated for cross-platform play, insisting gamers should have the freedom to play together irrespective of console or platform, and reintroduced backward compatibility to the Xbox ecosystem. He has overseen the acquisition of a handful of first-party studios with the intention of diversifying the brand's content; introduced Xbox Game Pass, an online game subscription service; launched the Xbox adaptive controller, the first controller released by a major publisher designed for gamers with limited mobility; and began work on Project xCloud, a game streaming service that will debut later this year and go head-to-head with Google's Stadia service.
Of course, it's not just consumers who have benefitted from Spencer's progressive vision: last year, Microsoft's annual gaming revenue went up by almost 15%, hitting $10 billion --a first in the company's history. "Certain cynical people look at me playing or caring about video games and see it as me being that way because of the job I have," Spencer told me. "I see it as me being one of the lucky people who found the job that is my hobby, my passion, the thing I love. I've been playing video games since I was six years old. This is what I'm made to do."
At five foot nine, with broad shoulders and a square jaw, Spencer looks more like a high school football coach than an executive. His personal style falls somewhere between geek dad and personal trainer: loose jeans, sneakers, some kind of video game t-shirt (usually an Xbox-related one), and a hoodie or blazer, depending on the occasion.
Spencer married his high school sweetheart, and the couple has two daughters, both in their twenties. During the week, Spencer keeps to a strict routine, arriving at work early but never staying past dinner time. He'll usually squeeze in a couple of hours on Xbox Live before retiring promptly at midnight. On weekends, he plays other things: piano, mainly, or chess. His broad tastes make him a skilled conversationalist and a fun sparring partner; get him talking about a subject he loves and his passion is evident. Music is probably his second-favorite thing to talk about after games: he is as comfortable talking about Xbox strategy as he is about Led Zeppelin (his favorite band) or old-school punk ("I like the kind of raw emotion and energy of good punk music"). He recently accompanied his daughters to a Rise Against concert, which he didn't hate.
Spencer's entire career rests on a chance encounter during his sophomore year at the University of Washington. "There was a guy who lived two doors down from me, and his dad was a vice president at Microsoft. He came to visit one day and saw me doing some game programming on my Atari ST. I think Microsoft was trying to do some of this stuff in Windows at the time. Of course, I didn't know what Microsoft or Windows was. I was completely oblivious to it. But he just said, 'Hey, come intern this summer.' And I was immediately like, ‘Right, let's do it.'"
Spencer began his internship with Microsoft in the summer of 1988. The company was only 10 years old at that point, and still very much led by a programming mentality. Spencer fit right in. At the end of the summer, Spencer's boss asked if he wanted to stay on--and get paid for it. Spencer spent the next few months waking up at 6 a.m. for classes and then driving across Lake Washington in his Ford Pinto--"a car known for its potential to blow up if you got rear-ended," as he remembers it--so he could be on the Microsoft campus by 11 a.m.
After graduating in 1990, Microsoft offered Spencer a full-time programming job in the multimedia group, where he went on to lead development on CD-ROM titles, working on projects like Encarta and the launch of MSN in 1995. In 2000, Microsoft officially entered the North American video game market with the announcement of its first home console, the Xbox. A man named Ed Fries was put in charge of acquiring first-party studios. When Microsoft eventually set up a new division, Microsoft Games, later the same year, Fries sought out Spencer. "His pitch to me was, ‘I've got this studio that I should probably shut down. Do you want to try running it before I do that?" Spencer said.
Spencer took over Studio X, an internal publishing studio, eventually working with designers like Peter Molyneux on Fable ; Brian Reynolds on Rise of Nations ; and John Tobias on Tao Feng. He spent a few years in London looking after Lionhead and Rare before returning to Redmond in 2008 to take over as general manager of the company's internal game studios and begin work on Microsoft's third home console, the Xbox One.
Facial hair mustache
The company targeted its first two consoles, the Xbox and Xbox 360, predominantly at core gamers, making the machines faster and graphically more powerful than their rivals. The strategy had worked, at least up to a point: while PlayStation and Nintendo were still ahead (with the PlayStation 2/3 and the Wii, respectively), Microsoft had successfully managed to carve out its own niche in the North American market. The Xbox One, however, seemed specifically designed to expand the brand's reach far beyond console gamers. In an attempt to appeal to a broader range of consumers, Microsoft shifted the Xbox One's focus away from gaming towards other entertainment, like television and movies. In doing so, it also introduced a number of anti-consumer restrictions, like preventing people from sharing games with their friends and requiring online authentication every 24 hours.
While these were later reversed after considerable public outcry, it was too late. The Xbox One and Sony's PlayStation 4 went on sale within a week of each other; both consoles sold one million units in 24 hours. But, while the PlayStation 4 continued to break sales records in its first year of release and beyond, the Xbox One quickly fell behind--and has never caught up.
A few months later, Spencer took over as head of Xbox. Whatever jubilation he felt was short-lived; a few weeks into the job, he got a call from Satya Nadella, Microsoft's new CEO. "I don't actually know a whole lot about why we're in gaming," Nadella told him.
Spencer tried to work out what to say to Nadella. He looked at where Xbox had failed, and how the brand could be saved--if at all.
It seemed like a good time to ask that question. Spencer was facing a lot of internal scrutiny from his own team. Many developers who had worked on the Xbox One felt let down by Microsoft's big vision; it was, as some told Spencer, not in line with "the soul" of what Xbox was. "Satya was transparent that there could be a future where gaming isn't a business that Microsoft should be in," Spencer told me. "But it's better to have it above the table than below the table, right?" Spencer tried to work out what to say to Nadella. He looked at where Xbox had failed, and how the brand could be saved--if at all. When he finally called Nadella back, it was to say this: "If we're going to stay in the gaming space, then let's make sure we're all-in. The last thing I wanted to do was run the gaming organization here as kind of an afterthought of the company and kind of half-in, half-out. Let's go fix who we are."
A few days ahead of E3 2014, Microsoft launched a feedback portal, inviting people to submit ideas on how Xbox could improve its products and services and vote on the best ones. Within a week, the portal had registered nearly 170,000 votes. "It was very public, anybody could see the list of suggestions that were there," Spencer said. "And we were actually using that as a way to drive the updates that we were doing. Backward compatibility actually came from that feedback. We didn't know if we could do it, but we set off a small team to see if we could get it done."
Many saw this as Microsoft's first act of atonement for the Xbox One snafu. The second came a year later, and it was led by Spencer. He pushed Nadella to acquire Mojang, the Swedish developer of Minecraft, for $2.5 billion--a move that gave Microsoft exclusive control over the most popular game in the world at the time. The company could have easily forced people to buy a Microsoft platform if they wanted to keep playing Minecraft. Instead, Microsoft announced the game would continue to be available on all platforms, including those of its direct competitors. It was an unprecedented move for a publisher of Microsoft's size. "One of the first calls we got after the Minecraft acquisition was from Sony saying, ‘Are you going to pull it off PlayStation?'," Spencer said. "And I'm like, ‘Why would I do that? People like playing it on PlayStation.'"
In March 2016, Spencer attempted something even ballsier: he opened up Xbox Live to cross-platform play, inviting rival publishers to allow players on competing consoles to connect with Xbox Live users. Cross-platform play became something of a cause célèbre for Spencer; he extolled its virtues on every stage and public forum. He stood on stage at Microsoft events and declared in front of millions that Sony, Microsoft, and Nintendo should be competing on games and services, not through exclusionary walls that hurt gamers. What right do video game publishers have to block players from playing together, he'd ask. Doesn't this create unnecessary divides, and prevent more people from playing games?
"One of the first calls we got after the Minecraft acquisition was from Sony saying, ‘Are you going to pull it off PlayStation?'," Spencer said. "And I'm like, ‘Why would I do that? People like playing it on PlayStation.'"
"The number of people that are actually buying a console every generation isn't growing dramatically, if at all," Spencer told me. "At one point you have to recognize that, okay, you can't just lead with one device. You can't just say, here's an Xbox. I'm going to go sell this device to every single person and that's what they're going to play on. That just doesn't work."
The idea of Sony, Microsoft, and Nintendo working together probably seemed crazy at first, but Spencer was relentless. In 2017, Microsoft and Nintendo announced a first-of-its-kind partnership for Minecraft cross-platform play between the Xbox One and the Nintendo Switch, a rarity for console platform makers. "I'm positive it was the first time a Nintendo ad ever had the Xbox logo in it," Spencer said, referring to Nintendo's ad announcing the partnership. Sony demurred for a long time before eventually allowing cross-platform play for Fortnite. It's now possible for PC, Xbox One, Switch, and PlayStation 4 players to play together. Earlier this year, Microsoft and Nintendo teamed up once again, revealing Banjo and Kazooie (two popular mascots of the Xbox-owned Rare Studios) will join the Super Smash Bros. Ultimate roster. Meanwhile, Sony and Microsoft recently announced a partnership to explore innovations in cloud, AI, and game and content streaming services.
"Nintendo is a strong player in this industry," Spencer told me in May. "Do I wish every Switch player was also an Xbox owner? That would be awesome, but that's not going to happen. Sony is the same way. I don't think gaming is better if Xbox somehow replaces PlayStation."
It's this kind of candor that has earned Spencer the respect of so many gamers.
Respect is probably too polite a word for it: Spencer is so used to being mobbed in public by well-wishers that Microsoft assigned him his own security detail ahead of this year's E3, adding to the already comically large party of people who follow Spencer around. To his credit, Spencer treats this as a fact of life--he ignores it as best he can--but is prudent enough to be apologetic about it if anybody points it out.
Not that anybody cares, really. Especially not at an event like the annual Xbox FanFest, which Microsoft throws for roughly 700 fans during E3 week. You can play games, chat with developers, drink, snack, and buy Xbox merch. You can also meet Phil Spencer. He attends FanFest every year, spending a few hours chatting to people and posing for selfies. His presence is never announced or scheduled: he likes to just drop in whenever he can.
A few days following the Xbox showcase, I accompanied Spencer on his annual FanFest visit.
The event is held in the same place as the showcase, inside the Microsoft Theater. The first person to spot Spencer as we walked in pointed at him and, in a dazzlingly accurate impersonation of the now-viral video of Keanu Reeves interacting with a fan during the showcase, yelled, "You're breathtaking!" Shouting things at Phil Spencer seems to be a well-rehearsed routine among Xbox fans; as more and more people were alerted to Spencer's presence, the "I love you!" declarations kept coming with startling regularity. Undeterred, Spencer walked around shaking hands and shooting the breeze. One guy asked Spencer to sign his life-size Master Chief helmet. Another pulled out an old Xbox controller. Spencer signed both. Someone else wanted to impart some feedback on how to improve Xbox Live. Spencer listened patiently. Almost everyone asked for a selfie. Slowly, a line began to form; after an hour, there were more than 50 people waiting.
I went down the line and spotted a guy with a lime green buzzcut. In a heroic display of brand loyalty, he'd also shaved the Xbox logo into the back of his head. "It took the barber four hours to do this," he told me. "But he wasn't mad because he remembered me from last year." I raised my eyebrows. "Oh yeah, I do this every E3. I even dyed my mustache green last year!"
I asked him if he'd met Phil Spencer before. "Yes, heaps of times! We're both from California. He's the best. The loveliest guy you'll ever meet. I actually feel really close to him."
At the front of the line, Spencer seemed a little distracted. "I'd love to find Hitman and Megatron after this," he said, scanning the room. Three years ago, Spencer got an Xbox Live invitation to play Destiny with a man named Keith Garlington ("Hitman"), a father of two who runs a funeral home in Arkansas. "Phil had talked a lot publicly about being a dad and not having enough time to play games, so I just sent him a message saying, ‘Hey, I'm a dad too," Garlington told me recently. Spencer and Garlington now play together a few nights a week. They're usually joined by Amin Cooper ("Megatron"), who works construction and lives in New Jersey. The three men talk about life, work, and family as they drive around in Forza and co-op on Destiny 2 strikes. "We know each other's wives' names. We know each other's kids' names. We know what we're all doing next weekend," Spencer told me. "What other social construct would put these three random people together like this?"
Both Garlington and Cooper came to FanFest at Spencer's invitation. It was the first time all three men had hung out in real life. Leaving Spencer to his line duties, I tracked them down to find out whether Spencer was actually any good at playing games. Did he kick ass? Or did they kick his ass? "We don't really play competitively, we mostly play co-op," Cooper answered diplomatically. Spencer, spotting us, rushed over. "Don't tell her anything!" he yelled before running away. "I think you can probably tell by now, having spent some time with him--Phil is 100% genuine," Garlington told me. "It's not a facade, and it's not for the camera. He's legitimately a good guy who loves games." For his part, Cooper admitted he was a little starstruck when he first reached out to Spencer on Xbox Live. "He was so friendly right away," he said. "He cares about everyone who plays, no matter where they're from or what they do. That's why everybody loves him."
The downside of such public adulation is the scrutiny that inevitably comes along with it. Spencer's detractors have wondered whether he is somehow playing the long con. From a purely competitive standpoint, Xbox remains behind PlayStation and Nintendo. It's hard to know by how much: Microsoft stopped releasing sales figures for its consoles in 2014, the same year Spencer took over as head of Xbox. Would Spencer be as collegiate with his rivals if he had a competitive lead to maintain? After all, it's easy to take risks when you have nothing to lose. "I hear that a lot," Spencer told me. "That I only care about cross-platform play because we're ‘losing.' There's no way for me to disprove that other than to say it's not true. These decisions aren't part of a strategy to eke away at number one's foothold or something. It doesn't mean that I'm perfect at this job. Obviously, you can get smarter people to do this job. I mean, I don't even have an MBA. There's a ton of things that I'm incapable of doing. If you put me as head of Microsoft Office or something, it would seem totally disingenuous. That's not what I am."
"I hear that a lot," Spencer told me. "That I only care about cross-platform play because we're ‘losing.' There's no way for me to disprove that other than to say it's not true.
In 2017, Spencer was promoted to Nadella's senior leadership team, becoming the executive vice president of gaming and reporting directly to Nadella himself. "There's no part or thing that happens at Xbox that Phil doesn't want to know about or be a part of," Matt Booty, the current head of Xbox Game Studios, told me recently. "He is always thinking about where we need to be and how to get there. He is like a chess player in that way, always planning five steps ahead. If you just trust in that, he will get you there."
A few days after FanFest, I tagged along with Spencer on a tour of the Nintendo booth on the E3 show floor. The heads of Xbox, PlayStation, and Nintendo usually visit each other's booths during the show as a sign of respect and friendly competition.
The first person Spencer bumped into was Steve Singer, Nintendo America's vice president of licensing, who, upon spotting Spencer, promptly gave him the middle finger. It was all for show, of course--the two men hugged warmly and talked shop out of earshot. Even inside the booth of a direct rival, Spencer's fans weren't far off. A young volunteer in a red Nintendo shirt spotted him and jogged over to say hi; it turns out the two know each other from Xbox Live.
Cowboy handlebar mustache
After a brief tour of the main part of the booth, Spencer was whisked upstairs to play some games. He made for the Luigi's Mansion 3 station and happily passed the next 20 minutes trying to maneuver Luigi out of a number of sticky situations. I'd love to say Spencer aced the demo, but the fact is, he kept dying. He finally realized why: he was accidentally pressing the wrong button on the controller. Every time the screen prompt told him to press X, he would press Y. (The Y button on the Nintendo Switch controller is in the same position as the X button on the Xbox controller.) "Remind me to tell them their X button is in the wrong place," he said cheerily.
In the last year, Spencer has made good on his promises to make Xbox a more collaborative and diverse platform. He's brought parts of Xbox Live to iOS and Android devices --as well as the Nintendo Switch--and pushed for more PC integration, something which has pleased a lot of PC gamers who have long argued that Microsoft wasn't doing enough to acknowledge them. But perhaps his biggest investment in the future of Xbox has been in the slow but s teady acquisition of a number of well-known studios, including Ninja Theory, Obsidian, and Tim Schafer's legendary Double Fine Studios. "I think people want us to do a better job with our first-party games," Spencer told me.
For his part, Schafer was initially skeptical of the acquisition. Firstly, it wasn't something that he'd been thinking about. Secondly, he was worried about potentially putting Double Fine's identity at risk. "Like, do we all change our emails to Microsoft emails and paint all the walls green?" he told me. What ultimately changed his mind was a phone call to the folks at Ninja Theory, who told him that Microsoft's insistence on letting first-party studios just keep doing what they wanted with minimal interference was true. "They said, ‘We are still who we are. They're letting us make the kind of games we want to make.' And that was a huge thing for me. I could see how it makes sense--it makes sense not to have them convert us to making Forza DLC or something."
When the discussions became more serious, Spencer invited Schafer out for a drink during this year's DICE Awards. He laid out what the acquisition would mean for Microsoft, and what it would mean for Double Fine. "I've worked with a lot of different publishers over the years and they all have their own personalities and styles--but Phil is just a very legit individual," Schafer said. "He's made a lot of really great public statements about diversity and making games a positive force in the world, which really mesh with Double Fine's own mission. It kind of cemented that feeling that this is the right thing to do."
If he'd wanted a second opinion, Schafer might have also called 343 Industries, the veteran Microsoft studio that oversees the entirety of its Halo franchise. The studio's head, Bonnie Ross, has worked with Spencer for more than two decades. A few weeks before E3, Spencer dropped in at 343 to give Ross and her team feedback on a demo for Halo: Reach on PC. The studio is located a short walk from Spencer's office on Microsoft's Redmond campus. Almost half of the building's ground floor is taken up by a Halo museum, which features everything from life-size Master Chiefs to television props from the live-action web series Halo: Forward Unto Dawn, which aired on YouTube and Netflix, and the Ridley Scott-produced "Halo: Nightfall." The museum also houses replica weapons, fan art, various Halo-related tchotchkes, and a random collection of Halo-branded snowboards (one of which Spencer owns).
"I've worked with a lot of different publishers over the years and they all have their own personalities and styles--but Phil is just a very legit individual," Schafer said.
As we sat down to play the demo, Spencer attempted to calm my nerves by telling me he usually finishes all the Halo games on Legendary difficulty. He breezed through most of the demo easily enough and made it to the final checkpoint, which required him to take out two Hunters. Spencer tried to do this multiple times: he would manage to kill one but kept running out of both health and ammo before he could get the second. I reminded him of his previous boast. He pretended he didn't hear me. Undeterred, he tried again. Someone offered to help, but Spencer jokingly waved him away. "It's ok, I got this."
After a few more tries, he finally killed both Hunters, but, just as the final cutscene was about to roll, an enemy he'd missed earlier snuck up behind him and shot him in the head. The room erupted in howls of disbelief. Spencer laughed. "I believe that's my cue," he said, standing up. Before he left, he went around the room, shaking the hands of all the developers and programmers who'd assembled to watch. "Good job, everyone. It's great. It's really, really great."
Photography courtesy of Jay Lewis and Microsoft.
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