A lot has changed in the video game industry during the last couple of years, with games being played via subscriptions, AAA-titles being more costly to develop than ever and console hardware being more expensive to produce (and not falling in prices) which leads to gaming becoming a more expensive hobby.
On top of this, the console industry has also stagnated and even started to shrink as PC and smartphones are growing. One person who is very worried about this is Phil Spencer, Microsoft's designated gaming boss. In a lengthy (and very interesting) interview with Polygon, he says it's getting increasingly difficult to secure funding for games as it's considered risky business:
"But I'll say the thing that has me most concerned for the industry is the lack of growth. And when you have an industry that is projected to be smaller next year in terms of players and dollars, and you get a lot of publicly traded companies that are in the industry that have to show their investors growth — because why else does somebody own a share of someone's stock if it's not going to grow? — the side of the business that then gets scrutinized is the cost side. Because if you're not going to grow the revenue side, then the cost side becomes challenged."
Spencer continues by explaining that he can't run an Xbox division that loses money, it's simply not doable, and this crisis in the game industry has led to a lot of lost jobs. Therefore growth must be prioritised, so people can make a good living and build a career in video games:
"We're a business. I've said over and over. I don't get any luxury of not having to run a profitable growing business inside of Microsoft. And we are that today. But just across the industry — you mentioned it, and in sitting here at GDC, I reflect on friends of mine in the industry that have been displaced and lost their jobs and how just, I don't want this industry to be a place where people can't, with confidence, build a career. So that's why I keep pivoting back to: How does this industry get back to growth?"
He says this is one of the reasons Microsoft are exploring launching older titles to competing formats, as it could lead to the console business growing. Right now, he thinks the only other option is growing "at expense of the industry", meaning that he needs to take gamers from Nintendo and Sony, rather than reaching new players. He knows launching games for competing formats hasn't been universally loved among Xbox gamers, but says "every decision we make today and tomorrow is for the better of Xbox", and points out that the future gamers of Gen Z considers it unthinkable to be looked out from certain titles because they have wrong format:
"This notion that Xbox can only be this one device that plugs into a television isn't something we see in the Gen Z research. Because nothing else is like that for them. Some of them will have an iPhone, some will have an Android, but all the games and everything is the same. I can still get to TikTok on both of them, at least for now. All of their stuff is available wherever they want. So for Xbox, our brand pivot — as we attract and maintain relevance with a younger audience — is 'Xbox is a place where I can find the great games I want to.'"
What do you think, is Spencer onto something, or is a shrinking console business not something to worry about?