Phil Spencer says the cost of living is hurting Xbox, ‘we aren’t food or shelter’
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The cost of living crisis has played a vital role in everyone’s lives, we all have to make cutbacks and make tough decisions. However, the question remains: how does non-essential entertainment such as games play a role in this?
Recently, in one interview with The Verge (opens in new tab)Microsoft Gaming CEO Phil Spencer talked about how the cost of living crisis has hit the Xbox and what one of the largest AAA companies is trying to do to help players during this time.
No one is claiming that game consoles and games are essential items. “We’re clearly in the entertainment space,” said Spencer, “we’re not food or shelter.” As families must find ways to cut back on their spending, non-essential industries like entertainment will inevitably see less spending.
Spencer also spoke about how families pay not only for consoles and games, but also for energy costs, an expense that doesn’t always cross everyone’s mind. But it’s not all doom and gloom for gaming.
“Games are generally a bit more resilient and weathering these times better than some other industries,” said Spencer, “because we have good value for money.” Good value; this seems to be the strategy for Xbox going forward.
Weather the storm
One of the best things Xbox is doing right now to make sure you get your money’s worth is keeping games accessible on old and cheaper consoles like Xbox One and Xbox Series S. While it wasn’t popular across the board as some developers thought these older models hold back next-gen consoles, other developers seem to think their complaints aren’t entirely warranted.
The whole “Series S is holding back next-gen games” argument seems really broken to me. Most of these games are also coming to PC and should already include a wide variety of configurations. For example, take a look at the Steam Hardware Survey. Much older stuff with significant percentages.October 20, 2022
Average fans also see the great value these older consoles have to offer. “Demand has never been higher,” said Spencer. “If we go back to the original Xbox, Xbox 360 and Xbox One, we’re selling more consoles than ever.” As it turns out, people want to have access to cheaper consoles and still play the latest games. Not everyone can dodge $499 / £449 / AU$749 for a Xbox Series X or $499.99 / £479.99 / AU$799.95 for a PS5.
Xbox is also moving forward with more subscription models for games. Subscriptions mean you “don’t have to pay $70 for all my video games,” Spencer said, “you can build a library in a different way.”
Mobile futures
I think everyone can agree that paying $70 for a single game can be eye-watering at the best of times. So it’s no surprise that companies are looking for different ways to make a profit selling games.
“Games have a business model of their own,” Spencer said, and while free-to-play is a great concept, it also needs to be “sustainable and profitable for the creator.” That’s why you get microtransactions and battle passes.
Making money is one thing, but making sure your product is value for money should still be at the heart of this transaction. That’s why games with a subscription model “should have perks and other things to make you feel like you’re a special part of that free-to-play community.”
Unfortunately, free-to-play games can still cost a lot of money due to micro-transitions and battle passes. In the end, these can cost more than an expensive one-time payment in the long run. So Xbox is starting to look at other areas of gaming that are still thriving at a time when spending money on entertainment is becoming increasingly difficult. As it turns out, the obvious successor was staring them straight in the face.
“Let’s say the gaming industry is worth $200 billion right now and growing maybe 9 or 10 percent,” Spencer said. “If console as a business is flat, and PC is essentially flat, but it’s still growing at 9 or 10%, that means all of the growth is happening in mobile.”
If you want to see how much money mobile gaming makes, all you have to do is look at one of the biggest gaming companies, Tencent. “A large portion of their revenue comes from mobile,” Spencer claimed. Like it or not, it seems that mobile phones are a critical part of the future of gaming.
The main way Xbox is preparing for this future is through the Game Pass Ultimate. Now it can compete with the mobile giants and bring games to iPhone and Android. It’s also good timing; things aren’t getting any cheaper, and if the future is mobile, Xbox needs to start catching up now.