[DIGITAL FULL SHOW] Bloomberg Studio 1.0 - Microsoft Gaming CEO Phil Spencer

I talk to you about my own sort of fear of kids playing too much at a friend. I try to think of it like he's it's like a painting. Yeah like show it. Ask him to show it to you. Like the same way you would treat a painting. I want to see what you mean. Yes that's right. So make it a family. Do you have kids. I have two daughters. Do they play. Yeah. They're older now but they. Not a lot because I'm growing up. I think it was always the thing that dad did. He's in charge of one of the top gaming consoles in the world. Microsoft X Box. A 16 billion dollar business. Home to

Minecraft. Halo. Sonic and perhaps soon. Call of Duty. If a 70 billion dollar deal to buy Activision goes through the executive behind that deal is Phil Spencer. And if he has his way he hopes the gaming industry will level up in the next 20 years and be less a battle between rival consoles and more home to platforms that reach every potential gamer on the planet. Joining me on this edition of Bloomberg Studio 1.0 Microsoft Gaming CEO Phil Spencer. So we're going to start by going in the way back machine a little bit. I did some research. You worked at a computer mart in Vancouver Washington where you were selling and playing a lot of computer games in the 80s. Yeah I'm thinking like stranger

things. Stranger things resonates with me. Yeah definitely. Growing up my inner geek Tim is there. I'm gonna need some photographic evidence of this. What were your most played games in the 80s. So it's funny. When I started growing up playing video games most of it was go into the arcades. Now most people don't

remember these days of like going to a store where you'd put quarters in play. Robot Tron was one of my favorites in their case. I would go play that and then probably more in the 70s. In the 80s. I remember my dad bringing a video game the Atari 2600 with the cartridges home and I was kind of the beginning of it and I just kept playing and it's still with me. You started out at Microsoft as an intern in 1988. How would you compare Microsoft's history on games under Bill Gates vs. Steve Ballmer versus Satya Nadella. Yeah I think like many things at Microsoft back in the 80s we started in video games as much out of kind of defensive. We were worried that other companies might be putting the whole P.C. in

place and the avenue to get there was through video games and game consoles. So we say okay we're going to go start our own game console because if anybody is going to build a computer for the home we wanted it to be Microsoft. I think through Steve's years it was more about growing the business and how do we bring kind of business leadership into this group of ragtag people who were out there just having fun building video games as part of X Box. I think with Satya when I first took this job and I got this job as head of X Box about two months after Satya Nadella became the CEO of Microsoft. Well I when I just started there were activist investors targeting the company. Yes. Stock hadn't been doing well. They were targeting X Box. Absolutely. Yeah. At

the time absolutely right. That there was a question of why are we in video games. In fact one of his first questions to me was because he had come from the cloud part of the business. Being in the cloud was he didn't actually understand why we're in video games not as a negative just as literally the wires. Why is Microsoft this at the time what one trillion dollar market cap company. Why are we in the videogame business. And he he challenged us like let's go figure out why we're in the videogame space and see if it makes sense. And if it does let's be all in. And if it doesn't we'd make other decisions early in that journey is when this game which I know you know about is

Minecraft and the opportunity to acquire Minecraft came about like months after this moment. So I might have it catered to that as Minecraft. And it really caused us as a team to think about OK if you're going to go spend two and a half billion dollars on this blocky Java based game how does this fit into the mission of this company. Let's talk about that strategy. Was the idea to tie gaming to the cloud. Was that the clincher. If you think about a game like Minecraft

or fortnight or roadblocks these are games that play on iPads. They play on X boxes PlayStation pieces. That games were going from per device to per user. And Cloud would be an enabler for that. But we didn't start with how do we fit cloud into video games. We were just kind of watching the trends of creators and where they were building and saw this transformation of games

being ubiquitous. How does this all as you see it connect to Microsoft's future. The cool thing I see going on now and it does fit with the investments Microsoft making in Azure and other places is today the world. Anybody is a creator and video games are going through that same transformation where if I rewind to my childhood and playing video games I walked into like an egghead software and there was a line of boxes. We might go create the best game in the world but there was no way for us

to get it in front of an actual person who might want to go play because we couldn't get shelf space. All these things today we see gamers on our creators on our platform from all over the globe who can create a game that can literally reach billions of people through our distribution capability to a player. A game is a game and you can deliver that game through the cloud to anybody who has a device that's capable of reaching the Internet. I hear you're still an avid gamer. How often do you play games. Like how many hours. I go to bed early. So I go to bed at 10 in Seattle at 10:00. People who play with me online

they tease me about how militant I am at 10:00. I'm out. I probably play 15 hours a week. As I understand it you do your own deals. You don't necessarily need permission from Snapchat to do a deal. Is that true. No there's there's definitely. It depends on the amount of the money in the deal. But when we think about some of our bigger deals we go to

the board. And so Satya Nadella Amy Hood the CFO have been incredibly supportive as X Box one of the biggest consumer businesses in the company. We're a brand that makes Microsoft relevant to a whole generation that probably doesn't think about a lot of other Microsoft products in their day to day life. Activision specifically is facing a lot of challenges here. There have been lawsuits there have been employee walkouts. How much did that concern you when your thinking about this deal.

Well you're in the process of a potentially monster deal 70 billion dollar acquisition of Activision. Talk to us about how this deal came together when we were thinking about on that idea of what are we capable of doing today. And where do we need to go. The biggest gaming platform on the planet is mobile phones. One and a half billion people play on mobile phones. And I guess regretfully as Microsoft it's not a place we have a native platform as gaming. Coming from console and P.C. we don't have a lot of creative capability that has Bill hit mobile games. One thing about the videogame space is if you've been around maybe too long you know most of the creators out there. So you kind of

know teams that could be a good fit in terms of what we were trying to do. But we really started the discussions internally at least on Activision Blizzard around the capability they had on mobile and then P.C. with Blizzard. Those are the two things that were really driving our interest. Big tech is under a lot of regulatory scrutiny. Big tech deals are under scrutiny.

What's the status of the deal. What have your conversations with regulators been like. You know I kind of come at this that big deals should be scrutinized. I think that's the role of regulators why they're in place. I feel good about the progress that we've been making asking good hard questions about OK what is our intent. What does this mean. If you play it out over five years is this constricting the market. I feel good about it. Microsoft had its time in the antitrust spotlight. Now the spotlight's on Google and Metta and Apple and Amazon. How is it that Microsoft has skirted the spotlight. Your competitors might say it's unfair. Well I think your point about us having grown through that time

I might call that the adolescent years for us as we were kind of learning. I think is an important consideration that we did learn a lot as a company through that time and what it meant. And I think that sticks with us today. You've been a really big advocate across that platform play and this idea that gamers should be allowed to play whatever games they want on whatever platform they want. Why is that so important to you. Maybe you happen in your household to buy an X box and I buy a PlayStation

and our kids want to play together and they can't because we bought the wrong piece of plastic to plug into our television. It just seems that these artificial constraints that the industry might put up for near-term kind of business dynamics in the long run if you take a business that is at 3 billion people growing to 4 billion people over the next decade and saying how do we continue to grow this business reducing friction for our customers have as an industry has to be at the top. So how far does this go. Does this mean that Activision gave that call of duty. You'll be able to play on any platform in perpetuity. I don't know what that means. And forever like when you think about how long and it's not for any kind of nefarious business

reason it's just like what are we even platforms mean 10 years ago. Like I think the definition of some of these things might change over time but our expectation is we want more people to play. So I know you're working with Sony on some things for the benefit of gamers. Can you talk to us about that a little bit. We have a pretty big publishing footprint on PlayStation as well as Nintendo which means we have good relationships with those platforms because we're there a big part of our business and we're a big part of their business. I think our long term ambition of where we see this industry growing is also shared. I think the area where if things get stuck a little bit it's in the kind of near or mid-term competition. If somebody walks into a store and they have one five hundred dollar bill they're either gonna walk out with a switch which is what most people buy or they're going to walk out with a PlayStation 5 or they're going to walk out with an X box or maybe somebody go buy a gaming windows P.C.. But in that world of somebody who's got to make a decision for one platform over another in the beginning

that is where I think we get stuck in some of the kind of near-term competition. I don't think that's bad. It's just the dynamic of each of us pushing each other to build the best product for our customers. Now while you've been working to make the gaming industry more collaborative the gaming industry has historically been tough for women for diverse voices. When you look back on GamerGate do you think you did enough. I can always look back at any incident for me and think about things that in hindsight I should have done more. I should have done better. I'm proud of how our team evolves how our leadership team evolves out there societal issues around us. The gaming industry is not kind of

immune to those people. In my position. Sitting here is kind of old white guy as head of gaming platforms not in a more the norm than I should be. And I talk about three billion people who play video games. And if you say your cousin your audience is 3 billion people then the demographic is the planet's demographic. I want our team to reflect the customer that we aspire to earn. I know that our teams ship their culture with every product they ship. Well Activision specifically is facing a lot of challenges

here. There have been lawsuits. There have been employee walkouts. There have been accusations of sexual harassment sexual assault. How much did that concern you when you're thinking about this deal. We had access to data from the company before we we announced the acquisition to see what the actual numbers were in terms of reports.

We definitely as a team signed up to say just like we're on our own journey with X Box that we're going to expand that journey if this deal closes. It's a lot of people and a lot of people that will feel very dedicated to and committed to to building a great workplace environment for them. That's true of any of our studios. Right. But it's obviously a conversation that you're going to have. You think about the board of Microsoft and when they're thinking about the deal and they're typing into their

search engine Activision what are the headlines that they're coming back. And there were questions that we had. We've learned from this. We will continue to learn and we're committed to that. That journey not only for the betterment of our teams but our customers the creators on our platform. We think it's critical to our business success that we make progress here. Is Bobby Kodak going to stay on. Yeah I'm not in a position to make comments about. Their leadership team were in the regulatory

phase and how that will close. Like when the deal closes. Then we have say in how they're managed and how it goes. But until that point them I'm not really in a position to say. There have been very specific allegations of Bobby being aware of things that happened and not reporting it to the board. What has he communicated to you about what he knew what he didn't know. The discussions we've had were about the teams where they're at. Can they make the progress they need to make. Because the closing is a long process. Are they putting in the work that they need to put in to. Move along their journey and I believe they're committed to that. When I look at the work that they're doing now there's

always more that can be done. Activision has divisions that are unionizing and I know Microsoft has said they'll recognize that. Yes unions. What does that look like. I've never run an organization that has unions of the sort. But what I can say in working through this is we recognize. Workers needs to feel safe and heard and and compensated.

Fairly in order to do great work. So we thought it was important to make a public statement on that front. For workers that are there that are making decisions about their employment and how they want to know what that relationship looks like to understand what it would mean if Microsoft was able to close the deal. When I think about. The environment on any of our teams I build from the perspective of people a building a workplace where people feel like they can do their best work in a sustainable way and they could see this as a long term career for themselves. So if X Box employees decided to unionize with Microsoft's support that we knew we made the public statement that it was it wasn't that it would have a broader impact than just the impact. What would potentially happen on the close of Activision Blizzard. My view on on metaverse is gamers have been in the metaverse for 30 years. So let's talk about some of the broader trends you and I talked a lot during the pandemic gameplay surge. Yeah during the

pandemic we were all stuck at home. Has that changed. It has changed. We've seen game play ours come down a bit which I will say I think is a good thing. People should get outside. People should moderate. Long term growth trajectory for the business is incredibly durable and strong. You have adults now that have grown up playing like myself and it's become a more normal part of how people entertain and how family spend time. As the economy has has tightened for consumers as gas prices are

higher. People are worried about what what their home economic situation looks like. We're seeing game play. Ours kind of stay strong. I think from a value perspective gaming is a good value for people at a time of kind of economic constriction. People bought Minecraft. They can continue to go play Minecraft. What about supply chain. What challenges are you still seeing. Are

all the consoles that you want to have made in time for the holiday is going to be here. I still think demand will outstrip supply for us this holiday. We'll see. When we get into 2023 you'll start to see more. That supply is is catching up with demand and maybe actually see one in the store. When you walk and what's the future of the console. I mean our console is going to be around in 10 years. If even Microsoft is you're sort of deemphasizing. You know I equate in my head gaming on console the gaming on a television. But absolutely people are playing on more screens. And I think for us as a platform if we don't adopt

that as part of our strategy we're kind of pushing against what our consumer what our customers are asking for. We talked a bit about kids earlier. And you know as a mom I'm always slightly terrified that my kids are playing too much. Videogames are ruining their brains. They're gonna be exposed to all this bad stuff. I know it's on the positive side. You're very pro game for kids. And I wonder I wonder how do you support that as a parent. You know what's best for your kid first. Like I'm not going to say what's best for any individual's kids. What we can say and the research backs this up that gaming can be a great on ramp for kids into STEM education as they think about. Well how are these games Bill. I also think the community power of gaming

is something that doesn't get talked about enough. Last night I was playing escape room on X Box with one of my friends. And while the conversation might start about how are we going to escape from this room then we're talking about his daughter who's looking at colleges and we just talk about life like people will when they're in the same place. And I think that ability for gaming whether it's with kids or adults to bring people from different backgrounds different geographies different socioeconomic different religion different genders together in shared experiences is pretty unique out there. And I

think building those connections that video games can enable. Maybe this is too altruistic. But there aren't enough of those things in the world today. Which brings me to the metaverse. No obvious Sobchak came on my show. I hope that this is the next big thing that happens off the mobile Internet. Facebook changed its name to Metta. Some gamers don't even want this whole

metaverse thing. My view on on metaverse is gamers have been in the metaverse for 30 years. When you're playing games if you're playing a World of Warcraft game you're playing in roadblocks you're playing in a racing game where everybody's in a shared world. These 3D shared worlds that gamers have been playing in for years and years I think what we've found is there's more connection. As I was talking about before because we have shared purpose it's not at all surprising to me that gamers might look at metaverse and think well I don't really get it because we've already I already have an avatar of myself and I can already go into a shared world and I can already sit there and have voice conversations with people anywhere. But I do think the skills that we have as game designers and game creators make a ton of sense in a lot of enterprise experiences. And this is why Satya gets excited about it. What about crypto play to earn is all the rage right now. Plato earned specifically is something I'm

cautious about. It creates a worker force out of players for certain players to kind of monetize now. To be fair for us in the game in the game industry this has existed for years and years. There have been gold farmers of people who literally just spend their time doing some menial task in a game to accrue some currency that then they could sell to some other rich player and for real money so that that person doesn't have to spend their time. But now you find games that are starting to build that into the economy of the game itself. We made some comments in Minecraft about how we view and FTSE in this space because we

saw people doing things that we thought were exploitive in our product. We said we don't want that. I think sometimes it's it's hammer looking for a nail when these technologies come up. But the actual human use or player use in our case of these technologies. I think there could be some interesting things. So let's talk about your priorities. Looking forward you're in the middle of trying to do this really big deal. Are we going to see you keep doing deals. Are you still on the lookout for new

studios or geographic locations where you want to build out Microsoft's gaming presence. Definitely. On the second part geo geographic expansion is critically. But we've hired our first people in Nigeria. Now as part of our team we have teams in India. Teams in South America. When I talk about 3 billion gamers I'll just use Africa for a second like one point two

billion people on the continent. Average age is what 20 or 21. I think it's very very likely that the next big hit games that we're going to see are not from the traditional locations not from the traditional people. I think that's fantastic. So geographic expansion is critical. Cloud is important to that as we put our data centers in places. And we can not only

distribute the games but allow creators to use our cloud development platforms to build games without having to have the local hardware right there in their house or in their office to go build. I think that is important. So we're gonna do a little rapid fire. OK. What video games are you playing now. Cult of the Lamb. Most important meeting you've ever played a game and you're trying to get me in trouble. But I've just played a game in a meeting with such. It's easier on teams calls because they can't see your screen. You're not with B. I have played games. Satires caught me playing games before. And yeah I'd say a SWAT team meeting. I plead the fifth. What's your favorite thing to do when you're

not gaming. Of all things snowbird with my family. You have a lot of gaming fans. Who do you fan over. Know one of the things I love to go do is find a game I've never heard of and go spend time with it and then talk to the creators about I think creating something. Putting it out there is such a brave thing to do. If you could see any band in their prime. Who would it be. Wow. So I'm a punk rock fan so I'd probably go back and say like the Ramones best piece of advice for your 20s when I think about least my career and that's the only lens I have. There have been a number of times when others have made bets on me that I probably didn't think I was ready for including the job. I mean now and to listen to the others around you when they are making a bet on you when they're pulling you to go do things at least for me who was probably reticent maybe a little imposter syndrome kicking in on was I really ready for something. But understand that others around

you when they're encouraging you that they're probably doing it for good reason. How do you balance work life and play. My little 15 minute commute back and forth is my transition zone of I'm now at work. I'm now at home. I don't have a home office because when I'm home I'm not a. Work like it's just always been my my thing is that segmentation with my family and what I do it

doesn't mean I've never responded to a male when I'm at home. But I I'm very regimented that way. When Covid happened it didn't work and it didn't work. Emotionally it didn't work output wise like motivation. And I was pretty transparent about that with the people around me and how I had to change things. Does that mean you want everyone else to come back to the office now. People have to work in the way that works for them. What is the gaming industry look like in five years and what does it look like in 20 years. We're going to see video games really gain their space in telling stories that really change people's

perspective on others lived experience. And I think that's a pretty cool thing. All right. Thank you. Thank you for joining us.

2022-08-26 05:55

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