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Xbox: Phil Spencer on the brand before and after his leadership

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Phil Spencer is all kinds of cool.

As I entered the Shangri-La’s Grand Apartment, with sweeping views of the Sydney Harbour Bridge and the Opera House, the Head of Xbox was tinkling the ivories on an equally grand piano. The song? “Linus and Lucy”, the theme from Charles Schultz’s Peanuts.

You can’t make this kind of stuff up.

There’s something about Spencer that makes him instantly approachable; combined with his 27 years at Microsoft itself, that makes him the obvious choice to lead the company’s gaming wing. We sat down to discuss where Xbox was before he was at the helm, and where he sees it now — after a lot of humility, that is.

“I always struggle with these kind of questions,” Spencer began. “I’ll say this in a very egotistical way — I don’t mean it this way —  but ‘before me’ and ‘after me’.

“I was in before and after. I was on the leadership team when [previous head] Don [Mattrick] was running Xbox. I ran first-party studios. I just never really get into this transition of ‘those people’ and ‘these people’ or ‘that team’ and ‘this team,’ because I was on both. I can look back and when we launched Xbox One, I think there were some goals that were genuine and well-founded.”

Though Spencer was involved, Mattrick (pictured below) was truly at the helm, and held responsible by consumers for the console’s failed emphasis on TV, TV and more TV.

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“The goal that the team had was to figure out how could we sell 200 million game consoles,” he said. “We’ve never seen a console sell that many units. The biggest individual console, the PS2, did 120 million or something like that. The approach the team took was people are moving to OTT Video Services [over-the-top, like Netflix and Stan] and television’s getting disrupted — and if we could build a console that could be at the center of this transition and really embrace not only people playing video games, but also people with the changing habits in television, you really take the console market and the gaming market and you expand it potentially.”

It wasn’t just television – the Xbox One had a huge emphasis on its Kinect peripheral at launch, bundling the device with every console, and subsequently pushing up its price point.

“We’ve got to do things around the console, like the HDMI pass-through, having voice. In order to have voice, you have to have Kinect, the IR Blasting to let it control everything in the house,” he said. “We’ve got to start up building TV content as a first-party capability.

“I look at all of those and from a pure business standpoint and goals, they’re all completely sound ideas. It’s not like somebody was out with evil thoughts or something. It’s a rational approach. Me, I’ve been on the Xbox since we launched the original Xbox. I’ve played video games my whole life. I still play video games all the time. That’s what I do.”

It’s hardly a surprise that Spencer’s vision for Xbox was centred around gaming.

“When we came in after two-and-a-half years ago and started running the Xbox program, I centred us back on not trying to become something other than a game console. You don’t earn the right to be relevant in other categories of usage for the console until you’ve earned the gaming right, so let’s go make sure that’s what we deliver,” he said.

“I think how it impacted the program — we did some things around making Kinect not required as part of the console because Kinect is a gaming device. It was interesting, but not ubiquitous. It’s not like every game was using it. I said, ‘Okay, for people who don’t play Kinect games. No reason that they should have to go buy one.’

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“We needed to make sure other features that we’re building are really embracing the games and gamers that are out there in the game development community and that our console is for them first,” he continued. “I’ll say when we look at what people do on the console today, video usage is as high as game usage, so it’s not like people aren’t watching YouTube and aren’t watching Netflix and Amazon and anything else that’s there, but I still think that we have to succeed with gamers first before we get any permission to go do anything else.”

New Xbox initiatives like Xbox Play Anywhere are a testament to this, showing that you can still iterate and innovate, but still within games specifically.

“I think that this has been a transformation in the company as well,” Spencer said of the cross-platform, cross-save, cross-buy model. “The idea that video games are a category that Microsoft should go be in a whole number level, full support, it only happened a number of years ago. We started Xbox because we were worried about the living room; Xbox became ‘how do you shore up computing in the living room?’ The people who were building it were clearly building for a video game console, but I’d say the company’s focus was a little more broad than that.

“Today, if you sit down with Satya Nadella, the CEO, Amy Hood, the CFO of the company, they will talk about gaming as a core capability of Microsoft, not gaming as a bridge to somethings else, but gaming into itself,” he continued. “It’s not just Microsoft, you see Google investing time in gaming, you see Facebook buying Oculus, you see Amazon buying Twitch, you see multi-billion dollar transactions going on at the gaming space, not so you can go be something else, but because gaming is a very high engagement, high monetization use on any electronic device that you see.”

We’ll have more with Phil Spencer – including his take on virtual reality, Project Scorpio and more – in the coming days.