Xbox chief Phil Spencer: Microsoft's game studio acquisition spree to continue

Phil Spencer
Phil Spencer (Image credit: Microsoft)

It's no secret that Microsoft is in buying mode right now. The big Redmond giant has been acquiring companies left right and center for the future of its platforms, recently picking up Clipchamp for Windows and Office, and a few months ago picking up Nuance for its Azure services. Xbox has been growing too, with Microsoft purchasing well over a dozen studios in the past few years, from Obsidian Entertainment to Bethesda's ZeniMax stable, spending billions in the process.

Speculation about who, or what, Microsoft may purchase for Xbox next never abates, although the acquisitions have slowed down a bit in recent years, despite rumors to the contrary. Xbox lead Phil Spencer recently spoke to the WSJ to reiterate that they are indeed, still on the lookout.

"We're always out there looking for people who we think would be a good match and teams that would be a good match with our strategy, so we're definitely not done."

Microsoft hasn't been shy about its strategy for growth with Xbox, gunning for gamers outside the typical console ecosystem via the cloud, and native experiences on PC. Sony's Jim Ryan recently echoed similar sentiments, signaling that PlayStation may follow suit. Ryan lamented how "frustrating" it is that their studios can't reach hundreds of millions, due to the fairly static install base of consoles.

Xbox Game Studios Buys Zenimax Media Bethesda

Source: Windows Central (Image credit: Source: Windows Central)

Mobile gaming has outpaced consoles for growth in recent years, possibly made more severe by the pandemic and global semiconductor shortage. In the same WSJ interview, Phil Spencer noted that Xbox Series X and Xbox Series S supplies are "gone instantly" after hitting shelves.

Meeting gamers where they are will help Xbox circumnavigate restrictions on silicon supplies, but only if they have the right content to do it. This year, Microsoft has Halo Infinite, Age of Empires IV, and Forza Horizon 5 to entice users on PC into the Xbox ecosystem with its subscription-based all-you-can-eat gaming service Xbox Game Pass. But much like Netflix, subscription services require a steady flow of high-quality content. Microsoft's portfolio of game studios is huge, but there's probably a future where Xbox guns for 1 big desirable Xbox Game Pass release at least every quarter to keep subscription figures rolling. To achieve that, more studios have to be on the menu. Right now, we can only guess and speculate on exactly what those studios might be.

Jez Corden
Co-Managing Editor

Jez Corden a Managing Editor at Windows Central, focusing primarily on all things Xbox and gaming. Jez is known for breaking exclusive news and analysis as relates to the Microsoft ecosystem while being powered by caffeine. Follow on Twitter @JezCorden and listen to his Xbox Two podcast, all about, you guessed it, Xbox!

  • Mistwalker. You get a mobile phone dev that also happens to be headed by the creator of the Final Fantasy series, as well as the makers of Lost Odyssey and Blue Dragon. Let’s goooooooo.
  • The beauty of Game Pass is that you don't necessarily need 1st party games from Microsoft/Xbox to fill the coffers. MLB The Show is a perfect example of that; as is Back 4 Blood and a good bit of the EA catalog via EA Play. While I'm very much looking forward to FH5, I'm anticipating Evil Genius 2 just as much (if not more so). Game Pass could be the worst thing to hit the productivity of the teen years since social media.
  • One AAA game every quarter is just the first milestone. The endgame is a AAA game each month from different genres, to keep different kinds of subscribers engaged without "genre burnout". In addition, while third party games can be helpful (especially those secured day one) they need a stream of first party games because those remain forever and when it comes to content subscription services, the backlist is the foundation, the assurance that there will always be something worth playing.
    To get there, MS needs to check off every major game type and they haven't. Their backlist is thin on first party action games, fighters, and adventure games. Shooters and RPGs? Check. Racers and real time strategy? Ditto. But there is still work to do. One thing to remember, though: MS needs the IP more than the studio behind it. (c.f.: GEARS OF WAR. HALO, too.) Because once they own the IP, they can always contract out developers for future projects. So, while it might be fun to speculare about MS picking up another BIG operation like Bethesda, they can get what they need in other ways; exclusive IP contracts (like SONY did with SPIDER-MAN), buying up underperforming studios from other big players (Crystal Dynamics comes to mind for now), or going straight to the source of the IP. In that latter vein, what first comes to mind is WB GAMES: MS already looked at ATT's asking price and passed, not because of the price, but because the core IP wasn't included. Since then, ATT has Merged WarnerMedia with Discovery and is working to spin off the combined operation. Because the combination remains cash poor, they are looking for investors. In a wishful thing exercise, MS could easily buy a majority stake, eliminating the company's large debt load, and provide proper funding for their video subscription service(s). Which makes sense because MS has come to LOVE subscription services. With inflation raring its head again (and eating away at the real value of cash hoards) MS has an added incentive to turn idle cash into long term assets so it makes sense to go after the SOURCE of the IP. Still, MS has reason to be leery of jumping into another business too far from their areas of competence (NOKIA!) so a more reasonable approach might be to buy a *minority* stake into WARNERDISCOVERY for say $20B, which should net them a 20-25% share of tbe operation, enough clout to ensure control of the IP for gaming. Not necessarily for console exclusives but the backlist and timed exclusivity of future releases should make it profitable for both sides. Mind you, I don't *expect* such a deal, but it is an example of tbe kind of moves that make sense beyond just buying more of the same. That's just idle speculation on the kinds of things MS's $tash and cash flow enables. After all, they have the resources and the current management team is sneaky. And donote the phrasing of Spencer's statement. It is broader than just saying they'll keep buying developers. Expect surprises.
  • At this point I'd just be happy with one AAA game, period. That being said, AAA games are always a buggy mess nowadays, they spend millions on graphics and voice talent and ignore the actual game and how it runs. In my opinion they would be better died to just throw that money into the indie market.
  • Great analysis, fjtorres, including solid points I had not previously considered. The only piece I might slightly disagree with you on is the need for first party releases vs. third party on GamePass. Clearly first-party has the advantages you gave. However, I would say that just as Netflix is perfectly successful with movies that come and go and still leverages them successfully while they have them, Microsoft can do the same with games they only have for a limited time. Further, there is a unique advantage to MS and GamePass that Netflix can't offer the studios: post rental sales. Microsoft has compelling data that GamePass customers are more likely to buy a game they had tried via GamePass than they would be to buy the game if they had never played it on GamePass. If this data is to be believed (it's possible that this is a correlation rather than a causation, which could be explained simply by the fact that GamePass subscribers are the big purchasers of games anyway), then this means that third-party studios may actually benefit from putting their games on GamePass for a time, independent of any fees MS pays them. If that proves true and the knowledge permeates the industry, then it would be safe to assume that most studios would want their games to move in and out of GamePass just to juice their own sales and also to time those GamePass appearances to times when there are not other big releases (just like movies time their releases to avoid too many opening on the same weekend). To the GamePass subscriber, this means that over time they'll get access to new and great games every month.
  • Oh, I'm not pooh-poohing third party at all.
    But from tbe subscriber point of view there is no certain availability of specific third party games because they come and they *go*, typically after a few months. Third party content on video streaming services stays longer, typically a couple years. Different markets, mind you. You might be deep in the campaign of a given game and not be able to get to a new release right away. Or you switch expecting to come back later. With first party, no pressure. With third party you can't be sure a game will be available for the entirety of a run. Which is fine: those folks get gamepass money and visibility but their main business is still in sales. MS games shower money regardless. This is particularly significant with "platform" games that you can play for years and years, sporadically. When you signup for gamepass you get to play MARVEL's Avengers. But somebody who signs up six montbs from now may or may not. Halo, Flight Sim, Forza and the entire backlist of MS games will be tbere, presumably forever because of BC support. Think of the first party as a good cake and the third party as frosting. Both are needed. The frosting catches your eye but it is the cake that fills the stomach. 😜
  • All good points. Thanks!
  • So SEGA can still be a thing? Something I see people on Twitter go nuts about.
  • I really don't like this market consolidation thing that's apparently going on. Microsoft already has enough studios they don't need rob other gamer's opportunity to experience a game. There's studios that make sense like Playground anf Insomniac and maybe Indie devs, but other then that, we shouldn't hope for more acquisitions.
  • Tell that to Sony or Epic and then get back to me. I just don't get the perspective when MS is not anywhere near the market leader in console or PC game sales.
  • You completely missed the point.
  • In my humble opinion, Microsoft only needs three more developers to accomplish everything they want. A fighting game developer to help revitalize the K.I. franchise. Phil has spoken about this several times so I'm really surprised that it hasn't happened already. A developer of family friendly/kid projects and a Japanese developer. The Japanese developer should probably have the most studios in order to make more in-roads into that market. These, with the 23 other studios that they already have, they should be able to easily hit their target of one big game a quarter without having to crunch or compromise on quality.