Microsoft expects big returns from Xbox, gaming CEO Phil Spencer says: 'The bar is high for us'

Xbox gaming CEO Phil Spencer reiterates that Microsoft expects big returns on the company's investments into gaming, which have reached $77.5 billion worth of acquisitions in the last 4 years.

3

The FTC v Microsoft trial in 2023 revealed a lot of interesting information about Xbox. One of the things that stood out the most was a frank explanation from Xbox CEO Phil Spencer about his responsibility to deliver continued gains and profits to Microsoft. "There's no part of our business where I get to lose money over time. The overall part of our business of gaming has to be a profitable, growing part of our business," Spencer said during the June 2023 evidentiary hearing.

Over the past 4 years, Microsoft has made incredible investments into gaming, first with its $7.5 billion acquisition of ZeniMax Media in 2021, and then with the $70 billion buyout of service titan Activision Blizzard King in 2023. Microsoft's CFO Amy Hood, CEO Satya Nadella, and the board of directors have high expectations for Xbox as a result.

In a recent interview at Gamescom 2024, Xbox CEO Phil Spencer reiterated this point. Spencer outlined key reasons why once-Xbox exclusives like Indiana Jones and the Great Circle are now coming to PlayStation 5, following other once-Xbox exclusives like Sea of Thieves, Grounded, Hi-Fi Rush, and Pentiment that had crossed over to both PlayStation and Nintendo Switch throughout this year.

Below is a transcript of what Spencer said during the interview:

"Going to the PlayStation announcement...obviously, last spring, we launched 4 games, 2 of them on the Switch, 4 of them on the PlayStation. We said we're going to learn, and we said we'd watch, and I think at the showcase I might have said 'from our learning, we're going to do more.'

"When I look [now], what I see is that our franchises are getting stronger, our Xbox console players are as high this year as they've ever been.

"So I look at it, and I say 'okay our player numbers are going up for the console platform, our franchises are as strong as they've ever been.'

"And we run a business. It's definitely true that inside of Microsoft, the bar is high for us in terms of the delivery that we have to give back to the company. We get a level of support from the company that's just amazing, in what we're able to go do.

"So, I look at this--how can we make our games as strong as possible with our platform continuing to grow both on console, on PC, and on cloud. I think it's just going to be a strategy that works for us.

"The last thing I'll say is that I think as an industry right now, there's a lot of pressure on the industry. It's been growing for a long time and now people are looking at ways to grow [further]. I think us as fans, as players of games, we just have to anticipate that there's going to be more change in how some of the traditional ways that games were built and distributed--that's going to change. That's going to change for all of us.

"But the end result has to be better games that more people can play. If we're not focused on that, I think we're focused on the wrong things.

"So for us as Xbox, the most important things are the the health of Xbox, the health of our platform, and [the health of] our growing games."

3

Xbox has indeed grown as a result of these acquisitions. Since recognizing both ZeniMax's Activision Blizzard King's revenues, Xbox achieved a record-breaking $21.5 billion in revenue throughout FY24, putting it much closer against Sony's $29.3 billion revenues earned during the same period.

As far as profits, however, that data remains unknown. Microsoft does not report the profitability of gaming itself, as Xbox is part of the More Personal Computing segment and is not its own reporting CSA within the company.

Microsoft has aspirations of achieving an implied $32 billion in revenue by Fiscal Year 2030, and ultimately wants to achieve market dominance through multiple channels including console, PC, and cloud--as well as using rival PlayStation and Nintendo platforms as additional ways to sell its games and franchises.