Larry Hryb: Hi, it's Larry Hryb, Xbox Live's Major Nelson. It's, uh, E3 2019 and I've done this a few years in a row. I'm, I'm with Phil Spencer. Phil, good to see you.

Phil Spencer: Good to see you. It's great to be here at E3.

Larry Hryb: We are, we're in your dressing room at the Microsoft Theater, you're-

Phil Spencer: I think technically it's the green room. Why do they call them green rooms? Do you know? You will know this.

Larry Hryb: Uh, you know what? It's a great question. I think I know the answer, but I don't want to misspeak.

Phil Spencer: Okay. Yeah.

Larry Hryb: But I will find out, and, and I'll ... That's, that's an interesting question. Why is it the green room?

Phil Spencer: I think it is the green room.

Larry Hryb: But this is where you're prepping because we're about, maybe 50 feet from the Microsoft Stage where we're gonna have our briefing on Sunday.

Phil Spencer: Yep. At the Microsoft Theater. Uh, so a little different set-up. We started this last year. I think everyone loves being here in the Microsoft Theater Stage. Looks awesome.

Larry Hryb: Well, for those of you that don't know, this is where, I mean, it's a world class theater. I think the Grammys have been here, the BETs have been here, the ESPYs are coming up next month.

Phil Spencer: That's right. Yeah. Yeah.

Larry Hryb: Um, what- the Video Game Awards that Geoff Keighley does.

Phil Spencer: Yeah. That's right.

Larry Hryb: So it's, it's, it's a big place.

Phil Spencer: Yeah, right here in LA live. It's so nice because it's right next to the Convention Center, so everybody who's got their passes to go to E3, they literally just walk across the street.

Larry Hryb: Yep.

Phil Spencer: Um, and it's right here. And after the show, as you know, uh, we open up the stage and all of the E3 attendees can actually come up on the stage, which is where we have all the stations set up.

Larry Hryb: Yeah.

Phil Spencer: For people to play games.

Larry Hryb: You have, uh, you know you've- I watched the rehearsal. It, it's coming up-

Phil Spencer: How'd I do? What'd you give me? A C? C plus?

Larry Hryb: You did- No, you did great. You, you always do great but to be honest with you, you're not on stage that much because it's about the- you know, the games are on stage.

Phil Spencer: That's right.

Larry Hryb: Right?

Phil Spencer: I mean, it's- we have, we have a lot of games (laughs).

Larry Hryb: (laughs).

Phil Spencer: More games, I think, than we've ever had, uh, on stage and I like, you know, I always have kind of, these, my own ideas about the kind of games that should be on stage and where they're from and bringing some games that we've never seen.

Larry Hryb: Right.

Phil Spencer: On our stage before, from creators that have never been on our stage before.

Larry Hryb: Right. Right.

Phil Spencer: And then some of our, uh, classic partners that always do a great job. I, um, I'm really happy with the line up.

Larry Hryb: Now, the, um, it's been a busy week with the, you know, we've been talking about these rehearsals. We've had them for many, many weeks. E3 is coming up, we had the Stadia announce earlier this week with our friend Phil Harrison (laughs).

Phil Spencer: Yeah, that was good. It was nice seeing Phil, um, on stage t- well, I guess it was on stage. On the white stage, but-

Larry Hryb: Yeah, he was on a white stage (laughs).

Phil Spencer: You know, the, I say this a lot of times. The industry's not really that big.

Larry Hryb: No.

Phil Spencer: Like, we all kind of know each other. Um, and I think in a lot of ways, while we're competitive in a lot of ways, we're also, um, rooting for each other.

Larry Hryb: Yeah.

Phil Spencer: I mean it, the biggest barrier for any of us is can we create something that captures someone's heart and mind?

Larry Hryb: Yeah.

Phil Spencer: Um, and it's not really, you have to win at the expense of someone else so, uh, I sent actually Phil a little note before he was go- Uh, before they were running saying, "Hey, best of luck with it."

Larry Hryb: Yeah. Yeah.

Phil Spencer: Uh, I thought they, they did a nice job. I'm looking forward to what Nintendo does.

Larry Hryb: Yeah.

Phil Spencer: Here, I think there's, uh, a lot of anticipation-

Larry Hryb: But they don't have Reggie this year.

Phil Spencer: They don't. No, Doug's great. He's-

Larry Hryb: (laughs) Doug's great. Yeah.

Phil Spencer: Um, and I actually don't know if he's, uh, in their, uh, their video or not. I haven't seen a preview of it or anything, but the, um, yeah. I think E3 is always such a special time and I mean, I look back and both of us have been to, how shall we put it? A few E3s.

Larry Hryb: Quite a few.

Phil Spencer: We've been to a few.

Larry Hryb: Double digits (laughs).

Phil Spencer: Yeah, maybe. Um, but, you know, you go back and E3 was really dominated by retailers and publishers.

Larry Hryb: Sure.

Phil Spencer: And you come now, and you have obviously, the great publishers are showing up but you've got companies like Netflix is here. Right? You've got Amazon through Twitch is here.

Larry Hryb: Yep.

Phil Spencer: You've got Stadia with their, how they're attaching their thing to E3. You've got obviously, Microsoft here. Um, and it's just really the transformation of our industry, I think, from something, uh, that many saw as kind of outside of the core of the mainstreams?

Larry Hryb: Yeah.

Phil Spencer: And now the largest companies on the planet see gaming as something that they, uh, that is an area that they want to invest. And the thing I love is, the partners that we've had for a long time, we've obviously been in this industry for decades. Um, and I- it's, it's just, it's a really fun time to be in the industry.

Larry Hryb: Yeah, a lot of folks don't remember but E3 kinda served a different purpose back in the day with the retail, right?

Phil Spencer: Yeah. You know, this was back when our, our, our games were distributed on either cartridge or CDs. Um, where the manufacturing time of the physical media was actually a real limiting factor.

Larry Hryb: Quite a few months.

Phil Spencer: Yeah, exactly. So we'd come to E3 and it was really just to have the retailers come and see what their, we call them, IPQs. Their initial, uh, purchase quantities.

Larry Hryb: Right.

Phil Spencer: How many copies of the game did they want to order for the holiday?

Larry Hryb: Sure.

Phil Spencer: That's why this thing was in May and June.

Larry Hryb: Right.

Phil Spencer: Because they had to get- we had to finish the game and build-

Larry Hryb: And get ready for later in the shift.

Phil Spencer: Yeah. And frankly, if you didn't build enough copies of the game, you were sold out. Which is where [crosstalk 00:04:26].

Larry Hryb: 'Cause there's no digital at this point (laughs).

Phil Spencer: That's right. That's right. So, and then I think what retailers started asking us is, "Hey. We don't actually ... We want another opinion on what games we want to order, so let's bring the press in."

Larry Hryb: Right.

Phil Spencer: So then it was, really became a press heavy show.

Larry Hryb: Sure.

Phil Spencer: Um, now with, with digital and streaming and, and, you know, the number of viewers that we get online it is, I really think about it as a consumer and a fan show?

Larry Hryb: Sure.

Phil Spencer: Right, it is really about that. But it's interesting, the evolution starting off from these lead times on building the games.

Larry Hryb: Yeah.

Phil Spencer: Um, and then printing the games.

Larry Hryb: Right.

Phil Spencer: Um, now games are instant.

Larry Hryb: Right.

Phil Spencer: Uh, so it's, it has changed but I don't, I don't ... I see-

Larry Hryb: Well, game delivery is instant (laughs).

Phil Spencer: That's right. Yes. Yes. We still have to finish the games. It's, it's always ... There's always a good snap that happens right now where you, you can ... As you're working on a game it's like, "Okay. Can we polish x amount of time up to a point where we would basically ship it?"

Larry Hryb: Yep.

Phil Spencer: Uh, and many teams use that, especially for shipping in the fall. You're using that to gauge okay, do we actually think we're in line?

Larry Hryb: Right.

Phil Spencer: To be done at the time we're telling everybody we're done? I think it's healthy.

Larry Hryb: Yeah. They have to do the work pack schedule.

Phil Spencer: That's right.

Larry Hryb: Yeah.

Phil Spencer: That's right. "Oh, we thought, okay we're gonna polish this level for the demo on the floor. We think it's gonna take eight weeks. Oh, it took 16 weeks."

Larry Hryb: Uh-oh.

Phil Spencer: It's brought- yeah, okay. We're probably a little-

Larry Hryb: (laughs).

Phil Spencer: And you see it, right? You always, every year you see a couple games that-

Larry Hryb: Yeah.

Phil Spencer: Start on the E3 bandwagon, think they're coming out October and then all of a sudden they're in February.

Larry Hryb: Right.

Phil Spencer: Um, but I think it's healthy, like, for us to have those experiences where people kinda, uh, see and get, and get reaction from players and what they think. And we're gonna have a lot of people playing games on our stage.

Larry Hryb: You have been on a lot of stages we've done. The Galen before, you know, before we got here. We obviously, at the Microsoft Theater, this is our second year. When you, when you're walking through that stage and you come around that Xbox logo for the first time, what do- what's going through your mind?

Phil Spencer: Well, I'm nervous.

Larry Hryb: Right (laughs).

Phil Spencer: I'm always nervous every time. Uh, you know, the thing I love about how our show has transformed is the role that the fans play in our show.

Larry Hryb: Yes.

Phil Spencer: Like, they're not just the audience. They are literally in the show and every year I have a couple new people around that haven't been at the show and they'll watch previous ones and they just, they're always blown away by the passion and energy of the fans. So when I first come out, the thing that always just literally overwhelms me when I come around the corner is how our Xbox fans are just so passionate about gaming, so passionate about Xbox.

Larry Hryb: Yeah.

Phil Spencer: Um, I say love most of what we do. Obviously that, that passion will tell us when they don't love-

Larry Hryb: Yes.

Phil Spencer: The things that we do.

Larry Hryb: They're not shy.

Phil Spencer: No. Um, but I, I really ... That is the thing that just hits me. And it, it really makes me kinda take, not instantly but it kinda, how lucky I am to be able to do what I do.

Larry Hryb: Right.

Phil Spencer: I mean, I'm a, a, a punky little kid playing video games back in the '70s and, you know, Mom telling me, "Hey, these video games are gonna be the end of you." And then so many decades later here I am running Xbox, running gaming at Microsoft. Get to work with some cool creators, cool people in the industry.

Larry Hryb: Yeah.

Phil Spencer: Some of my best friends that I've met, uh, through playing and building of games. And I, I do some things a little bit for me, but, uh, my two daughters are gonna be in the audience this time.

Larry Hryb: Oh, they're coming this year?

Phil Spencer: They're coming.

Larry Hryb: That's great.

Phil Spencer: For the first time. Ever.

Larry Hryb: Yeah.

Phil Spencer: 'Cause it's always been school.

Larry Hryb: I, I met one of them and-

Phil Spencer: Yeah.

Larry Hryb: It's gonna be great.

Phil Spencer: Yeah, so they're always in school at this time but now they're in college and, and they're done for the year so they're both gonna be, uh, here. And I, you know, it just, it's nice to kinda, these are the ... This is what I do.

Larry Hryb: Are there Dad jokes in the, in the briefing?

Phil Spencer: (laughs) If it is, probably from them. They got a ton of Dad jokes. They have a ton of Dad jokes. But, you know, it is such an important part of my life starting Xbox in, uh, back at the launch of, of the original Xbox. I, funny enough this week I had lunch with, uh, Robbie Bach.

Larry Hryb: Right.

Phil Spencer: And Shane Kim, and we were talking about E3s the past. And I was watching some of the old videos of Robbie coming out from behind a curtain.

Larry Hryb: Right.

Phil Spencer: You know, and you look at the show now, and it's, it is ...

Larry Hryb: The production values are ...

Phil Spencer: I mean, this show. You've seen the, like-

Larry Hryb: Yeah.

Phil Spencer: There's no show we've had that has the production value of this show.

Larry Hryb: Yeah. There's things in this show we've never had in any other show (laughs).

Phil Spencer: That's right. This is multiple things, right? And, and it's, uh, which is awesome.

Larry Hryb: Yeah.

Phil Spencer: And, uh, but just, you know, the whole journey with the fans, with the show, with the industry. Um, and my own, you know, personal kind of, little small a part of that, um, it's, it's just a really cool time of the year where I get to think about all that.

Larry Hryb: xCloud.

Phil Spencer: It's there. It's in the show.

Larry Hryb: Yeah.

Phil Spencer: Um, uh, it's going to be ... You know, it's our, I say it's the future. I think it's important for people to understand that our journey with streaming is not one where we're trying to get people to stop doing what they're doing today.

Larry Hryb: Sure.

Phil Spencer: We, we're ... We love obviously, people playing on a console. People playing on xBox. We're doing more on PC. We've announced Game Pass coming to PC. We're gonna talk more about that on stage and the lineup of PC games both coming to PC Game Pass and just the, the commitment and delivery of a real PC first service.

Larry Hryb: Yeah.

Phil Spencer: That we're delivering for a customer who says, "Hey, I play my games and I love to play on PC and that's where I want my life and I want Microsoft to contribute something meaningful."

Larry Hryb: Yep.

Phil Spencer: Um, I think that's gonna be awesome. So we look at streaming as a choice for you.

Larry Hryb: Sure.

Phil Spencer: It's not, you're able to buy games from us. You can download them to the devices that you have and play them. We want to give you the ability to stream games so that when you're away from the devices that you normally play on, you can play. And yes, when you think about multiple horizons out, you think about somebody playing anywhere they are and parts of the world where people probably never buy a gaming console.

Larry Hryb: Sure.

Phil Spencer: Never buy a PC, and this is an option. But it's not like tomorrow I'm trying to say, "Hey, you should stop doing what you love to do today and start doing something that we need you to do." This is really about putting the choice in your hands. About, "Hey, where do you want to play?" Like, I was sitting in my hotel room last night playing on my phone. xCloud on my phone, because I didn't bring an Xbox to my hotel room.

Larry Hryb: Right.

Phil Spencer: Um, and I had a couple things I wanted to, I wanted to farm my Farm Together farm a little bit.

Larry Hryb: Right.

Phil Spencer: And, uh, so it was an easy thing for, for me to go do but it was about my choice.

Larry Hryb: Yeah.

Phil Spencer: And when I get home, I'm gonna go turn that same game on and play on my console. Play on my xBox in all its, you know, great fidelity on the screen and sound and everything else, and, uh, but it's about convenience and choice for us. It's, it's not about trying to get you to adopt, uh, something that we kinda need to get you to adopt tomorrow. Um, we're gonna learn a ton from our customers using the technology. Using the features.

Larry Hryb: Yeah.

Phil Spencer: Um, which is coming, uh, this year. Which is gonna be great.

Larry Hryb: I want to talk about something that's not even remotely E3 related before I let you go.

Phil Spencer: Yeah?

Larry Hryb: You recently went to Africa.

Phil Spencer: Yeah.

Larry Hryb: Tell me about that, because I was looking at some of the photos. It was really interesting.

Phil Spencer: Yeah. You know, it does fit a little bit with the, the xCloud dialog but for just clarity, uh, Microsoft has seven development centers, um, in the world. Kind of outside of our Redmond. What we call, uh, Global Development Centers. And the, the next, the new one is Africa and I happen to be as Microsoft the executive sponsor for the African development center.

Larry Hryb: Okay.

Phil Spencer: It has nothing to do with gaming.

Larry Hryb: Sure.

Phil Spencer: It is us putting two, uh, hubs of development. One in Nairobi, Kenya, the other in Lagos, Nigeria. Um, so I was there as more of an executive function.

Larry Hryb: Sure.

Phil Spencer: Uh, for Microsoft in opening those. We're- our plan is to have 500 people there in the next couple of years doing development, and it's amazing the amount of talent. We opened up jobs, the amount of qualified candidates that we got was incredible. I will say though for gaming, because I was there.

Larry Hryb: Sure.

Phil Spencer: Um, so we met with some of the local gaming developers and streamers.

Larry Hryb: And there's, so there's a game industry in there.

Phil Spencer: Absolutely.

Larry Hryb: Yeah.

Phil Spencer: I mean, and, and I've said this a number of times so people are probably tired of hearing it. There's, there are 1.2 billion people on the continent of Africa, and the average age is 19 years old.

Larry Hryb: Do the math. Figure it out.

Phil Spencer: Yeah. They play games, they watch games. They don't always have the devices that people can play games on today.

Larry Hryb: Sure.

Phil Spencer: Uh, so that's where I think about our technology like streaming, how do you find a kid who lives in Nairobi who's probably not gonna go grab, buy, buy a gaming PC or go buy a gaming console just because it doesn't fit into their lifestyle?

Larry Hryb: Sure.

Phil Spencer: But why can't we bring games to that person? The funny story is, uh, there's a company called, uh, Brick and they put remote wireless routers-

Larry Hryb: That's right.

Phil Spencer: In buses. These little buses in Nairobi. And what they do is, they're mostly offline. So with your phone in the bus, you connect to their local ... They have a terabyte storage.

Larry Hryb: Sure.

Phil Spencer: It's really cool tech. And you can browse their videos and stuff on your phone offline.

Larry Hryb: It's kinda, it's kinda like when you see on the airplane. We have, like-

Phil Spencer: Very similar to that.

Larry Hryb: Some movies and ...

Phil Spencer: And then they have a button that says, "Hey, if you want to get to the internet, click here."

Larry Hryb: Sure.

Phil Spencer: Click, and now you're on an LTE internet connection. Um, and you watch an ad or something.

Larry Hryb: Sure.

Phil Spencer: To kinda help fund that. So I decide, I'm sitting there with the owner. I say, "I wonder if I can connect to xCloud (laughs) from this?"

Larry Hryb: No.

Phil Spencer: Yeah. And like, the, just so we're clear. At this point, I'm on a development xCloud server which is in Quincy, Washington and I'm sitting in Nairobi, Kenya.

Larry Hryb: Actually on the other side of the globe.

Phil Spencer: That's right. And I said, "Let me see."

Larry Hryb: In a different, yeah.

Phil Spencer: And it's gonna be, you know, WiFi inside of this taxi. LTE from the little antenna in the taxi. Uh, it's more like a bus.

Larry Hryb: That's right. To a tower.

Phil Spencer: Out, and then, uh, routing, I think it was getting routed through London back ... And sure enough, there's a frame of Crackdown. And I could, like, move ... It was, it wasn't, like, nobody would play it.

Larry Hryb: Sure. Sure.

Phil Spencer: But it was a little bit of a glimpse of, like, what if?

Larry Hryb: Right.

Phil Spencer: The data center is within a couple hundred miles of here?

Larry Hryb: Right.

Phil Spencer: You know, when the infrastructure gets into place, why won't people in Nairobi, Kenya someday be playing some of the great games that we're gonna show on our stage?

Larry Hryb: Right.

Phil Spencer: Um, and just open up the ability to play to more and more people? So I was incredibly energized both to be in Africa, just because, um, there's such a, a passionate community. People really driven with the- everybody has their hustle. Their side hustle. The thing that they're doing.

Larry Hryb: Right.

Phil Spencer: A lot of technology innovation for companies like this company Brick that's doing this thing in taxis.

Larry Hryb: Right. They're being creative in solving these problems.

Phil Spencer: Totally.

Larry Hryb: That are ... In, in really unique ways.

Phil Spencer: Yeah, there's another ... Just quickly, because I'm on it.

Larry Hryb: Yeah.

Phil Spencer: But there's a ... There's this other company that we've met with that does personal, um, solar panels. So when you're away from the cities, um, getting power-

Larry Hryb: The power grid's not quite there.

Phil Spencer: The power's not there.

Larry Hryb: Yeah.

Phil Spencer: A lot of the lighting and stuff is still done with kerosene, which has its own issues in terms of the residue that comes off.

Larry Hryb: And safety. Right.

Phil Spencer: And fire damage. So this company sells, rents basically, a personal solar panel that you stick outside your house. Put a solar panel up, and it has USB jacks effectively at the bottom.

Larry Hryb: Sure.

Phil Spencer: And you can charge your phone. You can charge, like, an LE, L, LED lantern.

Larry Hryb: Sure.

Phil Spencer: Um, and now they have a little television and then you're also connected. That thing's connected LTE. That's how they kind of meter it and know what you're doing. So then they want to talk about, "Hey could we ever put games in this?" Because people love to play games.

Larry Hryb: Solar powered xCloud (laughs).

Phil Spencer: It's, you know, and like, years away.

Larry Hryb: Sure. You can see it.

Phil Spencer: But just being inside of the discussion about, you have, like, over two billion people playing games today on every continent. Um, and I think the future for this art form that I love that has, has been such an important part of my career and frankly, just me as a person, at this point. Um, I love the fact that, with the creators here.

With all of the companies pulling together, you know, partnerships are being created that many would have years ago said, "That'll never happen." Um, I think the, the future is, is really bright in front of us as the games industry. We've got to manage it the right way. We gotta kind of listen to the signals that come in around what things people are worried about.

Larry Hryb: Yeah.

Phil Spencer: With our, our art form. Um, and play, but man, do people love to play.

Larry Hryb: Yeah.

Phil Spencer: And, uh, that's a, a cool place to be.

Larry Hryb: And then, getting it back to E3 tomorrow you're on stage. We're gonna walk out there at 1:00.

Phil Spencer: 1:00.

Larry Hryb: Pacific, that's 4:00 Eastern.

Phil Spencer: Yeah. I think we have two more run throughs today.

Larry Hryb: Yeah.

Phil Spencer: One in wardrobe.

Larry Hryb: Yep.

Phil Spencer: So, um, and, but yeah. I feel really good about this show and the whole week I think, is just gonna be fantastic. The, uh, uh, I can't wait to spend the week with both the fans and the partners, um, and 1:00 tomorrow is when we kick it all off.

Larry Hryb: And there's gonna be, uh, can you give us a little clue how long you think the show's gonna be?

Phil Spencer: Uh, well I, I tweeted out, you know we have, uh, 14 Xbox game studios.

Larry Hryb: That's right.

Phil Spencer: Games and, uh, we have a lot of games.

Larry Hryb: By the way, that's a minimum. Right?

Phil Spencer: (laughs).

Larry Hryb: Can I say that?

Phil Spencer: I'm just gonna keep ... I mean, people try to parse, how many studios do you have?

Larry Hryb: I know. Right. Right. Who's working on what?

Phil Spencer: As what, and, um, but, uh, we have a, a lot of games. Uh, but I, I like, you know, I always like about that 90 minute mark.

Larry Hryb: Yeah.

Phil Spencer: Like, in terms of, I just think it, it stays tight. We kinda keep on message.

Larry Hryb: Yeah.

Phil Spencer: Um, uh, but I'm really excited about how Matt's team, the Xbox games team.

Larry Hryb: Matt Booty.

Phil Spencer: Matt Booty's team.

Larry Hryb: Yep.

Phil Spencer: Uh, is showing up. I think, uh, it's, it, doing some things that we haven't done before. Uh, showing some games we haven't sh- shown before. Uh, I think that part's just gonna be a lot of fun. But, yeah, I'm, like I said. The timing, I like to keep it tight, keep the message-

Larry Hryb: Sure.

Phil Spencer: Just keep things rolling, and I feel like we have a really good show.

Larry Hryb: And again, you're, you're not on stage that much.

Phil Spencer: People don't want to see some guy talking.

Larry Hryb: They want to see games.

Phil Spencer: Yeah.

Larry Hryb: And we're gonna show it to them.

Phil Spencer: That's right.

Larry Hryb: All right, Phil. Thanks so much. Good luck and we'll see everybody Sunday. 1:00, uh, Pacific, that's 4:00 Eastern. I'll have a link in the blog, uh, and below for everybody else. Thank you, my friend.

Phil Spencer: Thanks, Larry.