Something big has happened to the video game industry over the last five years – you may have noticed. All the old rules about consoles – the fact that they enjoyed five-to-eight-year life cycles, the fact that games “just worked” out of the box – they’re all gone. An accelerating consumer electronics sector and the mass penetration of broadband internet have led us into a new era of chaotic innovation and fraught business model evolution. And somewhere in the middle of all this, people are making and playing games. How do those people keep up?

These are very much the concerns of Phil Spencer, the ex-game developer who now heads up Xbox. Spencer has always put himself forward as a fan rather than a suit. His mantra is “we put the gamer at the centre of everything”. But what that actually means is changing – not just in terms of hardware, but in the way games are made and played.

Over the last five years we’ve seen the emergence of a new concept: the video game as a service. What this means is the developer’s support for a new title doesn’t stop when it’s launched. They run multiplayer servers so that people can compete online; and they release extra downloadable content (DLC) in the form of new items, maps and storylines – sometimes free, but very often paid for. There’s a clear reason for this model: the costs of mainstream game development are rising faster than potential revenue. To create 1080p and 4K games, teams are bigger and development cycles are longer, and then there’s the cost of maintaining those online servers. It’s expensive, and one way to pay for it is to ensure that players who enjoy a title stay around and keep investing in the experience.

In this way, games like Destiny and The Division have mutated into services – and although some gamers despair at the new era of endless DLC, season passes and add-ons, it is working. Both those titles have maintained huge and profitable user bases even in this volatile and uncertain era; Destiny has 30m active players, contributing generously to Activision’s $1bn a quarter in digital revenues.

Activision’s online shooter Destiny has 30m regular players and has spawned several pieces of lucrative DLC. Photograph: Michael Nelson/EPA

So being able to build and sustain a community around a single title takes the risk out of development. However, the costs of renting and running server networks and maintaining the matchmaking and lobby infrastructures make the model inaccessible for smaller teams. Should it be?

“This is directly in line with what I think the next wave of innovation needs to be for us as a development platform,” says Spencer. “Say there’s 10 people in a garage that have an idea for a service-based game – what does it mean for them to build up the infrastructure to go and create that game? How can we help them? And at the other end, are there things we can do to support a developer who has to move on to their next thing but still wants to support the player base of their previous game? Those things are important to me.”

His solution, it seems, is to make Microsoft’s Azure cloud computing platform more open to smaller studios, so they get access to a large global network of servers. “They don’t have to go buy a bunch of servers on their own and stick them under their desks and hope they get enough players to pay for them,” he says. “We can build on the elastic scalability of our platform. From a reliability standpoint, from what the latency looks like, this has been a big part of the investment that we’ve made in our server-based side. We’ve talked a lot in the press about the consumer side of Xbox Live with Arena and Clubs, and other things that we’ve done to innovate. There’s a whole developer side of that, which you’re gonna hear more from us.”

On the plus side what this may mean is more innovative independent developers working on persistent world experiences like DayZ, Rust or Playerunknown’s Battlegrounds. The concern is, making the games-as-a-service option more accessible may lead to a greater number of titles that abuse DLC, microtransation and freemium mechanics – which is exactly what we’ve seen in the smartphone sector.

“I worry about it too,” says Spencer. “What I worry about is a game that feels to me like it isn’t a service-based transactional game, has to inject those things in order to survive in today’s world, or injects them as some kind of money grab. I’m worried about the unnatural fit of those things together. Fifa Ultimate Team is crazy successful and people love that. I think the card model there, and the way they’ve built the creative along with the engagement and monetisation, makes sense to people, and consequently millions and millions of people play.

“But if I was playing a single-player story-based game and all of a sudden there was a paywall in the middle ... I mean, I’m old enough I remember horse armour, right? People had this view of, ‘Wait a minute, this is not that kind of game.’ We want to open up the opportunities for developers to do what they want to go do. But I also think we have to be able to support, as an industry, all kinds of games. I hear from gamers, ‘I don’t want microtransactions in all my games. I don’t want paywalls in all my games,’ and I think they’re absolutely in their right to voice their opinion. I do think there are models where that makes sense, and there are other models where it doesn’t.”

Will a more supportive server infrastructure allow more offbeat indie multiplayer titles like DayZ? Photograph: Bohemia Interactive

So what about the games that don’t need to exist as services? We’ve seen a huge drop in the number of big, single-player narrative adventures – the games that provide a discreet experiences and then end. How do we keep those experiences alive?

“The audience for those big story-driven games... I won’t say it isn’t as large, but they’re not as consistent,” says Spencer. “You’ll have things like Zelda or Horizon Zero Dawn that’ll come out, and they’ll do really well, but they don’t have the same impact that they used to have, because the big service-based games are capturing such a large amount of the audience. Sony’s first-party studios do a lot of these games, and they’re good at them, but outside of that, it’s difficult – they’re become more rare; it’s a difficult business decision for those teams, you’re fighting into more headwind.

“We’ve got to understand that if we enjoy those games, the business opportunity has to be there for them. I love story-based games. I just finished [LucasArts-inspired RPG] Thimbleweed Park – I thought it was a fantastic game. Inside was probably my game of last year. As an industry, I want to make sure both narrative-driven single-player games and service-based games have the opportunity to succeed. I think that’s critical for us.”

Spencer feels there are also design issues with a lot of mainstream single-player games. They tend to be part of long legacy franchises, and they rely too much on assumed knowledge about control interfaces and game conventions. “As creators, we’ve got to think about accessibility of the content that we build. Our big narrative story-driven games are in some ways less accessible. They may be the nth iteration of a story that, if you didn’t play the first and minus-one versions you don’t feel connected to. From a mechanics standpoint, they know the core audience has been playing games since PS1, and they just assume you’re a master with a controller.”

“It’s why I really applaud teams like Telltale Games who have taken an interesting approach to narrative-driven games. They pick stories that people already know, like Walking Dead and Game of Thrones, and build a mechanic that’s accessible. From a core standpoint, we may say is, ‘Ah, it’s kind of quick-time events. Is that a real game?,’ but if you think about broadening the audience, you can’t assume that somebody can left-click down on the stick and hold the right trigger and then hit Y over and over in order to solve some problem. As developers, we need to think about how to broaden our audience.”

Spencer feels that, from a creative standpoint, we need new types of narrative experience – but from a business standpoint, it’s getting harder and riskier to commit to those games. Is there an answer? Spencer thinks there is – and it comes from watching the success of original content made and distributed on modern TV services. “I’ve looked at things like Netflix and HBO, where great content has been created because there’s this subscription model. Shannon Loftis and I are thinking a lot about, well, could we put story-based games into the Xbox Game Pass business model because you have a subscription going? It would mean you wouldn’t have to deliver the whole game in one month; you could develop and deliver the game as it goes.”

It’s a fascinating idea. Until now, services like PS Now and Game Pass have been used simply to give players access to larger numbers of back-catalogue games, which is exactly how the Netflix digital service started up – as a repository of older games and box-set TV. But then, the Netflix model evolved to fund new material and revolutionalised the market. It’s no wonder Microsoft is considering something similar. “We’re in a golden age of television right now,” says Spencer. “The storytelling ability in TV today is really high, and I think it’s because of the business model. I hope as an industry we can think about the same. [Subscription services] might spur new story-based games coming to market because there’s a new business model to help support their monetisation.”

Phil Spencer: ‘Telltale Games pick stories that people already know, like Walking Dead [pictured] and Game of Thrones, and build a mechanic that’s accessible.’ Photograph: Telltale Games

This is all very interesting, but looking at the market as it stands, Xbox is weaker than PlayStation in terms of first-party studios, which tend to be where epic, agenda-setting story games come from. Sony has Naughty Dog, Guerrilla, Media Molecule, Japan Studio, Polyphony and Santa Monica; Microsoft has Rare, 343 Industries, Mojang, Turn 10, The Coalition and a few important second-parties like PlayGround Games and Remedy. Xbox is strong in racing games, and Minecraft is still huge of course, but it’s games like The Last of Us, Horizon Zero Dawn and Uncharted that people are talking about.

Spencer knows this. “Right now the focus is really on the content that we’re building,” he says. “I know I get some community pushback on our first-party [slate], and what position we’re in, and I want to say to people: that same level of commitment you felt from myself and from the team as we’ve evolved platform over the last three years – as we’ve evolved service over the last three years, as we’ve evolved and innovated hardware over the last three years – is going on with our first party. I don’t want to go and pre-announce a bunch of things, but we are upping our investment, there’s no doubt about that.”

The changes in the way games are developed and sold isn’t going to let up any time soon. But Spencer has made a big concession that server-based games have to work harder and think harder about the business model, and if it’s working well for millions of gamers then smaller studios need a way in too. At the same time, the industry won’t widen its audience by making ever-more complex demands on the time, skills and wallets of its hardcore users. More needs to be done to open up the idea of interactive entertainment. Before the likes of Netflix and Amazon made sophisticated, challenging box-set drama so easily and readily available, would so many people have invested in productions like Stranger Things, Westworld or Game of Thrones? Could new ways to access console games bolster uptake in the way that fresh business models utterly exploded the mobile sector?



These are things the industry should consider. And the guy at the head of Xbox seems to be doing that.



