Larry Hyrb: Hi, it's Larry Hryb, Xbox Live's Major Nelson. Welcome to the show number 633. Jeff couldn't be here. He's over in France. I don't know what he's doing over there, but he said he can't be there, so I said, “Who can I get? Who can I get to sit in for Jeff?” and I got Phil Spencer. Hi Phil.

Phil Spencer: I'm subbing in for Jeff today, I love that.

Larry Hyrb: You're subbing in for Jeff.

Phil Spencer: Jeff's much better at this than I am.

Larry Hyrb: I think he's over in ... I think he's overseas, he's working on upcoming because Crackdown comes out in a few weeks.

Phil Spencer: It does, I'm looking forward to that.

Larry Hyrb: You've been playing it. I know you've played it quite a bit. I haven't had a chance to play one of the latest builds, but it's feeling good. Right?

Phil Spencer: It feels like Crackdown.

Larry Hyrb: It feels like Crackdown.

Phil Spencer: Yeah, and I think which is what I wanted us to get to. For Crackdown for people who haven't played, it's been a while since I kind of ignored version two. I'll say version one launched and...

Larry Hyrb: Now you worked on that a little bit?

Phil Spencer: I did, yeah. Car wars. Code name with Dave Jones was the name of it. It was a fun, fun title to work on. You know we obviously launched it with the Halo beta on it and I think that kinda gave some a skeptical view on how this was going to turn out.

Larry Hyrb: But I remember that, because everyone's like "Ah, this is not going to be really good 'cause it's in the-"

Phil Spencer: That's right.

Larry Hyrb: "You're putting in on the beta." And then everybody got it and like, "Holy cow! Wait a minute!"

Phil Spencer: I loved it. I played a ton of it. I thought just the feeling, the physics, the movement of the agent, the leveling I thought was awesome. So, when I was playing this one, it was probably a year ago where I was spending a little more time with it and the agent to me just didn't feel right. But I say it feels like Crackdown not to downplay it. Crackdown is what it is, right? It's not meant to be... It's not a novel.

Larry Hyrb: Right

Phil Spencer: It's not hyper realistic graphics. I hear people say "Hey, why does it look like that?" Because that's how Crackdown looks. And if we were gonna make it look different, it wouldn't be Crackdown.

Larry Hyrb: It wouldn't be Crackdown.

Phil Spencer: Doesn't take itself too seriously. Terry Crews in the game was an awesome choice. And it kinda fits with the overall motif of the game. And I love it because it feels kinda like old-school Mayhem game. You're gonna play with your friend, you're gonna have a good time.

Larry Hyrb: Blow stuff up.

Phil Spencer: That's right

Larry Hyrb: A lot of stuff.

Phil Spencer: a lot of leveling, a lot of collecting. And I just ... I like that motion to gain something. I have fun with, not that we build games for me.

Larry Hyrb: Right.

Phil Spencer: But I just want-

Larry Hyrb: We kinda do, we kinda do!

Phil Spencer: That's not true, that's not true. But the ... I just want people to go into it ... It's Crackdown, so if you don't like Crackdown you're probably not gonna like this game. If you love Crackdown I think you will like this game.

Larry Hyrb: I know I was talking with the team that was working on it. They've got some cool stuff, over the next few weeks you'll start hearing more and more as we build ... get up to launch.

Phil Spencer: Yeah.

Larry Hyrb: But they were showing me the tech behind the cloud-based stuff, and it's kinda cool.

Phil Spencer: Yeah, you know that I thought we overplayed at the launch of the game. For some not necessarily the right reasons. Cloud, cloud was the game. And it's gotta be game game first before it's the how we build it. People don't care as much about how we build something.

Larry Hyrb: Sure.

Phil Spencer: They care about what we build. So tone that language down. I think in the end we're really happy in the tech that we invested in oh so many years ago with Cloudgine and Dave and stuff to make this work. So I feel really good about the use of the cloud and the use of the technology and [inaudible 00:03:34] and stuff to make this game the way play the way it plays. And I think the people who are interested in that will find some of the backstory stuff that we do on that after the game is out to be really great. I'll say another thing I really love is just seeing Joe Staten stepping in-

Larry Hyrb: Oh, Joe, yeah.

Phil Spencer: Obviously you've known Joe since back when he was at Bungie. And he's become such a spokesperson for this game. I think it's just awesome getting into a more public role in one of our games and I think it's great.

Larry Hyrb: Yeah I'm going to have him on the show when we get closer to launch.

Phil Spencer: He's really great at talking about the game. He has such a sensibility for how games are built and the hooks and it's really ... I just have a good time. Sometimes when you're in the publishing organization, you work on a lot of different things. It's not always easy to find something that's yours and that you can be the kind of out front person, but I think he's turned out to be the person who's out in front of that game in a very public way and I think that's great.

Larry Hyrb: Yeah, it's funny how Jeff isn't here as we were talking. But he just texted me, I'm gonna tell this story and he's gonna kill me. He says "Don't judge me, I'm at Starbucks." So he's in France at a Starbucks.

Phil Spencer: We should all judge him. Even in Seattle.

Larry Hyrb: @JeffRubinstein on Twitter, you can hit him up on Twitter. They can find you on Twitter, too.

Phil Spencer: They can at @XBoxP3. I've been a little less active on Twitter lately, I don't really like that that I'm less active. I gotta figure out how to engage more. The stream goes ... I mean, how do you do it?

Larry Hyrb: It's hard because it's ... I wake up in the morning, you're an early riser, right?

Phil Spencer: Yeah, yeah.

Larry Hyrb: You're an early riser. I'm an early riser. I check it out, see what's going on and reply to a few things because there's a lot of chatter that happens when you're offline. I mean, that's just the way it is. Stuff to keep up with. And it is, it's one of those things. You'll notice like on the weekends I'm more quiet, because it's just like "Oh man, I just want to spend some time-"

Phil Spencer: Yeah, you should with your family.

Larry Hyrb: With my ladies. But yeah, it's hard to do, but it's also exciting and fun because you know this, you and I have been doing this for a long time. It's the excitement you get out of people that just love the product.

Phil Spencer: Yeah, yeah.

Larry Hyrb: Love our games! And love gaming! It's really, really gets me going. So that's what it does.

Phil Spencer: I used to just love when it was a smaller community. Not that that's what my goal is anymore, but I almost used it as kind of an AMA type thing.

Larry Hyrb: Right

Phil Spencer: And I always get a lot of knowledge out of what people are asking. like I get a lot of where are people's questions, what are they worried about.

Larry Hyrb: What's going on here?

Phil Spencer: Yeah, that's right. And it's more difficult to do. That's on me, like the community's not doing anything wrong. I gotta ... It's been I say a month or two since I was in that mode on Twitter and I want to do that. Because that feedback from the community is great. I'm doing a little more of that on Xbox Live now. Because it's just sometimes a little bit easier when I'm online and somebody wants to play something, or just somebody wants to-

Larry Hyrb: What did we play last? You and I did Forza... Oh, we played some Forza a few ... when that came out.

Phil Spencer: Horizon, yeah.

Larry Hyrb: Horizon, that was a lot of fun.

Phil Spencer: Those guys. I mean, they are... Playground is ... They is magic. That game ... The hook for me in that game is just so good. And yeah, I've been playing that. You know... we obviously have our Game Pass commercial that we roll out every so often. Comes out of our mouths, but I have my story. Vermintide 2 I found in Game Pass. Which funny enough for me, I get a code to every game on Xbox. So I had it-

Larry Hyrb: But you never had a chance to look at it.

Phil Spencer: I hadn't really. And then it was-

Larry Hyrb: What drew you to it?

Phil Spencer: It was in one of the Game Pass quests. And if people have been watching, we've been trying to play with these ideas of GamePass quests where we'll build little challenges in games and you can earn Microsoft rewards for doing these things. And it's really a discovery mechanism. So I'm like ... We're early on a quest, and if you're going through the flow right now you can see that we're early on-

Larry Hyrb: We're trying to figure it out.

Phil Spencer: The user interphase though is not so great and also this rewards app pops in your face and it's all blue, and it's like ... But anyway, we're working through it, and so I sit down and I use our stuff. And send my feedback.

Larry Hyrb: As you do.

Phil Spencer: Yes, as I do. And the Vermintide was one of them. I think it was like get two achievements, or whatever it was, in Vermintide 2. So I said, "Oh, okay I'll launch this thing." Obviously you've heard me before tease we've got a lot of Warhammer and Vermintide games. Those guys are really prolific. A lot of games on the platform.

Larry Hyrb: Which is one way to say it.

Phil Spencer: But man, I've been playing this and I really like it. I mean, I'm kind of a ... I'm probably more just from my growing up more of a fantasy than sci-fi just in terms of my core.

Larry Hyrb: I'm the absolute opposite.

Phil Spencer: Yeah, and it's like ... And I respect that.

Larry Hyrb: Likewise.

Phil Spencer: But the, so I'm like "Oh, this is like 30-40 minute co-op strikes." Like this game makes a ton of ... I think they do a great job putting just hordes of enemies. And I think I've saved the planet from the hordes of rat men so many times. But I have a good time. Because I can play with new people, so I've been doing that. I'm trying to work through MCC legendary with some friends of mine, which is fun.

Larry Hyrb: The latest update is really nice.

Phil Spencer: It is. They've done a really good job and-

Larry Hyrb: You see that article on Kotaku last week?

Phil Spencer: Yeah. And I like the one about the kudos to 343-

Larry Hyrb: Yeah, because it came out and they kept working on it over the years, frankly. For the better.

Phil Spencer: Yeah, and I think it's awesome when we stay on things. I will say the quality of the launch wasn't where it should be.

Larry Hyrb: Right.

Phil Spencer: So, it's a little bit of two sides of the coin. I mean, you can't rewind time. So once you're in a situation, I love the fact that 343 didn't lean back, they leaned in. They rolled up their sleeves and learned from what happened. And then they stayed committed to the franchise and the fans, which I think is awesome. Obviously we need to learn on how we actually ... Not getting ourselves into that situation again, which I think would be fundamental.

Larry Hyrb: Right, it's come ... I'm looking at the studios here. Last year was huge. 2018 was huge. You stood on stage at E3, you announced all the studios. I mean, I'm looking at this, it's quite the portfolio you've collected. I mean most people collect like shoes and I don't know. They collect coins. Sometimes they get video games up on a cabinet. You're collecting studios from around the world! For us, though, for the gamers. For everybody.

Phil Spencer: The 2018 was a fun year. But you and I we've been on this journey now for a while.

Larry Hyrb: Yeah.

Phil Spencer: You know, what'd I say is ... This is only my fifth year in this role.

Larry Hyrb: Is it already?

Phil Spencer: I think coming up on my fifth.

Larry Hyrb: Yeah, you're right.

Phil Spencer: If I'm counting correctly.

Larry Hyrb: Happy anniversary.

Phil Spencer: I've run out of fingers at some point. I think at the beginning we tried to figure out what we were about, why we were here. Trying to get back to the soul of what it means to be an Xbox team. And then we put on our hats and said, "Okay, let's figure out a strategy for why we're going to be in this space. We don't want to just duplicate what somebody else is doing. If somebody else is doing a great job being what they are we, should have a unique reason to be in this industry."

Larry Hyrb: And what's ... And have a value of something that is valuable to customers that they can't get anywhere else

Phil Spencer: That's right. That's right. Whether that's hardware differentiation, whether it's ... And at the same time we were doing all that work, we were working on things. Like well, we've got to get our hardware in a better position. I love the S and the X and where they sit today, and I think we learned a lot about that. But I would look and I would say at the end of 2017, beginning of 2018 we really solidified the strategies ... our longer term strategies. Say decade-long strategies of what we're trying to do. And it's really about putting the gamer at the center of everything. Play the games that you wanna play on the devices you wanna play them on with your friends, wherever they are. And you should be able to cross-play with anybody. You should be able to, as much as we can, we're going to bring our content to you wherever you are. And that means we need to have a critically successful console ecosystem. We've gotta be great on PC and eventually we wanna be great anywhere that somebody wants to play one of our games. Or one of our partner's games.

Phil Spencer: When I looked at 2018, because I'm just ... Obviously early in 2019 I was trying to get my head around well what's this year?

Larry Hyrb: What's next, yeah.

Phil Spencer: And what I loved about 2018 and you know this, and it's not something we've talked about in the press a ton. But this time last year we did a really big reorg.

Larry Hyrb: Right.

Phil Spencer: Where we brought in a couple new leaders, 'cause we had a real good vision on where we wanted to go. At least we had solidified that.

Larry Hyrb: Came up with the idea and now you have to put everybody in place to execute that plan.

Phil Spencer: That's exactly right. And I would say what I love the most about 2018 is I feel like we have ... We got the right teams together. And I mean that, teams in kind of a plural. Some of those were added, as you said. Six new studios, adding the seventh at The Initiative and they're doing a great job hiring. And I think now we're execution mode. Like I look at 2019 and where we're going with future consoles, all this xCloud coming to PC in a much bigger way this year. Doing some things we had been talking about for a while for real on PC this year. And this is a year where it's not strategery, it's we're gonna roll up our sleeves and show. And I love that. I love the studio acquisitions as a part of that. I love the team as it's set up right now, and our leadership team. And how they're showing up the different leaders, some new, some that have been around for a long time. I think everybody sees it now that this is the year, okay, it's going to be ... This is ... Now it's go time.

Larry Hyrb: But I also want to point out, is that when you talked about the studio specifically. Some of them are going to have some stuff this year, and some of them like The Initiative won't have it for a little while.

Phil Spencer: That's right, that's right.

Larry Hyrb: So it's not like we're going to have all 12 studios, "Here's all the new stuff you're going to see." It's rolling, that's just the way it works.

Phil Spencer: Yeah, the real goal with the studios for me is to get a large enough studio base where we can delight and surprise ourselves and our fans with games. And it's on a regular cadence. So we're not always pinched to say, "Okay, well what can we announce?" Now we can say "What do we have to announce, and which of these things do we actually want to announce? And what do we want to let sit and percolate a little longer?" You know this, it's been a while since we were in that position with our internal studios. And I feel really good about that. As Matt Booty and I were sitting down and looking at all the different things the teams are working on, it's just ... The kind of capability that we have now as a first party organization, I do think it will continue to get bigger. But the ... What we have right now is just so different than the position we've been in the last five years.

Larry Hyrb: Without a doubt, I mean just even the games alone. Obviously people think about games with Compulsion and Ninja Theory. It's quite amazing, and I know you've looked at the pipeline and you're excited about the pipeline.

Phil Spencer: I am. I mean one of the cool things was Obsidian and seeing their announce at the game awards. It was ... I've seen what Ninja Theory's working on next and what their pipeline looks like.

Larry Hyrb: I'm dying to go out there to that studio. I know you went out a little while ago to visit them.

Phil Spencer: Yeah, we were there in November.

Larry Hyrb: I'm dying to go out to Ninja Theory, 'cause I mean that game. 'Cause as an audio nerd, that game blew my mind.

Phil Spencer: Oh, it's ... I'm actually going back, and truth be told I haven't finished it I was kinda at the second to last chapter. And I got stuck in some other things. So literally yesterday, I think I'll probably finish it today. I'm on the last chapter and I've got ... Yeah, you put the headphones on-

Larry Hyrb: We're talking about Hellblade if you haven't played it...

Phil Spencer: It's on Game Pass.

Larry Hyrb: It's on Game Pass.

Phil Spencer: It is. And yeah, the collection of things that the teams ... That the studios that have come together. I was out at Rare at the same time, we went to Rare, Playground. Saw what Playground's working on next. I saw what Rare is working on next and their continued growth and success with Sea of Thieves.

Larry Hyrb: Everyone's streaming that now, you see that?

Phil Spencer: It is ... I mean, it's such a fun game. A community, you and I have played it. [crosstalk 00:15:11]

Larry Hyrb: Yeah we've played it, yeah we've played it. I remember me running away from those guys and you're like, "Drop the sail! Go around the other side of the island!"

Phil Spencer: I always laugh when people come to me about Sea of Thieves and they're like, "Oh, it's the most tranquil, calming game." And I'm like, "You have not played the same Sea of Thieves that I have."

Larry Hyrb: No.

Phil Spencer: "'Cause when I'm playing, I'm always looking at the horizon. Is that a sail? Is that a sail?" It can be one of the most kind of on edge games. But Rare has done a really nice job in learning from the community. It get the feedback from some [inaudible 00:15:38] this game when they launched. I don't think people understand the role that the community has played in what Sea of Thieves has become.

Larry Hyrb: Right

Phil Spencer: And that feedback loop ... I mean I guess we could've sat back in beta for nine months or whatever, I'm not sure what that would've meant. But we said even before we launched that the gamer's voice is going to play a big role in how we grow this game. And that's not done. And we look at where this is going. Some of the stuff announced, some of the stuff unannounced. I think it's something that's long for us. We're big believers in the Sea of Thieves and where it's gonna go, and it's great to see Joe and the team continue to innovate there.

Larry Hyrb: Yeah, I had them on when we were down at the event in the Mexico City. I had those guys on, and I'm gonna have Joe on, Joe Neate, the executive ... I think I'll have him on the show in a couple of weeks.

Phil Spencer: Yeah.

Larry Hyrb: To talk about what they're working on. Yeah it's ... They have such a great job over there. So yeah you've been playing a lot of games that have been announced and haven't been announced.

Phil Spencer: Yeah that's always ... When I go dark on Live it's usually I'm-

Larry Hyrb: That's why he's not tweeting folks, because he's too busy playing those unannounced games.

Phil Spencer: I'm on a dev kit. And well, because it's showing up in the last two to three months when something's going to ship and giving some feedback is not always the most productive thing for a team. So-

Larry Hyrb: It can derail them, actually.

Phil Spencer: It can. So-

Larry Hyrb: "Phil says he wants this! Stop the presses!"

Phil Spencer: That's not what they say. It's like, "Just tell him we'll do it later." But so getting her in early, getting your hands on things if they're things, I don't know how to put this without ... Like if there are games that I have some history with-

Larry Hyrb: Sure.

Phil Spencer: Then I might have something to say about some of the kind of core values.

Larry Hyrb: And when you say history, as a player or as somebody who was in production.

Phil Spencer: That's right.

Larry Hyrb: Right? I mean, because you've played so many games both as a regular person playing them and as well as someone who's-

Phil Spencer: Then I put my other non-regular player hat on.

Larry Hyrb: Exactly.

Phil Spencer: What have you been playing?

Larry Hyrb: One of my ... let's see, Assassin's Creed: Odyssey.

Phil Spencer: I watched you! I saw ... Well I don't watch you, I see on Live that you're playing.

Larry Hyrb: That game is just, I got ... So I started playing in October when it launched. And then I said, "Okay I gotta put this-"

Phil Spencer: Yeah, you went away from it for a while.

Larry Hyrb: Right, because I went into Red Dead. And I finished Red Dead, went through Red Dead, and then I went back to it, and it just, it just ... The game just got bigger and bigger and bigger. I don't understand that game and how they shipped it, it's so huge!

Phil Spencer: And you played ... I remember you played a lot of Odyssey, too, didn't you?

Larry Hyrb: I did, yeah.

Phil Spencer: That's the thing. I'm letting our Origins, [crosstalk 00:18:00] You played a lot of origins. I'm letting Odyssey ... I've played, I don't know, ten hours of it.

Larry Hyrb: The combat's amazing.

Phil Spencer: The team does a fantastic job. That was another thing. I got to go out with Ubisoft and sit with some of the creators. I played that a year ago and played some of the other games. And just talked to the teams about whether it's a game that we're marketing or somebody else is marketing. I don't really care bout that.

Larry Hyrb: It's a game.

Phil Spencer: It's a game. So this one, since I played so much Origins I'm kinda ... I don't want to burn out on it. So I'm letting it sit for a little bit.

Larry Hyrb: It's so good.

Phil Spencer: I go back to it every once in a while. What else?

Larry Hyrb: I'm playing that. I was in North Carolina last month for The Division 2.

Phil Spencer: Yeah

Larry Hyrb: So playing the new Dark Zones that we've talked about over the past couple weeks. So playing a little bit of The Division 2 before it launches, of course. That's one of the ... I can do that too, Phil.

Phil Spencer: Yeah, yeah.

Larry Hyrb: So I'm playing that. We're still getting into Overwatch. PUBG just shipped Vikendi, which is the new snow-covered map.

Phil Spencer: Snow map, yeah.

Larry Hyrb: Yeah, the snow map. They shipped that this week, so we played that a little bit. Sea of Thieves, of course, trying to get the gang back in. And that's one thing I was telling Joe. I was like, "Look I love Sea of Thieves, but when I go in the world I kinda have to block out my calendar for an hour or an hour and a half." So that's why I know they're working on the arena stuff for a little bit-

Phil Spencer: A tighter loop.

Larry Hyrb: A little bit tighter loop, yeah. So yeah, those ... That's kinda what I'm focused on right now. I haven't had a chance I'll talk about ... Here's the headline that everybody is going to pick up on. I haven't had a chance to check out the new Mario on the Switch.

Phil Spencer: The... Not Smash Brothers.?

Larry Hyrb: No, the U.

Phil Spencer: Oh, the okay.

Larry Hyrb: the U. So I've gotta check that out. But yeah, man, just a little bit of this and a little bit of that. Yeah it's been and then one thing I'm really excited about is the Anthem VIP demo coming out this week. Have you had ... Did you play the demo?

Phil Spencer: Yeah.

Larry Hyrb: When we had internal access to it? A lot of fun

Phil Spencer: It is fun.

Larry Hyrb: I'm sure you gave your feedback to Casey.

Phil Spencer: Yeah, yeah. I like Casey a lot. And even Patrick back when a year, year and a half ago when we were looking at some stuff on that game. And it's great to have Casey there. He's such a strong, creative leader. It's fantastic to see him back at BioWare and doing cool things. Yeah, I mean, you play a lot. I see you online. I love the fact that I see your go-to's and then, which is awesome. And I think it's nice to be for both of us, I think, to be able to work in a space where kinda our hobby is our job.

Larry Hyrb: Yeah, well that's why you and I have talked about this off the air as well as on the air, it's we just love what we do. And I've been here I think ... You had a nice comment to me on Twitter that moment you were on Twitter a few weeks ago, where I'd just just past 18 years here.

Phil Spencer: Congrats on that.

Larry Hyrb: Thank you. Of which 15, 15 and a half were here at Xbox. Because it's fun! And we work with amazing, smart people. And you and I are blessed because we get to work with these people and you moreso than me, but represent the brand to a lot of people.

Phil Spencer: Yeah I mean going back to 2018, 2019 where we are. And I've done this kind of story too many times, but what I will say today is when I sit down with the teams ... And I did a couple of product reviews yesterday. Almost 100% of the time, the team sits down having made so much more progress on what they're working on so much more than I expected.

Larry Hyrb: Right.

Phil Spencer: And it's just awesome when you get to work with teams that are just accelerating on their own. Like they have their own belief, they have their own capability, they feel empowered. They know who their customer is, they know what they're trying to do.

Larry Hyrb: There's focus.

Phil Spencer: That's right, and you don't ... I sit down, I try not to say something stupid to slow them down, because they're just doing it.

Larry Hyrb: Right.

Phil Spencer: And -

Larry Hyrb: You get out of the way.

Phil Spencer: Try to get out of the way. And you know, I'd say a few years ago it was more about alignment, more about belief, what can I do to help, how do we untangle some things that maybe are tangled. But it's just so cool. I mean you think, I've been with the company for a long time and I say, "Okay, at some point somebody else is going to sit in this chair." And like that's just fair. But right now it's so much fun.

Larry Hyrb: Yeah. You know what I was thinking, I was looking at ... We're going to play a little Jeopardy.

Phil Spencer: Uh oh.

Larry Hyrb: What is 137 days and 15 hours?

Phil Spencer: I'm going to guess it's E3.

Larry Hyrb: There you go. E3. E3 Getting ready for that!

Phil Spencer: Yeah.

Larry Hyrb: I know I've been in some meetings and I know you've been in a lot of meetings as well.

Phil Spencer: Yeah, you know this is going to be a fun E3 for us. We ... Obviously there was some news about E3 in the fall and we had a discussion internally of, "Should we go big? Should we save some money?" You know, what does that mean? We decided, no, we're going to do our thing. And we're gonna go and be as big at E3 as we've ever been and I love that opportunity. I love the opportunity to be with our fans in the industry. And the industry conversations it's like a revolving door in Sarah Bond's team who runs business development for us.

Larry Hyrb: Right.

Phil Spencer: Right now and the third party's coming through, and what we wanna do at E3. A lot of interest. It is going to be fun. This team ... We gotta... Last year we changed venue which I think-

Larry Hyrb: Oh boy, did we. We upgraded.

Phil Spencer: We did, we did.

Larry Hyrb: The Galen was great, but wow.

Phil Spencer: Yeah, it wasn't ... Not that it it's the Microsoft Theater, but the Microsoft Theater is a special place. I love the location how it's right in the center of everything.

Larry Hyrb: Yeah.

Phil Spencer: And this year we're changing up a couple, as you know, things about how we're showing up at E3 I think again in a positive way. Though you know we've done it now for a while. This team. Like the team in ... I love how we throw a new wrinkle in, because I think it gets a lot of us a little bit on edge and try to be the where it is-

Larry Hyrb: That's the way it was last year.

Phil Spencer: That's right.

Larry Hyrb: Everyone was like, "The people that have been doing ... A lot of the folks on our events team, in all of their different parts, have been here for a long time."

Phil Spencer: They have

Larry Hyrb: So they were like, "Oh, I don't know." And it was great to see people roll their sleeves up and solve problems and get excited about the new location.

Phil Spencer: They did, they did. And I think it was world class.

Larry Hyrb: Yeah.

Phil Spencer: And I'm looking forward to this year. I'm thinking ... Interesting on how and who we get on stage and how we kinda do that this year. And then I think it's gonna be great. There's ... I think we're still going through some of the internal discussions about how much long term versus how much near term do we talk about. You know me, I'm always more of a proponent for just being as transparent as we can be. That said, you know, if things could change or something you don't want to head-fake people and say we're doing X and we're doing Y, but I feel really good about our plans and we'll kind of work through those things. With the larger organization.

Phil Spencer: But I think it's going to be ... I think the content that we'll have will be great. I think we'll talk about our future. I think we'll talk more about what the Xbox brand means to us. I think rightfully, most people when they think about an Xbox they think about a gaming console. We do as well. And I love the fact that the gaming console has played such an important role in our strategy, but at the same time we have millions of Xbox customers who we never see on console today.

Larry Hyrb: Yeah.

Phil Spencer: We see them on a phone, or we see them on a different device or on PC. And to really continue to push this idea that you can be a member of the Xbox community even if you're not playing your games on a console.

Larry Hyrb: Wherever you are.

Phil Spencer: Wherever you are. And we want to continue to make that possible. You can stay connected to your friends, you can stay connected to your content. One thing I'm doing, which I had a good time with when I was away over the holidays. I was playing games on xCloud.

Larry Hyrb: Really?

Phil Spencer: Yeah, yeah.

Larry Hyrb: You announced, we announced this last year. And I know that internally ... I haven't had a chance to do that yet. I've had my devices ready to go but I-

Phil Spencer: Yeah, so-

Larry Hyrb: Tell me about that.

Phil Spencer: It was fun. [crosstalk 00:25:44]

Larry Hyrb: Be careful!

Phil Spencer: No, I was just playing. I think that like anything, we want to make sure we get it as right as we can. And the best way for us to do that is to test it, test it for us.

Larry Hyrb: Play it.

Phil Spencer: I was, I don't mind saying, I was in Hawaii for a little while and I had my device and I'm playing and it's cool because when I'm doing it, I'm just on Xbox Live. Like I'm getting the same toast pop-ups, people inviting me to parties and stuff. Like to anybody else in the service, I'm just playing.

Larry Hyrb: You're just playing.

Phil Spencer: And I'm playing this game-

Larry Hyrb: That's the way it should be.

Phil Spencer: That's the way it should be. That's right kinda a ... So I am as much a part of the Xbox community in that context as I am when I'm sitting down in front of my X-

Larry Hyrb: Regardless of what device you're on or where you are

Phil Spencer: That's right. And there's I'm learning a lot as I'm playing games this way. It's helping me kinda think about the experience before we get it in the hands of customers. But I think it's just, when I think ... It'll be ... Let's be clear. It's gonna be years, I think, before this is the primary way millions of people are playing. But as ... Sitting at a company like Microsoft with the assets we have, I think we should focus on the now and let's go be great with the consoles we have in market now. And the games that we can go build. Let's think about our future and our kind of the existing spaces of console and PC, and let's go be real meaningful in those places. We've got significant work we've got to do on PC but I love the plan. But I think we should also have these kind of five, ten year views on where we think things can go. And I love the fact that we can play in all three of those horizons at the same time.

Larry Hyrb: Now I have to ask you this because your boss, the CEO of the company, of the ... The CEO of one of the most valuable companies in the world, Satya. What's that like, his engagement with gaming? I mean clearly you report to him, so he knows it's valuable to the company and it's a big deal.

Phil Spencer: Yeah. I'd say for Satya Nadella, our CEO, and Amy Hood our CFO, which are probably my two primary contacts. Incredibly supportive. And obviously when you're going and adding the studios that we did, in the last what now 8 months. Amy's got to approve all that as the CFO.

Larry Hyrb: The Chief Financial Officer.

Phil Spencer: Chief Financial ... And I've said this before. Satya looked at me on the last one we finally because we closed them all now, we've closed them all. And he was like, "Man, we're really in on content, aren't we?" I'm like, "Yes we are." But he loves the strategy. And I think he more than anything he trusts the team.

Larry Hyrb: Now Amy doesn't play a lot of games, does she? Was it you that were telling me the story about The Division?

Phil Spencer: No, I don't think so.

Larry Hyrb: Somebody was telling me this story about it, and I don't know Amy that well. But somebody was telling me this story, because she's our Chief Financial Officer. And apparently we were talking about The Division and she said, "Oh I love division!" No, not that type of division. Not long division, because she's a numbers person.

Phil Spencer: That's right. Yeah, Amy pays a lot of attention. She watches streamers, she stays-

Larry Hyrb: Oh really?

Phil Spencer: Oh yeah, yeah. She stays very connected. She's got younger kids. She doesn't have a ton of time so she doesn't play a lot, but I think as her kids are getting into the ages where they'll be playing she'll have that connection which is great. Satya just, I think for both of them, trusts in the team, belief in the strategy. Our critical components, big supporters. You know, there's certain things where I have to work like ... Take Game Pass. Satya will ... It's easy. He calls Game Pass the Netflix of Games.

Larry Hyrb: Right. A lot of people do.

Phil Spencer: A lot of people do. And it's not.

Larry Hyrb: Right.

Phil Spencer: Right? And that's not disrespect to Netflix. I'm a Netflix subscriber, I love it. But it is fundamentally different. The content that we have works differently than a video-

Larry Hyrb: Sure. A movie or TV show.

Phil Spencer: Where I watch it. Right, where there's a beginning, a middle, and an end, and then it stops. Not all games are like that. Games last longer. Some games have business models inside of themselves. People ... Some of the aspects that are similar, it's been really cool just to see the uplift in gameplay. People when they find ... I saw some interesting stat, I'm sure we'll kind of publicize them at some point. Human Fall Flat is a game that's done incredibly well in Game Pass. And when we watch those players we say, "Okay. Oh, here's a puzzle game that we don't know how it would've done on Xbox without the exposure of Game Pass." You can never kind of do the before and after of that. But now you see, "Hey, we got a lot of other puzzle games that all of a sudden are becoming more popular. And where are those players coming from?"

Larry Hyrb: All boats rise.

Phil Spencer: Yeah, it's actually. Literally, it's coming from people who their first real puzzle genre game that they play was a game like Human Fall Flat. I think how awesome is that that we have this kind of this system where people can try new content? Low friction, low barrier. Get exposed to something that is fun, creatively put together, a game I love. And then when they find, "Hey, I do like this. Thomas was alone, I'm going to go try that game. I'm gonna go find other puzzle games because I found that I like it."

Phil Spencer: And I don't know that that happens so much on a video service. I think it maybe happens some, but I don't know if it like ... I don't know if all of a sudden House of Cards is popular and people go looking for other political dramas or something. But in games, I think because of the community nature of it, because the business model of a lot of the games and stuff. It is, it works different than video. It works very, very healthy ways. Which has been awesome. So I love the discovery that happens in the in Game Pass and stuff. Satya is a big believer. And I mean, when you think about the consumer-facing businesses inside of Microsoft, the consumer products. And we do the brand analysis of what Xbox means. I mean, Xbox is a global consumer brand in so many markets. And they love that.

Larry Hyrb: It is, it's kind of amazing. We've talked about it. You've been here at the company a long time as well as I. To remember, I always tell people the story of when we were at Millennium, which is an old office park we used to be in-

Phil Spencer: The gravel pit.

Larry Hyrb: Next to a gravel pit. And I used to remind people that we would ... It was the team ... When I joined the team it was like 300 people. And now I don't even know how many people are in the Xbox work around the world.

Phil Spencer: It's thousands.

Larry Hyrb: It's thousands. And they're around the world, which is ... It's growing and growing and growing. And as you just alluded to earlier, there's tremendous aspirations to go beyond the console.

Phil Spencer: There is. And the growth is part of it. I think on a percentage basis we're one of the fastest growing groups around. Obviously the acquisitions have a large part of that. And going around the world, a love the fact that we no longer try to push everybody to live in the upper northwest corner of the United States.

Larry Hyrb: Thank god, yeah.

Phil Spencer: You can go do an acquisition or hire people once you've got a footprint in different places. Even remote employees. I had a good lunch with one of our strong Xbox Live devs who lives in southern California and works from his home. And he has for years. And I think you want to find the best talent. You want them to be able to be comfortable with where they live. You know, I think. I was down at Brian Fargo in inXile there in Malibu. Which is ... or Newport. Newport. And then they've got another part of their studio that's over in Louisiana. The Silicon Bayou. And I think it's great that we can actually put ... have footprints, have offices in different places. It lets us hire more different kinds of people.

Larry Hyrb: The talent pool is much bigger.

Phil Spencer: That's right, we're not always competing with ourselves. It is ... It means a little more travel. But I just think is the community and culture we have inside of our team, it is such a great addition.

Larry Hyrb: That's why I've been fighting for years, I want to get a studio out in New England where I'm from. There used to be a couple in Boston area-

Phil Spencer: There were, yep.

Larry Hyrb: But there's a lot of tech, a lot of students out there. I'll be going out there for PAX East in a couple months. And it is amazing how ... When I was growing up, and you grew up in the northwest.

Phil Spencer: I grew up in southern California and then I came up here to go to this college.

Larry Hyrb: Well when I grew up in New England, you know, there wasn't... Video games weren't a big deal. And then of course I moved out to Microsoft in 2000-ish. And I go back there now, and now it's like it's everywhere. And it's just [inaudible 00:33:36] same thing. Our business went from to the point from the 300 people on Xbox to the thousands around the world. Everybody games now.

Phil Spencer: Yeah. And that's ... You look at the stats, you look at the size of the business, the growth in the business. It is-

Larry Hyrb: Bigger than Hollywood.

Phil Spencer: And I'd just say it's mainstream. It's the number of people who play, or watch, or have interest in it. I think for us, as an industry, we have to recognize that the kind of responsibility with the reach that we have now. And I think we're doing more of that. You know, I love ... I'm on the ESA Board, which is the Entertainment Software Association, and Reggie's there. And Shawn's there. EA's there and Activision. It's like all of the main game publishers and first parties. I know Shawn's doing the D.I.C.E. keynote, Shawn Layden from Sony this year. I got the privilege of doing that last year. He and I had a short email exchange on those platforms as an industry with the amount of ... You think about how many kids on the planet their first use of any technology is through something like Minecraft. And I'm not saying that because we own Minecraft, could be Minecraft on the Switch or an iPhone.

Larry Hyrb: Right, whatever.

Phil Spencer: And then well what does that mean? I'm literally sitting in Jeff's seat today because I started playing video games with my dad who was an engineer, and a few years into it I wanted to figure out how these things were built. So I learned to program. Then I went to college and got an engineering degree because I wanted to figure out how things like that were built. And that whole STEM path, the social impact that gaming can have, it's such a great way to bring people together in a world where a lot of things are dividing us. Whether you're a that and I'm a this. And there's no overlap in that.

Phil Spencer: We have an art form in a society in gaming. A social that can really be an impact. Have a good impact on the planet. I love that. And I love seeing the industry start to grow into that. Realize that opportunity. And so many great people in the industry see that and grasp that and the work that happens. And we do it in a collaborative way. That's ... We're not competing on who's adaptable, who's more accessible. Let's actually be an industry that does the right thing for as many people as we can.

Larry Hyrb: Well before you ... I know you've got to wrap it up in a few minutes, because you need to go. But one thing I wanted to talk about last year was a big year was the adaptive controller. You kinda alluded to that a little bit. That was still huge, and we saw it in the commercial.

Phil Spencer: Owen, yeah.

Larry Hyrb: With Owen. Over the holiday. That's ... What a great product that is. And I know that you get comments all the time on social and I do all the time on social and in person. The difference that product made.

Phil Spencer: Yeah, the videos that we see, it's so ... I had a little bit of this when we launched Kinect. Kinect was more something I don't think we foresaw, but autistic children who couldn't play games and we're getting videos from parents who could play for the first time with their kids. And that was, I'd say an emergent capability. This with the adaptive controller was so like a team. I think we've said this before, it started as a hack-a-thon project at Microsoft. And so it's not like some executive upon high said, "Hey, we're gonna go do this."

Phil Spencer: This was community driven inside of the organization. And not just people on the games team. That came together to go build this thing. And now I see the impact that that has, and in kind of writing an awareness in the industry and growing an awareness in the industry that we want everybody to play. And when everybody plays we all win. I kinda love that, that tagline. And I like that tagline not as a Microsoft thing but as an industry thing. The Owen commercial, the first time I saw that, it's an emotional thing. I think on YouTube, they also have the backstory of all that. That is his best friend. In the-

Larry Hyrb: He's a real kid, a real story.

Phil Spencer: That's right. He loves playing video games, this whole thing. Like, "What do I love about video games."

Larry Hyrb: He and I were trying to play over the holidays and we never connected.

Phil Spencer: Oh, that's okay.

Larry Hyrb: I'll trying to play a game with him.

Phil Spencer: I just love the impact. And that's such a ... I think the adaptive controller was just a great manifestation of an industry that's starting to realize its place and its capability. A team-

Larry Hyrb: And responsibility.

Phil Spencer: And responsibility. Perfect, perfect word for it. And then the first thing we did when we had some early working models is we sent them to a lot of different companies in the industry and we said, "Hey, whether you want to do this, or you want to do something in your own skin or whatever. We think there's a real capability." And the response from the industry has been great. It's not a Microsoft thing. It's an industry thing and it all kind of builds on itself.

Larry Hyrb: I know that you've, you're famous. You've gone one record as famously saying, "If anybody else wants to use this technology then have at it."

Phil Spencer: That's right. And I think there's the adaptive controller, there's the text-to-speech, speech-to-text work that we've been doing in games. There's just toxicity online, obviously we talked about that. It all ... Again, you have to come back to are we building things that people love? Like responsibility without kind of engagement from people who love what you're giving them is the most important thing. And I think 2018 was a fantastic year as an industry for just the innovation for the art form. When you think about all of the great games that were put out. Red Dead was awesome. Nintendo just had an awesome, an incredible December. Sony first party has been doing a really good job. You see third parties, first parties doing incredible work.

Phil Spencer: We talked obviously a lot about where Sea of Thieves is and how that's grown in 2018. I think it's a real nice year for the industry to continue to push in so many fronts and I don't see that momentum stopping. Just as I go around and talk to different publishers, different studios. It's so ... People are really energized right now. There'll be natural cycles in terms of business growing, whatever. But I think that responsibility matched with the opportunity to reach so many people just has the creative community, as far as I can see it, more pumped about what they can do than ever before. Which, as a gamer, I'm incredibly excited.

Larry Hyrb: Back in 2018 and kind of a preview of 2019 by Phil Spencer. Thanks, man. I know you gotta go, you got a busy day today. More game ... You reviewing more titles?

Phil Spencer: I am. Yeah. And like I said, maybe I'm gonna sneak and finish Hellblade's last chapter.

Larry Hyrb: Let me know if you need any help. No, you have to do it. You must finish.

Phil Spencer: I'm right there. But yeah it's today ... Everyday is kinda stacked with stuff. But it's good. We're in here early in the morning, and I appreciate you coming over.

Larry Hyrb: Oh, my pleasure.

Phil Spencer: You beat me in today. So I came in-

Larry Hyrb: I feel good about that. I feel good about that.

Phil Spencer: And Jeff being at Starbucks gave me the opportunity-

Larry Hyrb: In France, in Paris, by the way.

Phil Spencer: Yeah, Starbucks in Paris. Come on, Jeff. But no, you guys are doing a great job just staying connected with the community that we have and giving people the information that they want. And I just appreciate the opportunity to come on.

Larry Hyrb: My pleasure, man. We'll have you on ... We've also got a new episode of Inside Xbox coming up in a couple of weeks. So we'll have some more-

Phil Spencer: I love Inside Xbox.

Larry Hyrb: Yeah.

Phil Spencer: I watch it-

Larry Hyrb: Every month.

Phil Spencer: Yeah.

Larry Hyrb: We'll have you on again. We had you on in Mexico City.

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

Larry Hyrb: I don't think you're on this next show, but 'cause when Phil comes on, he brings the heat.

Phil Spencer: No, I see these opportunities to talk with the community and there's things I want to talk about. So I'm probably a little less glitzy than some of your other guests. Hosts. Guests. But I'm ... Yeah, I appreciate it. So any time.

Larry Hyrb: That sounds fun. All right, we'll let you go and people can find you on social, on Twitter.

Phil Spencer: XboxP3, or P3 on Xbox Live.

Larry Hyrb: You're one of the four people I follow, so just follow me @Major Nelson and when he's tweeting. All right, man, we will talk to you later. Thanks, Phil.

Phil Spencer: Thank you.