The Leadership of Phil Spencer
Looking at the 10 Years of Phil Spencer
“A brand is a living entity-and it is enriched or undermined cumulatively over time, the product of a thousand small gestures.” - Michael Eisner
The Phil Spencer Era Begins
On February 4, 2014, Satya Nadella became the third CEO in the history of iconic tech giant Microsoft. Nadella came in after an up-and-down decade for Microsoft, which saw the company mostly fail at trying to replicate the successes of Google and Apple. Under his leadership, Nadella would refocus Microsoft around what it does best - software. The new leadership would scrutinize two major company divisions, Windows Phone and Xbox. The Windows Phone was killed off despite the billions they poured into it. The Xbox brand suffered a massive hit following the epic failure of the Xbox One reveal. Despite overcoming the odds of having the Xbox 360 mostly lead the PS3 through its lifecycle, the reveal of the Xbox One nearly killed the green brand.
Some in the company who did not support the brand wanted to kill or sell it. Nadella had to decide, and he ultimately chose to stick with the gaming brand. He would sit down with longtime employee Phil Spencer, who convinced him they could still make Xbox a major brand for the company. He then promoted Spencer to lead Xbox in March of that same year. The Phil Spencer era had begun.
The Phil Spencer era has officially hit ten years, a whole decade, at Xbox. Spencer is among the longest-reigning top executives in gaming history, and it's safe to say he has managed the brand through some rough times while also providing a north star for its fans to follow into its future. While some have been annoyed with Spencer’s dedication to the long term over the short term, Spencer has given Xbox record revenues and a path to a potentially industry-altering future. He has also made it clear his focus is on what’s best for Xbox as a brand, not how many consoles they sell to win an imaginary war.
Stop Asking About Walt
The quote at the start of this article comes from former Disney CEO Michael Eisner. Eisner ran the world-famous company from 1984 to 2005. Like Spencer, Eisner came in at a critical time in their respective brands' history. After years of financial trouble that almost ended in the company being sold off as parts, the Walt Disney Company finally decided it was time to think big to save the company and picked Paramount Pictures President Michael Eisner. It was the first time an outsider would lead the long-time family company.
Following Walt Disney’s passing, the company changed hands to a couple of people who were either friends or loyal company men. Ron Miller, Walt’s son-in-law, had overseen some financially tough times. At the company's lowest point, it was almost sold off in parts to investors as the movies weren’t making money, and only the theme parks were helping keep the doors open. Eisner came in, and his first order of business was to stop what had become a slogan around the company - “What would Walt do?”. Eisner told his new team that while they could respect and honor Walt, they had to move on from him to try new ideas. Eventually, slowly but surely, the company would begin to expand and have some of its best years in the 90s. The animated movies saw a tremendous comeback, creating many childhood memories, and the company expanded into television with ABC and ESPN and even expanded to cruise lines. Eisner also embraced new technologies such as computer animation, welcoming the titanic change that would shape animation.
Eisner focused on the company's strengths while also expanding what the company was. The Walt Disney Company was primarily a theme park and movie company when he started. By the time he left, Eisner had transformed it into a corporate powerhouse, adding hospitality, leisure, and television to their portfolios. His philosophy of treating a brand as a living entity that needed to grow and maintain its personality and goals is very much the reason for what Disney fans call - “the Disney Decade.” It took me a while to realize this, but Phil Spencer is the Michael Eisner of Xbox in many ways.
Fixing Xbox One
Much like Eisner, Phil Spencer entered during a rough period for the Xbox brand. Despite having their foot on Sony’s neck and proving that the PlayStation brand was not immortal, the reveal of the Xbox One killed the brand’s momentum so badly that we are still dealing with the fallout. Spencer’s first decision was to kill off the Xbox One’s requirement for Kinect and drop the starting price to $399, matching the PS4. He then began to change the culture at the company to go from typical console war attacks to embracing a love for the industry as a whole. In Spencer’s first E3, the developers had a title card with their favorite games, and you saw games that were Nintendo or PlayStation classics. Spencer’s decision to change to a nicer and less “console war” mindset would eventually spread as Sony joined in and calmed some of its shots.
For the next several years, Spencer’s tenure was a roller coaster. You had some highs like the development and release of the Xbox One X. He also launched the new service Xbox Game Pass, giving video games a taste of a Netflix-style service. You also saw Spencer embrace the fandom and become much more transparent with them. But you still had some lows. The exclusives at first looked promising, only for games like Crackdown 3 to undeliver or Scalebound to be canceled. The biggest franchise for the brand, Halo, launched what I consider to be its weakest entry - Halo 5: Guardians. The lack of exclusives hurt the brand as PlayStation 4 put Sony back on top of the console world, and Nintendo shrugged off a mistake in the Wii U to launch the incredible Nintendo Switch midway through the generation.
Despite this, though, it can be argued that Spencer saved Xbox One from being a Sega Saturn and Wii U-type failure. The system still sold about 58 million units in its lifetime, which is pretty impressive for a system with a major lack of exclusives and a bad start. However, Spencer used the Xbox One years to prepare for the future, which you can see when he launched Xbox Game Pass. Game Pass quickly became the number one reason to get an Xbox One. The service added a day-one launch for exclusives and hasn’t looked back since. He also started a shopping spree to add many studios to address the exclusivity problem. The future was indeed in Spencer’s mind and would come in 2020.
Power Your Dreams
The Xbox Series family of systems is the Phil Spencer era's first true console. The Xbox Series S and X were made to offer the gaming choice that Spencer had been pushing for a while now. When asked, Phil said he wants any screen to be a potential Xbox. He’s looking into cloud technology and the rise of handheld gaming PCs to expand the brand to new places potentially. But for the console space, Spencer had Xbox offer two consoles for different demographics to give gamers a choice on how they wanted to play.
The Xbox Series consoles were able to endure a rough launch. This time, it wasn’t out-of-touch messaging but a worldwide pandemic that took a lot of the fun out of the typical video game console launch. Still, the system had survived and sold over 20 million units. Xbox also had two of the biggest acquisitions in gaming history: Bethesda and Activision-Blizzard. The Xbox Series X is also the most powerful console available as of this article’s publishing. Yet, despite all of this, Microsoft is still behind Sony’s PlayStation 5 in terms of units sold.
For Phil Spencer, the units sold don’t seem to be what he cares about. An emphasis on player count, and revenues overtook the units sold metric in quarterly reports. Spencer had also talked about exclusives being bad for the industry, which is facing ballooning costs. Spencer wants Xbox to be more than just a console. His long-term vision is Xbox as a gaming hub you can access on your console, phone, TV, or even your smart fridge’s screen. Much like Eisner brought Disney into new industries like television, Spencer wants Xbox to be more than just a console; he wants it to be a platform.
Spencer’s vision for the future of gaming brings up a lot of debate. I maintain my belief that a big part of it is that many gamers are still holding on to the industry as they remembered it as a kid. But what did Eisner do? He stopped asking, “What would Walt do?” and asked, “How do I expand the Disney brand?”. Phil is doing just that as he looks at ways to get Xbox in front of mobile gamers and potential new gamers who won’t buy a console anytime soon. If Spencer achieves his goal of transforming Xbox from a console to a whole gaming platform hub across multiple devices, he will alter the course of the industry.
What’s Next
Now, while I applaud Phil’s ambitions and think most of his goals would be great for the industry as a whole, I want to caution Phil. If Phil Spencer is the Eisner of Xbox, he may want to avoid what led to Eisner being booted out of the company by Walt’s nephew, Roy. After expanding the company, Eisner started to get conservative with his ambitions after the new Disney’s California Adventure Park opened to lackluster attendance. He also saw the quality and financial success of the animated films drop, and he became hostile to trying anything new. He also oversaw the relationship with Pixar almost break completely. Eisner went from the hero to the villain, and that was his downfall.
Phil Spencer has to avoid becoming the villain, not just to Microsoft to save his job, but also to the fanbase that has grown to love him. Sometimes, fans feel Spencer lacks a cohesive vision or message for Xbox’s future. I see where Phil wants to go, but I think Phil himself has trouble communicating his plans. He is towing a fine line in dealing with fans who want to keep the industry the same and pushing his vision for Xbox while keeping his commitment to being transparent with the fanbase.
The Phil Spencer era is not over, and we haven’t seen its final chapter. Phil is not going to stop disrupting and trying to expand the Xbox beyond the plastic box. As Phil always says, “When everybody plays, we all win.”