Xbox’s Phil Spencer Delivers Cutting, Correct Remarks About AAA Games In Leaked Email

While the highest profile news items from the big, self-inflicted Microsoft document leak were the new Xbox Series X refresh and Bethesda’s entire release line-up in the next few years, I was struck by a specific email from Phil Spencer pointed out by Kotaku’s Ethan Gach.

In it, Spencer talks about the ever-increasing risks of publishers sinking hundreds of millions of dollars into AAA games where they become make or break without any other real distribution channels bringing in revenue in the digital era. As such, they rely on decades old IP rather than taking risks to make new IP instead the way upstart companies have found success with.

“In the new world where a AAA publisher doesn’t have real distribution leverage with consumers, they don’t have production efficiencies and their new IP hit rate is not disproportionally higher than the industry average we see that the top franchises today were mostly not created by AAA game publishers. Games like Fortnite, Roblox, Minecraft, Candy Crush, Clash Royale, DOTA 2, etc. were all created by independent studios with full access to distribution. Overall this, imo, is a good thing for the industry but does put AAA publishers in a precarious spot moving forward.”

So, what’s he saying here? He’s referring to a lot of big, independent publishers that are treading on dangerous ground. He’s right when some of the biggest games in the world arrived through slower burns from relatively smaller studios. But I think we can pinpoint some of the games and examples he’s coming up with, which may inform which companies feel so willing to sell to megacorps like Microsoft.

Rockstar and Activision are example he cites about studios who can spend $200-300 million and automatically produce a hit that will more than cover that. But even Activision, it seems, has executives who would rather take $69 billion than necessarily rely on Call of Duty continuing to print money every single year without fail, and Microsoft seems like the right partner for that where everyone gets what they want.

However, we can see some examples of companies that feels like what Phil is talking about here. I’m getting a lot of Ubisoft vibes for franchises like Assassin’s Creed and Far Cry that seems like they will go on forever as Ubisoft refuses to shelve them. This could encompass Square Enix doing Final Fantasy, which sounds like it should be a sure thing, but FFXVI this year may not have been quite the blowout hit they were hoping for, and even a franchise that storied can lose some sales steam in time. EA and its eternal sports games its desperately holding onto, often refusing to innovate. BioWare is heading back to Mass Effect after the spectacular failure of Anthem. Gearbox is just doing infinite amounts of Borderlands-related projects after Battleborn failed.

There’s another angle too, where if the old IPs don’t work, you now see loads of branded IPs. Half of large, independent studios seem to have a Star Wars game or two in the works right now. Ubisoft has Star Wars and Avatar. Square Enix tried twice with Marvel between Avengers and Guardians of the Galaxy before they sold those two studios when both games underperformed.

I think Phil is being insightful here, and while in theory, it seems like being independent is good, and selling out to join up with Microsoft or Sony or whoever is bad, the risk attached to projects from some of the mid-size to bigger studios may be too much to bear if things don’t change. Some survive, some thrive, but it’s getting harder and harder to sustain in the current state of the market. Not that Microsoft buying everyone and all games heading to Game Pass is the answer, but Spencer is right about one of the major problems.

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