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Phil Spencer - Part One

The MGS boss explains in-depth the Ensemble closure, and explains the thinking behind the move

Last week, Microsoft announced that it would be closing Ensemble Studios, the developer behind the long-standing and hugely successful Age franchise. However, the publisher is adamant that such a move doesn't imply any kind of slow-down in the investment being made in the game space.

In his last interview on UK soil before heading back to the US (following his promotion earlier in the year), Phil Spencer - head of Microsoft Game Studios - tells GamesIndustry.biz the reasons for the closure, explains his email to staff, and outlines precisely why MGS is still a key player in videogames publishing.

GamesIndustry.biz Ensemble Studios - a big name in the industry thanks to the Age franchise - and in your email to staff you called the decision to close the studio as "the right thing for our business at this time". Explain why it's the right time for this.
Phil Spencer

First I'll start off by talking about the Age franchise, and I just want to reiterate that the franchise remains very important to us, something that is a pillar of our support of Windows. The first three iterations of the game sold millions and millions of units and got us a lot of customers, and that's great - the fans of that franchise and the online connection that we continue to have with those customers is an important part of running MGS - and something that we don't expect to drop.

Running a game publisher, especially a first party game publisher, is about exclusive franchises, and those franchises driving platform initiatives - in our case today both the Xbox 360 and Windows. Making sure that when you look at your franchises and build a plan for how those franchises will come to market, why they're going to matter when they come out, what are the things you're going to be talking about when you talk about the next release of a Gears game, or a Halo game, or an Age game, that you have big news or a big plan, or something that's really going to change the perception of your platform.

As we know, those kind of efforts - especially in today's videogame business - require resources. You need to have a lot of people behind your franchises that are really driving platform success. For us, today, it's important that we have those investments in those huge franchises that we're building - things like Fable, things like Banjo, Halo, Gears.

And we do have a plan for Age of Empires, and it is something we'll continue to push, it just didn't require that we had Ensemble Studios as an entity inside of MGS in Dallas, as full time internal employees, as a studio that would be the sole source of Age content going forward.

So we made a business decision to redeploy resources, and I think Shane said this in the press as well - this is a business decision, making sure that we have as many resources as we need behind the key franchises, that we have a long term plan for Age, and we redeploy people in the spaces that we need them.

It's not meant to show any lack of commitment to any of the franchises - I understand it's a difficult situation at Ensemble, it's never a decision that you take lightly. We've done this before with FASA, and rewinding a bit we had a studio in Salt Lake at one point, and there's always a little bit of a transition, but it's done with a long term play in mind, about how you want to grow the importance of the MGS franchises.

GamesIndustry.biz You also mentioned the notion of "scalable ventures" - is that something you can clarify?
Phil Spencer

There wasn't anything specific there, and I'll use Halo as a public example of this working when we announce things. When you look at that franchise now, you have the first-person shooter franchise with Halo 3, millions of people play that online, we continue to feed out map content, and other stuff to support that game.

Obviously we have future plans to support that which are unannounced, but we're going to do something with Halo.

Halo Wars, another part of that franchise's future, we've talked about Peter Jackson's work on Halo... franchises today, especially first party franchises, are multi-faceted, but even third party franchises are big ventures because of the investment required. You need to make sure you have a lot of people behind the different parts of the franchise development that are required for success.

So when we talk about that specific term, you look at something like Fable, Halo, maybe some of the stuff we're doing around Forza or at Rare - that's work behind big franchises, multiple facings. It just requires people in close proximity to one another to really pull that off.

GamesIndustry.biz So with the Age franchise, there's a strong echo of Halo, in that it's something you retain the rights to - you just don't need to own the company that's working on it?
Phil Spencer

Well, there's more than one team building Halo games right now. There are more than two or three teams building Halo things right now. Some of them we will own, some of them we won't. It's never been, for me, about who you own or don't own - it's about working with the best creative talent in the industry.

It's one of the important reasons we're here in Europe - the history that Europe has in creating some of the best franchises in videogame history is clear, and us creating a publishing presence here is to further work with the likes of Dave Jones, Peter Molyneux, Sarah and David up at Bizarre, Remedy - the teams that we're either working with today or have worked with in the past.

It's important that we continue to work on those relationships - but it doesn't mean you have to acquire them all. Some of them you will, like Lionhead. Some of them, like Epic, you'll just continue to maintain an external relationship.

GamesIndustry.biz But isn't the danger that if you don't own a studio, you can't guarantee that titles will be platform-exclusive.
Phil Spencer

You're in the industry, so you'll get this - Gears of War is about Cliff Bleszinski and Tim Sweeney, and that team's passion for building Gears. It's not about us owning a brand called Gears of War - and I'm not downplaying the importance of that brand - but it's about having passionate creators working on those franchises, so that when the games come out they actually matter, not because of the name on the box, but because of the content that's on the disc.

The thing that really changes a player's perception about your console - and Gears 2 is one of the best gaming experiences I've ever had, by the way - is a fabulous game. And that's not because of the ownership situation of the company or the IP, it's because of the relationship we have with Epic, and that push to build great games together.

Sometimes those relationships are like the ones with Lionhead or Rare, where we own them, and sometimes it's an external relationship. And sometimes that relationship changes, like the one with Ensemble. We have a plan to work with Ensemble's creative leadership moving forward as an external company. I'm committed to that plan. We committed to that with Bungie, and we continue to work with Bungie today.

This is about that relationship with the creative talent. You can't own creative people - they work with you. If you own the franchises without key creative leaders behind them, you don't own much.

GamesIndustry.biz What people will look at is a comparison with Sony, which is investing a lot on platform exclusives and owned studios, and based on the August NPD numbers, the console sales levels are closer than ever...
Phil Spencer

I think they were actually closer last month [in August] than they are this month [in September]...

GamesIndustry.biz But people will compare Sony with Microsoft and wonder why you're coming at it from a different direction?
Phil Spencer

Well, I love this conversation. Let's start from the beginning of both consoles - PlayStation 3 and Xbox 360 - which first party has had more success on their own platform? We have Gears, Halo, Forza, we're continuing to push existing IP while bringing new IP to market. I'll line up against Sony's first party any day.

Now the news, when you're talking about something like Ensemble, that's us building that franchise pipeline that you've seen come to market for the last three Holidays. I remember last E3, sitting there, people looking at our line-up and saying that they get we had a very strong line-up - Mass Effect and everything that's coming - but what about next Holiday?

Then I was sitting at this E3 and I go through Too Human, Viva Pinata, Banjo, Fable, Lips, Gears of War, Scene It - that's all before Holiday - and then Halo Wars. And the press are saying exactly the same, that they get it's an incredibly strong Holiday relative to the competition, saying we'll win this year in terms of content...but what about next Holiday?

And I'm confident for next Holiday as well, that we're going to stand up at the next E3, or at the right time, and we'll show a line-up that will continue to win. We talk about our games when we understand what they are. I'm not going to put a billboard up on stage and say, "Boy, I hope you buy this game when it comes out and when I know what it is..."

We talk about games when we know what they are, when we can guarantee the quality to the customers, and we'll say when they're going to come out - I think the customers want that. But lining us up against Sony first party - I love that comparison. Review score average, exclusive hits to-date, you pick the metric and we can talk about it.

GamesIndustry.biz WildTangent's Alex St John told GamesIndustry.biz that he thought the "ramping down" of first party was a natural by-product of this part in the console lifecycle - is that something you'd agree with?
Phil Spencer

We're as invested now in first party as we've ever been, so there is no natural divesting of first party studios in order to shrink some cost involved in being in the console business. We continue to spend in first party, moves like Ensemble do not actually reduce the headcount in MGS - it just redeploys the headcount.

It doesn't mean that all the people in Dallas are going to be moving somewhere else, when we talk about the number of people working on games, inside of MGS that's a number that remains very strong.

So this isn't a natural downsizing of us in the middle of the console. In fact, when we look at our standing, and Don Mattrick standing on stage and saying that we'll outsell PS3, at the success that we're having in Europe with the leadership team that we've built here, the unit numbers of our platform continue to sell, and the franchises we're continuing to build here... you could argue now is the perfect time to invest in first party for the future, because we can look out at the end of the lifecycle, whenever that might be, and see a huge installed base to sell into.

So no - I understand what Alex is saying, but this isn't part of us trying to shrink our first party effort. In fact, we're not shrinking our first party effort. It's simply redeploying people behind different endeavours.

GamesIndustry.biz So to clarify, the investment is as strong as it's ever been, and ownership of first party studios doesn't represent a decrease. You might not be investing in the first party studios, but it doesn't mean you're not investing in first party titles?
Phil Spencer

Your statement is correct, but I would also say that we are as invested in first party studios. When you look at the head count numbers - and these aren't things that we share - but we're investing in a big way behind key franchises for us.

And I'll include Age in that - we're going to invest in Age of Empires in a way that makes sense for the future of how we view of how a Windows game should be deployed, sold and consumed.

There's a scale, size and opportunity there that we want to go after and build. And we will do that. And the same thing's true across all our internal studios. I wouldn't say we're redeploying from internal to external resources - our investment in internal first party resources remains very strong.

Phil Spencer is head of Microsoft Game Studios. Interview by Phil Elliott.