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Phil Spencer - Part Three

The MGS boss on Games for Windows, digital distribution and the importance of the European territory

In previous parts of the interview with MGS boss Phil Spencer, he talked in-depth about the Ensemble Studios closure and what it meant for the wider publishing business, as well as his vision for the Windows game experience and the future of Lionhead and Rare.

In the final part of this interview, Spencer reveals his thoughts about the Xbox 360's struggle in Japan, the challenges ahead for the Games for Windows brand, the relationship with retail over digital distribution and the importance of Europe as a territory. What are your hopes for Fable 2's performance in Japan - do you think it can generate a console sales spike?
Phil Spencer

Absolutely - Fable 1 sold for us relatively well in Japan, and it's interesting to look at Rare and where they came from. Their heritage is obviously with Japanese publishers - and the Rare games sold well in Japan. We look at a game like Banjo and think that we can have success in Japan as well.

But it's a tough market for us, and we know that. The investments we made in Blue Dragon and Lost Odyssey were important not only for the sales success of those games, but also establishing that we're serious, and it's a long-term play.

I think some of the support you see in Japan now comes out of the investments that we make early on, that say we're really going to try and mean something. Along the same lines, our investment in Gears of War early on was also about trying to make sure that Unreal Engine 3 ran really well on 360. We knew if we signed up the game, it would make it easier for games like BioShock and other UE games to show up on our platform.

Japan is very similar - we went into Japan and wanted to make sure that our platform was supported with games that matter. RPGs are one of those kinds of games that really matter, and there's Ninja Gaiden, Devil May Cry, Resident Evil - games that weren't traditionally 360 franchises.

This is all part of an investment in content - there's not always a one-to-one correlation with how that investment pays out. It's very smart to look at it and see that we're getting a lot of support from Square right now, when certain RPGs come out our console sells out in that market... well what about that?

It is a long fight - Fable, Banjo, these games are part of that as well, but we're signed up and we're going to keep our Army hats on to try and get it. It must be a complement to you when Wada-san explains that for business reasons Square Enix didn't really have a choice in releasing Final Fantasy XIII on the Xbox 360, because the global installed base is so significant - the performance in two of the three territories is having an influence globally?
Phil Spencer

Absolutely. I think we lose sight of the fact that we've been in this business basically seven years, and we were literally nobody. Certain people would even say we didn't belong in the party seven years ago when we showed up at the door.

Now, to not only talk about the platform's success, but also some of the franchises that we've built in that time that are held to the same esteem as franchises that are significantly older and developed by companies that have been in this business a lot longer than we have.

I do take a ton of - I don't know if pride is the right word - but it's an accomplishment. We have a lot more work to do, but to see it play out the way it's playing, and to make sure that our customers have access to franchises like Final Fantasy and Resident Evil - games that in previous generations we wouldn't have seen - it's a great testament to the investment in both the quality of the content creators and the platform work that's happened. The Games for Windows brand has been out for a couple of years now - how would you evaluate the impact it's had on the PC gaming market?
Phil Spencer

Well I think you have to start with the goals, when you kick off a programme like that. I think it's easy for people to look at it and say that it doesn't seem to hold the same weight as a brand like "360" does - but I might argue that on the Windows side that's not what the customer wants or needs.

We went in with some goals around, I'm going to say: "Cleaning up the retail experience" - making sure that customers knew what they were buying before they bought it, and helping the publishers reach their customers through things like Live for Windows. And there are other solutions out there - we were making sure we had a solution on our own, and you see developers signing up to that.

So given the goals that we've had, I feel very good about the success that we've had. I think it is a worthy criticism to push on us to say that we should be doing more, and I don't disagree with that. We will do more - it's important to us.

Some of this is re-trenching and making sure we don't just follow old patterns because we don't think about it hard enough to come up with new patterns. And some of that is part of what we're doing today.

But the number of people playing games on the Windows platform today is incredibly high - I think everybody understands yet. Digital distribution is a key pillar of the Xbox 360 strategy, but isn't great for retailers. Meanwhile, second-hand game sales is good for retailers, but bad for publishers. It's not a cause-and-effect scenario, but how do you see that playing out - are retailers feeling threatened by the direct relationship that publishers like yourselves have with the consumer?
Phil Spencer

I don't know if they're concerned. I think they see a healthy business right now for games, and expectation from all that I see from analysts - not that I pay too much attention to that - is that the industry will continue to grow.

If we all understand - you can see it in movies, you can see it in music - that the relationship between content creators and consumers will migrate and change, then I think there are roles for people to play in that relationship.

Assuming we're delivering great products to consumers, at price points that seem fair and equitable, I don't have concerns we're going to alienate - our plan is to include people in our plans going forward.

Xbox Live is an example of that, and retail has a healthy relationship selling points cards, selling Live Starter Kits, and other things that are created. And the game sales are strong I think because of the relationship between the content creator and the consumer - and that helps retail as much as anybody else. You're now headed back to the US to run Microsoft Game Studios - will Europe still maintain a priority in your thinking as a result?
Phil Spencer

We created [MGS Europe] 18 months ago as an organisation to run content, to run our publishing business here. You saw us create a team with Chris Lewis and David Gosen to fill out the marketing and platform and content, so I feel that we have leadership momentum here - and I include Mark Betteridge and Peter Molyneux and leaders in our studios as part of that team.

We look at our success to date, and we understand - much like our discussion about Japan - that having content creators and content that is very tailored towards the European market is incredibly important, especially in the console space in the competitive environment that we're in.

I understand as a gamer the brand that Sony has here, and the work that we need to do to build content and franchises that uniquely resonate with the customers in the different European markets. Investment in studios, investment in people on the ground creating games is critical to us succeeding in this market.

And ensuring that when games come out, as with Lips and other things, that we tailor those games to the specific markets - so if you're in Spain and you want to hear a Spanish pop song, you should be able to do that, and we're doing the work to enable that functionality. That is important.

The team here [in Europe], even though I'm going back, will continue to grow and continue to be part of our success. I'd like to think that my time here will make me a better leader for MGS on a global basis in understanding what it means to succeed.

So this time, I think it was too short because we enjoyed our time here, but I think it was invaluable in thinking about how MGS should expand to be a global publisher for content across the world. So MGS will continue to be a flagship publisher of videogames?
Phil Spencer

Absolutely. And Europe specifically - I think I did the math about a year ago, so it might even be higher - but over 40 per cent of MGS games historically have come from Europe, when we think of Project Gotham Racing, Crackdown, and all the different things that we've done here.

That shows both the content creation community that's here, and also how important it is for us that we have content that comes from Europe - it tends to do well in Europe - so let's make sure that we continue to invest.

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

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