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Satya Nadella and Phil Spencer on Why Microsoft is “All In” on Gaming

Ahead of the first-ever Xbox & Bethesda Showcase on Sunday, Head of Xbox Phil Spencer hosted a series of conversations with Satya Nadella, CEO of Microsoft, and members of Microsoft’s Gaming Leadership team on the future of gaming at Microsoft. We’ve shared some highlights from the day in another article, but we also wanted to share one of the day’s biggest moments on its own.

The conversation between Spencer and Nadella focused on the importance of gaming at Microsoft and in the world. Since this was such an important conversation, we thought it would be best to share it in its entirety. (Please note that we’ve edited slightly for clarity.)

Phil Spencer:  I’m thrilled to be joined by Satya Nadella to talk about how Microsoft broadly can drive gaming forward. Thanks for being here, Satya. Why don’t we start by talking about why gaming is such a priority for the company?

Satya Nadella: Thank you so much, Phil.

Gaming has been key to Microsoft from our earliest of days. Our oldest currently supported software franchise is in fact our game Microsoft Flight Simulator, which we released three years before the first version of Windows, even. Gaming is fundamentally aligned and woven into our mission as a company. When you talk about Xbox’s mission to bring the joy and community of gaming to everyone on the planet, which I absolutely love, this is precisely what I think of when we think about Microsoft’s mission, which is to empower every person, every organization on the planet to achieve more.

As a company, Microsoft’s all-in on gaming. We believe we can play a leading role in democratizing gaming and defining that future of interactive entertainment, quite frankly, at scale. There are really three, I think, areas or key areas where we believe we have incredible competitive advantage. First is our leadership in cloud computing; second, the resources we have to build out the subscription value with Xbox Game Pass; and third is our overall focus on empowering creators. I’m really excited about the opportunity in gaming.

Spencer: How about we start talking about Azure? Here’s the thing when I think about it. Going back to the birth of personal computing in the 1970s, the ability to play games has been limited by the cost and power of the specific device you’re using, whether it’s an arcade cabinet or a PC, a phone, a tablet, whatever. And that cost and those requirements have always severely limited who can play, where they can play and who they can play with.

When I was a kid, it was crazy to think about having a Galaga machine or a Ms. Pac-man machine in your house. You had to go to the arcade. More recently, if you couldn’t spend hundreds of dollars on a game console, potentially thousands of dollars on a high-end PC, you simply couldn’t participate in the global gaming community in a significant way.

The cloud will allow us to completely remove these barriers to play worldwide. Of course, there’s still a place for consoles and PCs and frankly, there always will be, but through the cloud, we will be able to deliver a robust gaming experience to anyone connected to the Internet, even on the least powerful, least expensive devices, devices people already own. And with the cloud, gaming players can participate fully in the same Xbox experience as people on local hardware. We couldn’t do that if we weren’t part of Microsoft.

Nadella: That’s so well said, Phil. I mean, the cloud and Azure have sort of fundamentally allowed us to truly put people at the center of gaming, enabling them to play the games in high fidelity, as you said, wherever, whenever they want on any device. Cloud gaming is truly a breakthrough experience. I mean, for me, you just go to, and I’ll tell you, it’s a really fast, easy way to get into gaming. It’s been a game changer for me. I love that I can go from my PC to my Xbox to my Duo, picking up on any game right where I left off and even using the touch controls on Duo. That is super well done, and I can use my controller, of course, on my PC.

You also see the power of the cloud when you look at the evolution of some of our first-party games, like Flight Simulator. It exemplifies, at least for me, what uniquely we can do by bringing together the power of all of Microsoft tech stack, right, from Azure AI to Bing maps, and even spatial computing, which came together to create essentially literally a digital twin of the entire planet.

And as you know, Phil, we’re also seeing tremendous traction when it comes to game development on Azure with companies like Pearl Abyss scaling their gaming, using the power of our cloud. And of course, game development doesn’t stop when the game is launched. In fact, one of the things we have learned from all of the work you all have done is in some sense, it starts after the game is launched because you want to be able to experiment, learn through analytics and continuously change gameplay.

And one of the things I’m most excited about is how we are enabling game developers to do just that with Azure PlayFab, which now holds more than 2.5 billion player accounts. It’s being used as the backend for more than 5,000 games, so a lot of exciting things that the cloud can enable.

Spencer: Yeah, and the complementary piece is opening up access to the games themselves. And that’s where Game Pass comes in.

Nadella:  That’s right. With Game Pass, we are truly redefining how games are distributed, played, and shared. The content is the driving force behind Game Pass’ growth, which is why I’m so excited about our acquisition of ZeniMax, which brings some of the world’s most iconic, beloved games to the service. With Game Pass coming to the browser, the value of the subscription is going to transcend from the console to the PC to mobile, and it’s great to see the progress.

I’m looking forward to how we continue to invest in Game Pass to add more content and bring the service to even more geographies as we make progress.

Spencer: Yeah, I’m so excited about the potential here. We continue to build value proposition of Game Pass through building our first-party game studios. As you said, the recent acquisition of ZeniMax is something I’m really proud of, where we’re bringing an amazing catalogue of games into Game Pass, just like you talked about.

For the first couple of decades, the only way you can play the game was to buy the game outright. And for many players, this can be an investment that limits their ability to play. That cost, the retail model have limited the audience for creators and the entire industry. That’s why we created Game Pass, to open up the ways that players can play more games with their friends, ultimately bringing in more players, making games more accessible to everyone.

Earlier this year, we announced that our Game Pass subscription had passed 18 million members. And what’s really surprised us is that it’s transforming how our entire industry thinks about Xbox and how we can reach a wider audience. And we’ll hear more about that later.

Let’s wrap up by talking about creators, which I know is a huge priority for you and the entire company.  

Nadella: Yeah, absolutely. When you step back and look at the next decade and the evolution of technology, I think one of the most defining trends will be how the balance between consumption and creation is achieved and the changes it brings about. Already, more and more people are creating something new and magical every day. You see that in all sorts of platforms, and there are growing communities who want to discover, explore, and build on other’s creations.

I believe we will need that virtuous cycle between content consumption, commerce driven by communities for everything we build. And there’s no better example of this than gaming. That’s why I’m so excited that so many games are evolving into these metaverse economies and societies, just like Minecraft, right? It’s one of the leading platforms in the creator economy.

Some of the coolest things I’ve seen over the past year is how people have used Minecraft to create new worlds in order to maintain even a sense of community and belonging that’s so important in times like these. They’re creating entire college campuses on Minecraft. They’re expanding that economic opportunity, too. In fact, creators have generated over $350 million from more than one billion downloads of the mods, add-ons and other experiences in the game. And that’s fantastic to see.

And when I think about our new platform, Microsoft Mesh, which enables you to interact holographically with other people with a true presence in a very natural way, one of the most exciting applications, I think, will be gaming. Niantic, for example, showed a great demo Pokémon Go using Mesh at our recent event. We’re very excited about what creators can do going forward with the platform shifts that we are going to have in the next 10 years.

Spencer: Yeah, and we’re actually going to hear a lot more about creators in our first group discussion coming up next. We’ve created an entire organization dedicated to empowering the game industry and developers of every size. But you’re right, we see the health of creators in and around our games as one of the key barometers for our overall business health.

Thanks so much, Satya, for joining us today.

Nadella:  Thanks so much, Phil. It’s so great to see how we’re working together as One Microsoft to bring the joy and community of gaming to everyone on the planet.