Leaked email reveals Phil Spencer's damning verdict on AAA games: 'Most publishers are riding the success of franchises created 10+ years ago'

25.09.2023 - 21:37 / pcgamer.com / Phil Spencer

A whole lot of interesting (and occasionally awkward) secrets were revealed by the big Microsoft document leak that occurred last week. One of the most notable bits was a brutally frank analysis by Xbox boss Phil Spencer on the current state of major videogame publishers like Activision and Electronic Arts, who Spencer said are struggling to find relevance in an industry that just doesn't need them like it used to.

Back in the pre-Steam days when videogames were purchased in physical stores, shelf space—literal, limited shelf space—was vital. If you couldn't find a spot to display your game—again, an actual spot on an actual shelf that you had to go into an actual store to see, this is how we did it back then—then your hope for becoming a hit with the general public was basically zero. (Yes, you could sell directly to gamers through ads placed in magazines like PC Gamer, but that's not going to get you any traction with slightly befuddled family members looking for gifts at the holidays.)

That's where the big publishers came into play. By leveraging their size, they could ensure spots on shelves and high-visibility promotion for games in ways that individual developers simply could not. As Spencer wrote in his leaked email (via Kotaku), «If you were a studio, you needed a AAA publisher to reach a customer at an Egghead Software.»

In the era of digital distribution, however, access to physical distribution channels is no longer required. That's led big publishers to lean on their other strength: Making big-budget blockbusters that are out of the reach of smaller operations.

«Very few companies can afford to spend the $200M an Activision or Take-Two spend to put a title like Call of Duty or Red Dead Redemption on the shelf,» Spencer wrote. «These AAA publishers have, mostly, used this production scale to keep their top franchises in the top selling games each year.»

But that approach creates problems of its own, according to Spencer, who said that the «hurdle rate» on these massive productions—essentially the minimum rate of return that major publishers will accept in order to move ahead with a project—is so high that it discourages a willingness to take a risk on anything new.

«You've seen a rise of AAA publishers using rented IP to try to offset the risk (Stars Wars with EA, Spider-Man with Sony, Avatar with Ubisoft, etc),» Spencer continued. «This same dynamic has obviously played out in Hollywood as well with Netflix creating more new IP than any of the movie studios.»

The net result, Spencer concluded, is stagnation: «AAA publishers are milking their top franchises but struggling to refill their portfolio of hit franchises—most AAA publishers are riding the success of franchises created 10+ years