Xbox boss Phil Spencer has inadvertently shared his opinion on the issues modern AAA games are dealing with - revealing he thinks publishers are "milking" their successful IPs and "struggling" to find new ones.
20.09.2023 - 12:37 / rockpapershotgun.com / Phil Spencer / Ethan Gach
Among the chunkier morsels from yesterday's leak of Microsoft documents is an extended email from Xbox CEO Phil Spencer, dating from 2020, in which he argues that today's largest AAA videogame publishers remain dogged by their "failure" to adapt to the shift from physical to digital videogame distribution, and especially, subscription models such as Microsoft's own Game Pass. This inability to move with the times, Spencer suggests, has created a situation whereby the largest publishers rely on sheer "production scale" to attract and retain customers.
In turn, this has meant that publishers are unwilling to bet on new IPs - it could be billions down the drain, after all. Instead, "AAA publishers are milking their top franchises but struggling to refill their portfolio of hit franchises", while relying on "rented" IPs such as Star Wars. This is an older email, of course, and there's an obvious element of self-flattery in the shape of Microsoft talking up Game Pass. Still, it's a persuasive account of recent industry history, bolstered by Spencer's notes from conversations with Assassin's Creed outfit Ubisoft and GTA publisher Take-Two Interactive in particular.
I've republished the email excerpt in full below, with a few inserts to clarify the Important Business Acronyms. Thanks to Ethan Gach for spotting.
In terms of subscriptions and the impact on larger publishers I realized that I haven't really done a good job sharing our view on the disruption AAA publishers potentially see and how their role in the industry will likely change with the growth in subscription platforms like Xbox Game Pass.
We should start with the question of why game publishers exist in the first place. And like many other forms of media the idea of a game publisher was created from an access "moat"; like movie studios locking up theater distribution, album companies locking up radio play, game publisher's scale in physical retail game sales allowed them to secure retail shelf space, in-store promotion and margin structure beyond what any individual studio could dictate when games were primary sold in retail stores. If you were a studio, you needed a AAA publisher to reach a customer at an Egghead software. [NB. Egghead Software was a brick-and-mortar retailer that went bankrupt in 2001.]
This constriction in the access from creator to consumer stayed in place for years and in that time AAA game publishers increased their control. The creation of digital storefronts like Steam, Xbox Store and PlayStation Store eventually [democratized] access for creators breaking physical retail's lock on game distribution.
AAA publishers were slow to react to this disruption. The AAA publishers did not find a way to leverage the
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