Microsoft’s plan for the future of computing

Housekeeping

But first, some news: This is the last Gaming newsletter. Beginning the week of Jan. 3, we will be expanding our entertainment coverage! That means more from me (Nick) and Janko Roettgers (our VR and metaverse reporter) on our site and in your inbox every week. You’ll be getting a brand-new Protocol | Entertainment newsletter arriving on Tuesdays, Thursdays and Fridays, and you can expect us to cover the intersection of new technologies like AR and VR, gaming, streaming and Web3 — and how they’re all coming together to form the metaverse. You don’t have to do anything to receive the new newsletters, but be sure to add entertainment@protocol.com to your Contacts list. Thanks, and we'll see you next year.

‘Put the player at the center’

When Phil Spencer thinks about the tech and gaming industries’ newfound obsession with the metaverse, the Xbox chief’s mind goes to Minecraft. It’s a logical leap. The sandbox creation tool, the bestselling video game of all time and one of Spencer’s most crucial acquisitions back in 2014, is in its own way a kind of proto-metaverse, inspiring a generation of games that task players with building worlds of their own.

Last week, Minecraft achieved a unique milestone: 1 trillion views on YouTube. It’s a testament to both Minecraft’s enduring popularity and also its ability to transcend platforms and media categories. Following the announcement, Spencer sat down (virtually) with Protocol to discuss Minecraft’s role in shaping the forthcoming metaverse, as well as Microsoft’s vision for the future of gaming, computing and online community.

The metaverse, as Spencer sees it, needs to be an open platform. Numerous companies, the most visible of which is Meta (formerly Facebook), want to stake their claim to what might be the next evolution of the internet. Yet Spencer said the metaverse won’t be able to live up to its potential if it's treated as just another frontier for corporations to conquer and control. Instead, it needs to focus on empowering players and creators, he said, as Minecraft does.

• “I draw some analogies to the web,” Spencer said. “We felt like we had this really open platform for creation and consumption. But frankly, there were some companies that really created and captured some of the control of that web … which meant some of what happens on the web today doesn't necessarily feel as open as I think we would all like it to be.”
• Spencer points to Minecraft as a “social and open creator platform” not constrained by any one device or piece of software, which has helped it achieve nearly 250 million lifetime sales and in turn created an entire economy through its in-game marketplace and its crossover success as an entire genre of YouTube and Twitch entertainment.
• “I think it's easy for a lot of tech companies to describe why the metaverse might be better for their company,” Spencer said. “But we've just learned that if we put the player at the center, to use my gaming vocabulary again, and try to build an ecosystem that works around their needs and creator needs, that the platform dynamic will take off.”

The turnaround at Xbox illustrates Microsoft’s commitment. Spencer, who’s been at the company for 33 years now, took over the Xbox division in 2014 and since then has executed a series of major seismic shifts at the company’s gaming division, bridging Windows 10 and the Xbox platform and launching the Game Pass subscription service.

• Spencer says the principles he’s used to steer Xbox forward are ones Microsoft wants to bring to the metaverse, including being willing to take once-controversial stances on topics like cross-platform play and letting players take their purchases to whatever device they choose.
• “We’re going to continue to — not to make it an ego statement — try to lead in some of the discussions on these topics and do it with our own content and our own service. Because we think it really does have a positive impact on gaming's continued growth,” he said of initiatives like Xbox Play Anywhere.
• “I want to be able to experience the things I own on any screen that can render those,” Spencer added. “I want to be able to have the experiences I have anywhere. I want to have them with the people I want to experience them with, and it requires a lot of cloud infrastructure to make that happen. It requires, like I said, a real open approach.”

The metaverse is going to require new thinking. Many of Xbox’s initiatives under Spencer have started as experiments, and they in many cases only became viable business strategies because of Microsoft’s vast resources and immense patience. Spencer says the metaverse is going to need a similar exploratory approach to figure out new business models and avoid replicating the pitfalls of Web 2.0.

• “I'd say, not to become an ad for Game Pass, but business model diversity is also important there. I don't think it's about one business model in any one of these contexts, whether it's gaming or metaverse,” Spencer said. “The more business models we see, the more creative we see. And the easier it is for people to find the experiences they want on the device that they have. I think that's critical to the growth of the platform.”
• On NFTs and the border blockchain gaming, which proponents say may play a role in the metaverse as part of the broader Web3 movement, Spencer said he wanted to clarify that he’s not skeptical of the technology itself, but of the current atmosphere around the space.
• “There's a near-term kind of hysteria around NFTs, which I think is as much driven by speculation as real end-user benefit. And so I'm just leery of that,” he said, adding that companies will need to also be conscious of the environmental impact on the planet. “In the long run, I think there is a real benefit to players to having open standards for digital entitlements, so that I don't have to buy the same content multiple times on different devices, so that I can gift the things that I own to different people.”

Spencer said the primary reason Microsoft is still so invested in gaming is that he feels the company can change the industry for the better — for not just game makers, but players and creators, too. “We know we'll have to lead with our first-party [data] in a lot of ways because we can afford to move, and we have reasons to move earlier than some of the other players out there,” Spencer said.

“It's fundamental to the impact I want Xbox to have in the gaming space as we move forward,” he added. “Because if it's not better for the players and the creators, you'll lose. You have to start with that as a core principle.”

A version of this story first appeared on Protocol.com. Read it here.

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Overheard

“Heads up open bracket players - you'll be playing this weekend on Series X development consoles. They're functionally identical and will be operating in ‘Retail’ mode so it's the exact same experience, they just look a little different. Why? Global supply chain shortage is real.” ―343 Industries’ esports lead Tahir Hasandjekic revealed on Twitter that the Halo Infinite tournament held last weekend in Raleigh, North Carolina had to rely on custom Microsoft hardware due to the retail console shortage.

“That’s a horrible vision for the future: The world has just completely gone the wrong way and people have to escape to these virtual realities. I don’t think it’s how things are going to play out. I don’t want it to be how things will play out. I’m a techno-optimist in the sense that I think AR — a real-world version of that metaverse, if you will, that’s about getting people outside and active and learning about their city, state, town — can help bring us back together.” ―Niantic CEO John Hanke elaborated about his vision for a real-world metaverse that relies on augmented reality and connecting people to their local communities in an interview with The Verge’s Nilay Patel last week.

Lootbox

Solana launches a crypto gaming fund. The venture capital arm of fast-growing blockchain platform Solana last week launched a $150 million fund in partnership with Forte and Griffin Gaming Partners to support investments in game developers and startups.

Activision Blizzard’s settlement goes forward. A federal judge said she plans to reject California’s attempt to block a $18 million settlement with the U.S. Equal Employment Opportunity Commission, calling the intervention “not appropriate,” Bloomberg reported. State regulators were concerned the settlement may affect California’s ongoing lawsuit against the company.

Ubisoft raises the curtain on new Splinter Cell. After months of rumors and speculation about the fate of the classic Tom Clancy series, Ubisoft finally confirmed that a Splinter Cell remake is in development at the company’s Toronto studio using the publisher’s Snowdrop game engine.

An NFT real estate sale. Indie studio 22cans, founded by Peter Molyneux of Fable fame, has sold more than $50 million in NFTs representing virtual plots of land in its new title Legacy, IGN reported. The game is not yet available, but 22cans is working with blockchain company Gala Games to release it next year.

The NFT backlash strikes back. Developer GSC Game World announced and then walked back a controversial NFT announcement for its upcoming shooter S.T.A.L.K.E.R. 2, The Verge reported last week. The studio intended to sell tokens for access to perks like being included in the game as a non-playable character, but said the “interests of our fans and players are the top priority.”

Clash of Clans studio comes stateside. Supercell announced its first North American studio last week, VentureBeat reported. The Finnish developer has operated a San Francisco office since 2011, but now plans to have a dedicated team of remote employees across the U.S. led by longtime marketing lead Ryan Wener.

Bungie’s workplace reckoning. Destiny and Halo creator Bungie is dealing with the aftermath of a damning IGN investigation about its endemic workplace sexism and harassment, with HR lead Gayle d'Hondt leaving the company after 14 years.

Labor organizing at game developers is on the rise

Last week, indie developer Vodeo Games became the first North American game studio to unionize, after founder Asher Vollmer and the company’s management voluntarily recognized the employee union covering both full-time and contract staff.

Vodeo is a small company of only 13 people, founded earlier this year ahead of its first release, Beast Breaker. But its union, formed with the Communication Workers of America, is the strongest evidence yet that labor organizing is coming to the game industry in full force. An employee activist group at Activision Blizzard is now trying to gauge interest in forming a union, despite significant pushback from management, and Vodeo’s union may be just the first in a string of significant labor actions in gaming come next year.