Gene Park has shared a big scoop about Microsoft and gaming that seems to have flown under the radar.
The Washington Post editor was talking about how Microsoft Gaming head Phil Spencer was about to be ‘real smug’ at news that most generative AI pilots are failing.
Park then explained:
…Phil Spencer lost the argument within Microsoft that gaming should be the tech pillar for the company. the Activision deal was Microsoft’s bid to compete with Facebook, Apple etc. then MS fully committed to AI instead.
Spencer Really Hoped Video Games Would Change Microsoft
Park then shared a quote from his interview with Spencer about the Activision deal in 2022. We’ll share the salient points below:
The $68.7 billion acquisition is an attempt to showcase Microsoft as distinguished in the global gaming space, Spencer said. This move is made amid tech giants like Apple, Google, Meta, Netflix and Tencent in China encroaching into the gaming space with various projects and investments.
…Google has search and Chrome, Amazon has shopping, Facebook has social, all these large-scale consumer businesses. … The discussion we’ve had internally, where those things are important to those other tech companies for how many consumers they reach, gaming can be that for us.
Park shared this commentary on this quote:
Spencer told me this on why Xbox committed $69 billion to buy Activision. then MS pivoted to AI
How Much Did AI Cost Microsoft Gaming?
There is reason to believe that Microsoft pulled the rug from under Phil Spencer and their gaming division. Microsoft recently laid off a large number of their staff across the company. Gamers were terrified by the onslaught of news, as rumors would drop of layoffs in their gaming studios, and some games and studios getting shut down.
As we have reported before, Microsoft has kept avoiding discussing what happened. Even their CEO, Natya Sadella, was frustratingly elusive and obtuse in the company’s last quarterly earnings call.
Did AI Cause Layoffs At Microsoft Gaming?
There is a rumor that Microsoft did not handpick jobs and roles that they could replace with AI. Instead, the layoffs were just to pay for their massive $ 80 billion investment in it. That’s almost as much as the $ 75.4 billion Microsoft spent to acquire Activision Blizzard King.
Only, it’s bound to get bigger. Microsoft has officially confirmed they spent over $ 100 billion on AI as of last month. Frustratingly, investors have been rewarding Microsoft’s moves with jumps in stock price.
If Park’s analysis based on what Spencer has told him is correct, Microsoft’s massive AI investment could backfire on them in the future. Some gamers could look forward to some schadenfreude. But if Microsoft’s bet on AI fails, that could lead to more layoffs in Microsoft Gaming again.
We certainly hope Microsoft recognizes there’s a captive audience and certainty in investing in gaming over AI. And we definitely hope they don’t realize it too late.
