Phil Spencer: MS Is Supportive of Physical, Strategy Does Not Hinge On All-Digital

Microsoft Gaming’s Phil Spencer has indicated a change in strategy for the company.

Talk of Xbox’s all-digital strategy started over a decade ago, when Phil’s predecessor, Team Xbox head Don Mattrick, unveiled plans to sell games as licenses. This meant even if you bought a game on disc, the consumer would only get a license to play the game, and subsequently would need to login online to be able to play.

We left that future behind alongside Don years ago, but the strategies Phil explored after that brought them in a similar direction. They found that most Xbox gamers were buying games digitally, as did Sony and Nintendo, but more importantly, they were making more business on Game Pass than selling standalone games. By its very nature, Game Pass would necessitate gamers only had digital games.

So in this generation, Microsoft launched the Xbox Series S, a version of their Xbox Series console that did not have an optical disc drive. The Xbox Series S proved popular, but the choice not to bundle an optical disc drive or offering an upgrade remained controversial for the console, among other things.

In a new interview with GameFile, Phil reiterated that the physical cost of manufacturing optical drives has a real impact on making game consoles. He said:

“Gaming consoles themselves have kind of become the last consumer electronic device that has a drive. And this is a real issue, just in terms of the number of manufacturers that are actually building drives and the cost associated with those.

And when you think about cogs that we’re going to go put in a console—and as you have fewer suppliers and fewer buyers—the cost of the drive does have an impact.

But I will say our strategy does not hinge on people moving all-digital. And getting rid of physical, that’s not a strategic thing for us.”

But this is where Phil explains Xbox’s shift.

“We are supportive of physical media, but we don’t have a need to drive that disproportionate to customer demand.

We ship games physically and digitally, and we’re really just following what the customers are doing. And I think our job in running Xbox is to deliver on the things that a majority of the customers want. And right now, a majority of our customers are buying games digitally.”

That seems to be a strong indication that Microsoft will continue to publish games on disc, but they’re also operating on the evidence that most of the Xbox fanbase is buying on digital. So, this would encourage them, for example, to work on a potential Xbox handheld gaming device. Such a device would necessarily only play games on digital, but for Game Pass players, that would be an asset instead of an issue.