Phil Spencer Discusses Xbox Handhelds and the State of the Games Industry

Microsoft’s Xbox business is in a strange place right now. After Microsoft completed its acquisition of Activision Blizzard in October, gaming became Microsoft’s third largest business in Q4 2023, and it’s now bigger than Windows. The company also announced that it now had over 200 million monthly active users on Xbox, PC, and mobile, a new record for the company.

However, Microsoft also laid off 1,900 employees across its gaming division earlier this year, and the company also announced an important change in strategy: With four Xbox exclusive games coming to other consoles, including the multiplayer games Sea of Thieves and Grounded, Microsoft hinted that it’s ready to do what it takes to ensure that its Xbox business keeps growing. And with Sony’s PlayStation 5 outselling Xbox Series X|S by almost 3-to-1 in 2023, we’re likely going to see more Xbox games coming to PlayStation and Nintendo consoles in the future.

In a recent interview with Polygon at the Game Developers Conference (GDC), Phil Spencer, CEO of Microsoft Gaming discussed various topics including how Microsoft sees the rise of gaming handhelds such as Valve’s Steam Deck and the Asus ROG Ally. In the latest episode of the Xbox Two podcast, Windows Central’s Jez Corden claimed that Microsoft is working on handheld prototypes that provide a native Xbox experience. However, Spencer suggested in that GDC interview with Polygon that Microsoft is currently more focused on building a better Xbox-like experience on Windows-based gaming handhelds.

Spencer, who said in the interview that he’s been using a Lenovo Legion Go during trips, admitted that the current experience of using the Xbox app on gaming handhelds is not great. But he also acknowledged some of his frustrations are also the results of these devices running Windows, a platform that’s not optimized for these new form factors.

“I like the fact that Valve, Lenovo, and Asus went out and innovated in a new form factor,” Spencer said. “And I will say that when I’m playing on those devices, it almost feels more like a console than a PC — nine times out of 10. The things that usually frustrate me are more Windows-based than device-based. Which is an area I feel some ownership of. Like, I want to be able to log in with a controller. I’ve got my list of things we should go do.”

Spencer didn’t comment on rumors suggesting that Microsoft could be working on its own Xbox handheld. However, the exec said in the interview that the Xbox hardware team is currently looking at “different hardware form factors and things that [they] could go do.”

Nintendo had great success with the Nintendo Switch, which has already sold more units (139.36 million) than Sony’s PlayStation 4 (117.2 million). However, would it make sense for Microsoft to launch its own Xbox handheld? “I want everything that we’re doing in the hardware space to be great. But if somebody chooses to go play today [somewhere else], I don’t want them to feel like a lesser Xbox [player],” Spencer said.

In a second part of his conversation with Polygon published today, the head of Microsoft Gaming also discussed the current state of the video games industry as well as the sustainability of AAA game development with a stagnating console market. “We’re a business. I’ve said over and over. I don’t get any luxury of not having to run a profitable growing business inside of Microsoft. And we are that today,” the exec said.

While Spencer seems to be aware that the company’s recent decision to port four of its games to other consoles has been controversial, he once again justified that his priority as CEO of Microsoft Gaming is to make the business sustainable. And again, he also acknowledged that this strategy may not go well with all Xbox fans.

“I will say, every decision we make today and tomorrow is for the better of Xbox,” Spencer said. “I know sometimes things get weaponized, that there’s some evil in the background that’s making us do things — ‘Phil hates exclusives and that’s why we’re like PlayStation and Switch now.’ Every decision we make is to make Xbox stronger in the long run. It doesn’t mean everyone’s going to agree with every decision we make. But it is fundamental for how we make decisions,” Spencer said.