Phil Spencer says the Xbox business will become “unsustainable” if it remains “irrelevant” on mobile

Microsoft’s gaming chief said Xbox will struggle to continue as a global company if the company doesn’t establish a foothold in mobile.

While the company’s proposed acquisition of Activision Blizzard is often framed as the Xbox maker looking to buy Call of Duty, Phil Spencer reiterated previous claims that the $68.7 billion deal is primarily driven from Microsoft’s mobile gaming ambitions.

“The idea that Activision is about Call of Duty on console is a construct that could be created by our console competitor,” he told The Verge’s Decoder podcast (transcribed by VGC).

While not directly naming Sony, the Xbox chief went on to refer to concerns the PlayStation maker filed with competition regulators currently reviewing the transaction.

“I have not heard [that] Nintendo has sent complaints about the deal,” Spencer noted.

Candy Crush Saga – First level ever

He said that over the past five to six years, all of the growth in the $200 billion global gaming business has come from the mobile segment, while console and PC revenues have remained “relatively flat.”

Spencer, when asked about a recent comment Microsoft made to a regulator about being a small gamer on PC and mobile, said: “I don’t think anyone needs that quote from us to understand how irrelevant we are in mobile. Anyone who picks up the phone and decides to play a game will figure it out for themselves.

“And for PC as well, our trials and tribulations over the last five, six years in PC gaming are well documented, and we’re continuing to work on it, and I love the work the Xbox app team is doing, and our PC Studio is doing a great job. I work on PC, but it takes time”.

He added, “Regarding the Activision opportunity, and I keep saying it over and over, and it’s true, it definitely starts with the idea that people want to play games on every device that has, and in a fun way, the screen smaller we play on is actually the bigger screen if you think about the installed base in the phone.

“This is just one place where if we don’t gain relevance as a gaming brand – we’re not the only ones to see this – over time, the business will become somewhat unsustainable, for each of us. If we can’t find customers on phones, on any screen that anyone wants to play games on, you’re really going to be segmented into a niche part of the game that running a global business is going to be very challenging.

Spencer added: “As a percentage of the overall games business, the console business is shrinking, because the overall business is growing and consoles remain relatively flat as a business, same with PC.

“And then when you look at the biggest game companies out there, Tencent is the largest game company in the world, a large part of their revenue comes from mobile devices, and then they put their commercial success that they’ve earned through the work that they have entered the market by acquiring other studios at a very fast pace.

Activision Blizzard claims that Call of Duty Mobile has been downloaded over 650 million times

“That puts a lot of us out there, who are perhaps traditionally segmented into a screen and a device, in a position of, OK, if you play it for 10 years, if the console itself isn’t going to grow and PC is going to grow in certain years and not [other] years and mobile continues to grow, how do you continue to run the business and stay competitive with others who are out there or are they acquiring talent, building new business models, new distribution, building new franchises?

“It’s imperative that if you’re looking to run a global gaming business at scale, you meet your customers where they want to play, and increasingly, mobile is where people want to play.”

Activision Blizzard said last week that its monthly active user base totaled 368 million for the quarter ended September 2022. Candy Crush King maker had 240 million players, World of Warcraft and Diablo studio Blizzard had 31 million players. million and Call of Duty publisher Activision for 97 million.

King has more players than Activision Blizzard’s other divisions combined, and it also generates more revenue. So, Spencer was told, Microsoft is actually buying the Candy Crush company rather than the Call of Duty company.

“Absolutely,” he replied. “And also, the number that’s not in the Candy Crush King number is Call of Duty Mobile and Diablo mobile, which are big franchises that exist in the Activision bucket and the Blizzard bucket, which are also major players on phones.”

The proposed $68.7 billion acquisition of Activision Blizzard would be the largest game industry deal ever, comfortably surpassing the record $12.7 billion merger between Take-Two and Zynga completed earlier this year. ‘year.

This deal brought Take-Two’s successful console and PC franchises such as Grand Theft Auto, Borderlands, NBA 2K and BioShock under the same roof as Zynga’s hugely popular mobile game brands such as FarmVille and Words With Friends.

Spencer said, “If you look at the totality of what Activision Blizzard King does, where their customers come from, where they make…capacity.

“I would say Activision Blizzard King did a better job before, definitely better than us, and now they’re in a position where they have great PC franchises, great console franchises, and great mobile devices. For us the real difference they add to us is their mobile capability.

Microsoft recently outlined plans to create a “next-gen game store” to compete with Apple and Google, aided by its acquisition of Activision Blizzard.

“Building on Activision Blizzard’s existing player communities, Xbox will look to scale the Xbox Store on mobile devices, attracting gamers to a new Xbox Mobile platform,” he said.

“Pulling consumers away from the Google Play Store and the App Store on mobile will, however, require a major shift in consumer behavior. Microsoft hopes that by offering familiar and popular content, gamers will be more inclined to try something new.”

During the same interview with The Verge, Spencer said he is open to engaging with Sony and regulators for Call of Duty to remain on PlayStation for the longer term than is currently agreed upon.