Sep 22, 2023 - Technology

Leaked emails reveal stress of leading Xbox

Microsoft gaming chief Phil Spencer at E3 2019. Photo: Patrick T. Fallon/Bloomberg via Getty Images.

The Microsoft leaks also show, however awkwardly, some of the inner workings of the software giant's gaming business and how its leaders interact with Microsoft management as a whole.

Why it matters: It may be as close as we get to seeing how Microsoft really thinks about gaming.

Details: A constellation of leaked emails dating back to 2020 show a gaming division experiencing understandable stress as a third-place, console-market challenger while trying to play ball with company priorities, particularly integrating gaming with cloud technology.

Cloud is key: In Jan. 2020, Microsoft CEO Satya Nadella asks gaming chief Phil Spencer and other Microsoft execs to help him understand an Activision-Google deal that involves esports broadcast rights and an Activision commitment to use Google's cloud tech.

  • Nadella wonders if Microsoft could have offered Activision better revenue splits to get Activision to use its cloud options instead.

Surging confidence: In March 2020, Spencer tells Nadella he has seen Sony's announced specs for PlayStation 5 and is feeling confident that "we have the better product."

  • Spencer acknowledges that the board of directors has previously spoken with him about "being too confident and maybe this will just reinforce that perception."

A "random thought": In August 2020, Spencer fields a "random thought" email from a Microsoft chief marketing officer who wonders why the company is pursuing a possible TikTok purchase instead of Nintendo, which "feels more logical."

  • Spencer describes merging with Nintendo as a potential "career moment," says Microsoft is the best possible U.S. company to buy it, and that a former Microsoft board member's acquisition of shares in Nintendo could "create opportunities for us."
  • But he notes that, even though Microsoft's board has previously given approval to bid for Nintendo or PC giant Valve "if opportunity arises," Nintendo is not in a position where it needs to sell.

Pressure to stay on "the ball": In 2021, Nadella reads a CNBC headline about Sony launching its new PlayStation in China ahead of Microsoft's Xbox and asks Spencer and other Xbox leaders about their market share vs. PlayStation in the U.S.

  • "I just want to make sure we are staying in the 'ball' game here," Nadella writes.

Game Pass to the rescue: In May 2022, Spencer notes the "disaster situation" of planned marquee games, including Starfield slipping into 2023, accepts leadership responsibility and rallies his team to cook up solutions.

Tactical cloud demos: In September 2022, Nadella asks Spencer to ensure Xbox prepares a cloud gaming demo for Meta's unveiling of a Quest VR headset (a month later, they pull this off). Nadella says he wants to "make it clear to the world that MSFT is focused on Cloud First approaches."

  • He hopes it'll also "tactically" tweak Apple and Google, who had been resistant to Microsoft's cloud gaming apps.

The bottom line: Like any division of a company, Microsoft's gaming team clearly needs to please the big bosses while figuring out how to outmaneuver its gaming competitors.

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