Xbox boss Phil Spencer is concerned about layoffs in the games industry, but also growth

Phil Spencer, the head of gaming at Microsoft’s Xbox department, was recently interviewed by the website Polygon about the state of the games industry. For example, Spencer was asked about the enormous numbers of layoffs worldwide, including Microsoft, which has laid off 8% of its gaming staff.

Spencer says that Xbox is ultimately a business for Microsoft that must be profitable and constantly growing. Spencer is responsible for that. The layoffs were also difficult for him, but necessary so that Xbox can continue to grow. Spencer wants Xbox to be a place where employees don’t have to worry about building a career.

“We’re a business. I’ve said over and over,” he said. “I don’t get any luxury of not having to run a profitable growing business inside of Microsoft. And we are that today. But… I reflect on friends of mine in the industry that have been displaced and lost their jobs and how just, I don’t want this industry to be a place where people can’t, with confidence, build a career. So that’s why I keep pivoting back to: How does this industry get back to growth?”

As for the state of the games industry and why many publishers and developers are dealing with layoffs, Spencer believes it has to do with a lack of growth. The games industry does not generate more turnover than years before. No more consoles are sold than the previous generation, while games are in production longer than before. As a result, you see that certain games are huge successes and others that also want to eat from the same ‘pie’ perform poorly financially. Then layoffs cannot be ruled out, because if your turnover does not increase, you will have to reduce expenses.

“I’ll say the thing that has me most concerned for the industry is the lack of growth. And when you have an industry that is projected to be smaller next year in terms of players and dollars, and you get a lot of publicly traded companies that are in the industry that have to show their investors growth – because why else does somebody own a share of someone’s stock if it’s not going to grow? – the side of the business that then gets scrutinized is the cost side. Because if you’re not going to grow the revenue side, then the cost side becomes challenged.”

Spencer is optimistic, he believes that the games industry can certainly continue to grow, for example through services such as Xbox Game Pass and xCloud.

“It can grow and it will grow again,” Spencer concluded. “But you see this time right now and the implications have human impact. And we should all reflect on that and think about it.”