In a brutally honest analysis, Xbox head Phil Spencer assessed the role of major publishers in the gaming industry in a leaked email from 2020. The significance of AAA publishers has changed due to services like Steam.
Where does the information come from? In the ongoing legal battle between Microsoft and the American Federal Trade Commission (FTC), countless documents with internal data and emails from Xbox were accidentally released on September 19, 2023. You can find more information about the mega leak from the colleagues at GamePro.
- Among other things, plans for the new Xbox and controller were leaked
- The release plans for The Elder Scrolls VI were leaked
- And it became known how much Xbox spends to get new releases immediately into Game Pass
In addition to such business secrets, emails from Xbox head Phil Spencer were also published, in which he assessed the state of major gaming publishers such as Activision and EA in a brutally open analysis.
The Diminishing Significance of AAA Publishers
What kind of emails are these? The emails are from a correspondence in March 2020 when the Xbox team was preparing for a feedback meeting with the GTA publisher Take-Two. In a memo to Microsoft CEO Satya Nadella, CFO Amy Hood, former Executive Business Vice President Peggy Johnson, and Marketing Chief Chris Capossela, Spencer discussed the role of AAA publishers in the gaming industry.
How does the Xbox head assess the publishers? According to Spencer, who has over 20 years of experience in the gaming industry, the role of publishers used to mainly consist of securing highly contested shelf space in retail.
AAA publishers could leverage their size to obtain shelf and advertising space that would have been unreachable for individual developers. However, this changed with the rise of digital distribution options, such as Steam or the proprietary stores of Xbox and PlayStation.
As Spencer explains, publishers have slowly adjusted to this change. To avoid fees from various platforms, they introduced their own clients and subscription services, which, however, came too late to become an attractive alternative.
Franchises that had once left Steam returned, and Game Pass became a big hit, while EA Play and Ubisoft+ remained small.
Good for the Gaming Industry, but not for the Publishers
What do the publishers have left? According to Spencer, the remaining advantage of major publishers is their ability to invest more money than anyone else in annual blockbusters. From around 2013, publishers then relied on production scope, according to the Xbox head:
Very few companies can afford to spend the 200 million dollars that Activision or Take-Two invests to place a title like Call of Duty or Red Dead Redemption on the shelves. These AAA publishers have primarily used this production scale to make their top franchises the best-selling games every year.
What is the problem? The problem with the supposed strategy of AAA publishers, according to Spencer, is that this approach undermines their ability to develop new IPs. They have become risk-averse and prefer to build on the successes of franchises that are 10 years old.
To avoid risks, publishers also rely on “rented” intellectual property, such as Star Wars at EA and Spiderman at Sony.
In contrast, successful games like Fortnite, Roblox, Minecraft, Candy Crush, Clash Royale, and many others have been created by independent studios that had full access to distribution, according to Spencer. This is good for the gaming industry, but puts the AAA publishers in a difficult position.
In the email, Spencer emphasizes that Game Pass can provide these publishers with a lifeline and help them work towards a successful future
, instead of pushing them out. This can be accomplished by granting them access to a large user base that they can monetize at their own discretion.
About half a year after this email, Electronic Arts announced that the EA Play
subscription service would be integrated into Game Pass at no additional cost.
