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Tom Warren joins Decoder to discuss what Phil Spencer’s departure means for the future of Xbox.
Nilay PatelCloseNilay PatelEditor-in-ChiefPosts from this author will be added to your daily email digest and your homepage feed.
Nilay PatelCloseNilay PatelPosts from this author will be added to your daily email digest and your homepage feed.
Today, we’re talking about the future of Xbox. Phil Spencer, a two-time Decoder guest who’s led Xbox for more than a decade, retired last week.
But in a shocking twist, his deputy and long-assumed successor, Sarah Bond, is also out too, and the Xbox division is now in the hands of Asha Sharma, one of Microsoft’s AI executives with no prior game industry experience. It’s a major leadership transition that suggests Microsoft wants to make serious changes to its gaming division, which owns franchises like Halo, Call of Duty, and Minecraft.
There is a lot to say about Xbox: The story of the console and Microsoft Gaming is a complicated one, with a lot of twists and turns since it made its big splash in the video game industry 25 years ago. Yet for a majority of that time, it’s been stuck in third place, behind Nintendo and PlayStation. That’s a surprising thing to say for a division of a company worth trillions of dollars that also owns some of the most celebrated gaming properties in all of entertainment.
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So Phil Spencer, who started at Microsoft in the late 1980s and took charge of Xbox in 2014, was given the job of trying to turn the division around. Since then, Spencer has tried numerous moves: the Netflix-style Game Pass subscription service; a major push into cloud gaming; buying Activision Blizzard King, the maker of Warcraft and Candy Crush; and many, many different iterations of Xbox hardware. As of last year, there are even plans to bring Halo to PlayStation — something game industry insiders thought was basically impossible just five years ago.
But as you’ll hear Tom explain, the game industry has been changing faster than Xbox has been able to transform itself, and almost none of Spencer’s strategies have really clicked. Xbox is still far behind Nintendo and PlayStation, and on PC, it still stands in the shadow of Valve, which runs the dominant Steam store and now makes the Steam Deck handheld. Microsoft has spent tens of billions of dollars trying to acquire its way to a stronger position against the rise of Fortnite and Roblox, mobile giants like Tencent, and a zero-sum war for attention dominated by apps like YouTube, Instagram, and TikTok. And yet the company has very little to show for all of that.
Today, Spencer’s grand vision of 100 million Game Pass subscribers streaming Xbox games to whatever screen they want using the cloud still feels out of reach. But, as Tom says, it’s not lost forever — Xbox is far from dead, and there is still hope yet that new leadership can take some big swings and make something happen again.
Okay: Verge senior reporter Tom Warren on the future of Xbox. Here we go.
This interview has been lightly edited for length and clarity.
Tom Warren, you’re a senior reporter at The Verge. You’re currently out on paternity leave, but Microsoft just brought you back.
Yep. This happens every time I take a vacation or leave. Microsoft decides, “We’re going to do something massive and ruin Tom’s life.”
Just punishment for all of the scoops you’ve dropped on this company over the years. So this week, as you were playing with your beautiful new baby, Microsoft initiated a major shakeup at Xbox, something we’ve seen coming for a little bit, but maybe not on this scale or this magnitude. Describe what happened at Xbox this week.
Phil Spencer, the longtime CEO of Microsoft Gaming, technically, but Xbox chief is what he’s known as, is retiring, so he is leaving Microsoft. Sarah Bond, the Xbox president, is also leaving Microsoft, and then they’re actually promoting Asha Sharma, from the CoreAI side of Microsoft, to the CEO of Microsoft Gaming.
So she’s replacing Phil Spencer, essentially. So it’s big news, a big shakeup, should we say, of Xbox. I think with Phil Spencer, it’s been a long time coming, right? I think Xbox fans have expected that retirement, but perhaps not so much Sarah Bond’s leaving.
And this is, I think, the shakeup, right? We knew Phil was going to retire. He’d been messaging that for some time. He’s been there for a long time. He’s a Microsoft lifer, really. Phil’s been on this show before, and we’re going to run some clips from his past interviews on Decoder, because I want to get your take on what happened between those interviews and now.
At a very high level, we knew Phil was going. Is it that everyone expected Sarah to be his successor, and that didn’t happen, and that’s the surprise here?
I think there are two surprises, right? One is obviously that Sarah wasn’t named Xbox chief and that Asha is the successor, because that was a quiet surprise and a surprise higher, really. But yeah, Sarah has always been the number two. She’s always traveled with Phil and always been the face of Xbox over the past couple of years as Phil has... I’d say he’s stepped back a little bit publicly since the Activision Blizzard acquisition.
So Sarah’s become the face of Xbox during that time, and she took over the platform work, the hardware work. So whenever there was any mention of the next-gen Xbox, it was Sarah who would come out and talk about it and not Phil. So that’s a change in itself, right, because it’s usually Phil. So I think everyone just thought, “Okay, well she’s being prepped to be Phil’s replacement eventually, whether it be a couple of years, five years, whatever,” and it didn’t happen.
Behind the scenes, I know that Xbox fans had heard, and expected, that this was going to happen, that Sarah Bond would be the heir apparent. But for a good year or so, I’ve been hearing different things about Sarah Bond, different from what perhaps the public perception is of her. So to me, it wasn’t a surprise. I was not surprised to see her not named, but I think it was more of a surprise to see Asha named. That was a surprise to me.
I know Asha a little bit. I’ve spoken to her a few times, but she’s like a non-gamer. She’s very straight about that and honest about it, but not that that really matters, I don’t think, to be a CEO, really, to be honest. But to Xbox fans and that gaming segment, if they see a non-gamer, it’s like... Particularly with Xbox, I think, because Phil has instilled that over the years, so they’ve come to that expectation. So that was the surprise of it, but I don’t think Sarah Bond was a surprise to me.
I want to come to Asha, the new leadership, and particularly the Microsoft AI of it all, because that seems like an important piece of the puzzle. I just want to stick with Phil and Sarah for one more second. There’s the reporting you have done about Sarah personally, and her skills as manager and potentially CEO, and then there’s Phil and the strategy he pursued for Xbox and Microsoft Gaming.
