Phil Spencer has revealed what he really thinks about Xbox Game Pass, and how cloud gaming factors into it, in his latest interview with the Wall Street Journal.

There’s a lot to read through here, but as a quick summary, Phil sees Game Pass as a way of giving consumers a choice on how they will buy and consume their video games. Game Pass is really growing right now on PC, mainly because they have hit the limit on console users interested in subscribing to it.

Phil does not see subscriptions as replacing traditional retail game sales. Subsequently, he also does not see a future where everyone only plays video games in the cloud. Game Pass has been designed so that the customers get to choose how and where to play. The cloud gaming side of it is still quite young, and supplementary to people who can already natively play their games on other platforms. In Phil’s own words, giving customers choice is good business.

Below are Phil’s comments on the topic, slightly edited for clarity.

We reported a few days ago that cloud gaming had been brought up as a growth sector in Microsoft’s last quarter. Here are Phil’s thoughts on cloud gaming.

“Our approach has been to give our customers choice in how they play. We haven’t gone out and tried to tell people that they should not play on their PC or they should not play on their phone or their gaming console.

We look at cloud as an option for people, maybe when they’re away from their console or PC, or they’re on a device like, that tablet right there, and they wanna play a game.

That tablet’s not gonna run most console games. So, we’re able to stream to that device. I think other people have gone out and tried to make it a real either/or choice – You’re either playing on streaming or you’re not – and we’ve taken a much more customer driven focus.

We have a subscription, as you say, you can buy games, you can subscribe. If you subscribe, you’re able to stream those games to any device with a web browser. And giving the customer the choice, putting the customer at the center of our decision making, has led to more success for us. And I think we just announced, we crossed 20 million people who have tried out cloud streaming.

It’s early. I don’t have a vision where everybody’s on cloud, nobody’s buying a piece of hardware. I don’t think that’s the future. But giving customers choice, we found, is good business.”

We also reported that Microsoft had missed their last sales goal for Xbox Game Pass in the most recent quarter. These are Phil’s thoughts on Game Pass in general:

“Our last public number (for Game Pass) was 25 million subscribers. We’re seeing incredible growth on PC. I think Satya Nadella (Microsoft’s CEO) in our earnings report yesterday talked about 130 % to 140 % year over year growth on PC, which is really where we’re focused.

On console, I’ve seen growth slow down on Game Pass. Mainly, because at some point you’ve just reached everybody on console who wants to subscribe. We don’t see subscription (growing bigger), unlike other forms of media, that have moved solely to a subscription business. Today, Game Pass, as an overall part of our content and service revenue, it’s probably 15 %. I don’t think it gets bigger than that. I think the overall revenue grows, so 15 % of a bigger number is a bigger number, but we don’t have this future where I think 50 %, 60 %, 70 % of our revenue comes from subscriptions.

The largest business model in video games is free-to-play. You download a game that’s free – Fall Guys or Fortnite – these are games that you have a device, you can download the game, and then they will sell you things in game to monetize, so that they do actually run a business in the game, but you’re not forced to go buy those things in order to go play the game. That’s the largest gaming business model across all screens.

It’s free-to-play, as you mentioned, there’s retail, people still buy video games, a lot of them that’s far larger than Game Pass is for us. And we have the option of a subscription, which we love as a choice, but not to the extent of cannibalizing the other businesses. We see it as just a customer choice. And I think it will stay in that 10 % to 15 % of our overall revenue and it’s profitable for us.”

Source: WSJ