Meet Microsoft games chief Phil Spencer, who helped drive $69 billion Activision deal

Phil Spencer, chief govt officer of gaming at Microsoft Corp., middle, arrives to courtroom in San Francisco on June 28, 2023.

Shelby Knowles | Bloomberg | Getty Images

When Phil Spencer took the helm of Microsoft’s gaming division in 2014, he and newly appointed CEO Satya Nadella weren’t certain if the corporate ought to maintain investing within the Xbox, which was dropping to Sony.

Less than a decade later, Spencer and the Xbox are on the middle of the software program firm’s largest acquisition ever. With the shut of the $69 billion buy of online game writer Activision Blizzard on Friday, Microsoft has made clear that gaming is not a query mark and is, the truth is, central to the corporate’s future.

“It is a rare sum of money for Microsoft, whose core enterprise just isn’t gaming,” mentioned Don Coyner, who was the primary individual to work on advertising and marketing inside the corporate’s Xbox unit. Coyner, who left Microsoft in 2018, mentioned he is assured that sensible folks on the firm can clarify the excessive value.

Spencer’s profile at Microsoft has grown immensely in a brief time frame. He advised an interviewer from gaming web site Shacknews in 2020 that he solely bought to develop into head of Microsoft’s gaming division as a result of so many different folks had left, and he was nonetheless there.

Activision marks one of many priciest offers ever in expertise. In addition to the hefty prices, it is also been extraordinarily time-consuming.

Regulatory pushback from the European Commission and businesses within the U.S. and U.Okay. stored the deal at bay for almost 21 months and compelled Microsoft and Activision to increase the deadline to shut, which had been mid-July, by three months.

There have been quite a few moments of uncertainty alongside the best way. In July, Spencer sat in on 5 days of hearings earlier than a federal choose in San Francisco, who in the end denied the Federal Trade Commission’s try to quash the deal. The FTC took its effort to an appeals courtroom, which refused to grant a movement that will have quickly stopped the transaction from closing.

Until now, gaming has been a small piece of Microsoft and a comparatively gradual grower. Revenue elevated 1% within the newest quarter, whereas the corporate as an entire grew by about 7%. In the latest fiscal 12 months, gaming income was $15.5 billion, accounting for 7.3% of whole Microsoft gross sales.

Rather than ceding the market to Sony and Nintendo, Microsoft’s highest-ranking managers determined to sacrifice many of the software program maker’s $111 billion money pile on a sport firm.

Bobby Kotick (L), CEO of Activision Blizzard on the Allen & Company Sun Valley Conference on July 11, 2023 in Sun Valley, Idaho.

David A. Grogan | CNBC

Spencer has been vocal in touting Activision’s strengths and was a key power in driving the deal. He’s loved a yearslong relationship with Activision CEO Bobby Kotick, regardless that the businesses have had some tense moments. For instance, Microsoft did not safe the writer’s titles for the subscription-based Game Pass library throughout negotiations in 2020.

In November 2021, Spencer approached Kotick and mentioned Microsoft was excited about discussing strategic alternatives between the 2 corporations. His outreach got here simply three days after The Wall Street Journal reported that Kotick hadn’t advised his board what he knew about misconduct inside the corporate. Activision shares tumbled 11% within the subsequent three buying and selling periods.

According to a regulatory filing, Spencer requested if Kotick would speak with Nadella, and Kotick agreed. The CEOs spoke the following day, and Nadella conveyed Microsoft’s curiosity in shopping for Activision. Some 59 days later the 2 corporations introduced their intent to mix.

Microsoft did not make Spencer obtainable for an interview.

From intern to boss

Spencer arrived at Microsoft as a software program growth intern in 1988. Two years later, after graduating from the University of Washington with a bachelor’s diploma in technical and scientific communication, he accepted a full-time job on the firm as an engineer. He labored on Encarta, Microsoft Money, Microsoft Works and different merchandise.

In the early days of Xbox, Spencer directed an inner sport growth studio, and in 2008 he took over all of its studios. In 2014, following the launch of the Xbox One console and the appointment of Nadella as CEO, Spencer took cost of Xbox.

Spencer has lengthy understood the significance of top-shelf content material. He was instrumental in getting Nadella onboard with the acquisition of Minecraft developer Mojang, which Microsoft acquired in 2014 for $2.5 billion. Minecraft has since develop into the bestselling online game, with greater than 300 million copies bought as of this week.

Spencer additionally took on an enormous function within the $8.1 billion buy of ZeniMax Media, the writer of Doom and Fallout games, in 2021. And at one level he was engaged on a bid for Warner Bros. Games, whose titles embody the Batman: Arkham games, he advised two advertising and marketing executives in a 2020 e mail. That deal by no means materialized.

Spencer and his Microsoft friends then turned to mobile gaming. They thought-about FarmVille writer Zynga, Pokemon Go developer Niantic and others earlier than going a lot larger with Activision Blizzard.

“Mobile is the most important phase in gaming, with almost 95% of all gamers globally having fun with games on cell,” Microsoft mentioned in its press release asserting the deal. While Activision is thought for franchises resembling Call of Duty and Overwatch, it additionally publishes Candy Crush puzzle titles which can be among the many hottest games on Android and iOS.

Spencer, a lifelong gamer, performs Candy Crush, he mentioned throughout the July hearings. In whole, he performs video games for about 15 hours per week, he advised Bloomberg in an interview final 12 months. He’s a fan of Banjo-Kazooie, a sport from Microsoft’s Rare studio, and Halo Infinite. In 2021 he performed Bungie’s Destiny 2 whereas one other participant streamed the motion stay on Twitch.

While Microsoft dominates in PC working methods and productiveness software program, Xbox stays smaller than Sony in gaming, even after 20 years of battle.

“I really feel we’re in an enormous gap with our games lineup each for platform advertising and marketing/differentiation and our Gamepass content material,” Spencer wrote in a 2022 e mail to Xbox executives that was made public within the FTC case. This 12 months Xbox has gained a handful of well-received titles, together with Zenimax’s Starfield and Forza Motorsport, printed by Xbox Game Studios.

Spencer has additionally acknowledged some enhancements. In 2020, as Sony revealed particulars of the PlayStation 5, Spencer wrote in a message to Nadella and Microsoft finance chief Amy Hood, “After virtually 12 hours of soaking of their unveil, taking aside their specs and searching on the neighborhood responses I simply needed to say that I’m pleased with our staff.” Microsoft had higher gaming {hardware}, software program and providers, Spencer wrote.

He likes to acknowledge the achievements of others.

David Hufford, who works in communications and analyst relations at Microsoft, recalled asking Spencer to talk at an occasion in 2021 honoring the twentieth anniversary of the unique Xbox launch. Hufford advised CNBC in an e mail that Spencer declined as a result of he needed to give attention to Robbie Bach, who ran leisure and units till 2010, and Jeff Henshaw, an Xbox co-founder.

Hufford mentioned that Spencer “most well-liked we highlight” these folks, “who performed extra seen management roles again then.” Even Bach, as soon as Microsoft’s chief Xbox officer, could not speak Spencer into providing on-stage remarks, Hufford wrote.

WATCH: Microsoft’s $69 billion Activision Blizzard takeover approved by UK

Microsoft’s $69 billion Activision Blizzard takeover approved by UK, clearing way for deal to close

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