The digital age has created a revolution in almost every sector, and the gaming industry is no exception. But while some celebrate the changing dynamics, others express apprehension. Among them is Phil Spencer, the ever-vocal head of Xbox.
In a private email that was recently leaked online, Spencer voiced concerns about the trajectory of AAA games and the sustainability of the old guard: the AAA publishers.
Spencer’s email, dating back to 2020, offers a nuanced examination of the gaming landscape. The disruption brought about by digital storefronts such as Steam, Xbox Store, and PlayStation Store has had profound implications for these publishers. Traditionally, these titans held a near-monopoly over the industry, leveraging their influence over physical retail spaces. However, with the advent of digital distribution, the playing field has been leveled, allowing independent studios to gain access to a broader audience.
In the heyday of physical distribution, these AAA publishers could secure coveted shelf space in stores, negotiate better profit margins, and commandeer in-store promotions. But with the digitization wave, the clout they once held started to wane. Rather than pivoting to accommodate the new digital environment, many AAA publishers remained tethered to their old strategies, failing to establish a robust digital presence.
Spencer, in his email, highlights a significant outcome of this shift: the rise of indie studios and their creation of some of the most iconic games in recent history. Fortnite, Minecraft, Dota 2, and Roblox, are multi-billion dollar games that all emerged, not from the behemoth AAA publishers with traditional methods but from different studios who applied an innovative approach to game creation and distribution.
As the sands of the gaming industry shift, AAA publishers find themselves in a challenging position. They’re invested in their top franchises, often hesitating to venture into the creation of new IPs due to the associated risks. This approach has led them to heavily milk their existing franchises. It’s no surprise then, as Spencer points out, that many of the top games today hail from IPs that were created over a decade ago.
Looking back now, Spencer’s words seem prophetic. Activision Blizzard, the very company it’s trying to acquire and is close to welcoming to the fold, has released a new Call of Duty game every year for over a decade. Not only that, but the company’s most recent top-billing titles like Overwatch 2 and Diablo 4 are new iterations of older properties.
Furthermore, to mitigate risks associated with creating new IPs, several AAA publishers have opted to work with “rented” IPs, like Star Wars. Spencer’s insights, although from 2020, remain eerily relevant today. The AAA publishers’ reluctance to innovate and adapt to the digital age has not gone unnoticed. Many in the industry echo his sentiments, arguing that while AAA games aren’t necessarily in jeopardy, the publishers behind them certainly are.
Aside from Activision Blizzard, Ubisoft and Respawn Entertainment check the boxes Spencer just created. The former, in particular, is all-in on Assassin’s Creed, working on a handful of derivatives from this fan-favorite franchise, including Assassin’s Creed Mirage, with its few “other” ventures being the Far Cry-like Avatar: Frontiers of Pandora and Star Wars: Outlaws, both of which are based on non-original IPs.
The gaming landscape isn’t just doom and gloom. Spencer’s email provides a silver lining. While the industry’s mega-publishers might be grappling with the industry’s evolution, indie studios have benefited from this, filling the void and offering gamers diverse and fresh experiences. For Spencer, this change is, in his words, a “good thing for the industry,” despite the challenges it poses to AAA publishers.
Finally, this “fear” might explain why Microsoft pushed to acquire ZeniMax Media. This conglomerate of award-winning video game studios have continued to buck trends in recent years, releasing original IPs like Deathloop, Ghostwire: Tokyo, Hi-Fi Rush, and most recently, Starfield.
The leaked email reveals more than just Spencer’s thoughts. It offers a mirror to the gaming industry, reflecting its current state, its evolution, and the potential path forward. The transition from physical to digital, from AAA dominance to indie innovation, signals a pivotal moment in gaming history. It’s a moment of reckoning, but also one filled with immense opportunities.
