Interview: Microsoft's Spencer Talks Exploring Microtransactions On Xbox 360

Author: by Leigh Alexander, Christian Nutt

As head of Worldwide Studios, Microsoft's Phil Spencer overlooks the quintessential first-party software strategy for the Xbox 360. He says the company never sets a fixed number for how many first-party titles to release; rather, the aim is to lead innovation on the platform and ship titles that suit the goal. One of the things the company's been exploring is alternative business models, like free-to-play supported by advertising or microtransactions. Microtransactions-based games are becoming increasingly prevalent in the PC space, where many industry-watchers believe they'll soon trump subscription-based titles as the primary model for online -- and continue to develop as a significant alternative to full retail. But in the console space, it's still very much a gestating concept -- one Microsoft hopes to further explore on the Xbox 360. For example, free racing game Joyride releases this winter, and will allow Gold subscribers to support their play via a microtransactions backend. "I'm curious to see how those kinds of new experiences evolve," Spencer says, speaking as part of a wide-ranging Gamasutra feature. It began before Joyride: "To be honest about it, our first introduction maybe was the avatar marketplace that shipped just not too long ago," says Spencer. "With the amount of Marketplace content I see in my friends list via their avatars, it seems like a lot of people are choosing to customize their avatar in interesting ways." That doesn't necessarily indicate an aggressive push to implement new revenue streams, however. While microtransactions may be becoming habitual to new digital-ready consumers used to small transactions on social networks like Facebook or mobile platforms like iPhone, the core gamer has historically resisted what it tends to view as "nickel-and-diming." Perhaps that's why Spencer is so focused on ensuring alternative business models are the right decision on a case-by-case basis. "Is it going to be an interesting part of our revenue streams going forward? If it makes sense to the customers, it will be; if it doesn't, it won't be," he explains. "So we need to build the right game where a customer feels like they get the right value, they're having fun, and it's an additive part of the experience." For example, the company's 1 vs 100 Xbox Live game show isn't microtransactions-based; it's ad-sponsored free-to-play. "We've had great adoption there," says Spencer. "But it will be an interesting part of our overall revenue stream if we get the games right, and if we don't then nobody will use it." Will the company aim to enable microtransactions for third parties? An Xbox 360 version of Nexon's MMORPG Mabinogi has been under discussion -- a free game with microtransactions support. For it to work the same way on the console as it has on PC, there must be a microtransactions element enabled for third-parties. "I think it's great to see the innovation with FarmVille and other things happening in the Windows space; I think there is learning for us on console there," says Spencer. "But as well, we have Games for Windows Live, and we are probably more focused on that marketplace in Windows right now -- maybe not as publicly yet, but internally we look at the size and the types of the communities that are getting created in these different Windows social environments that we think map very well to what we're about and the experiences that we've had on console," he adds. "It's something that I'll just say we're very active in internally, thinking about the right experiences that make sense on both platforms.... there's a new set of publishers out there and a new set of content that customers are really gravitating towards," Spencer continues "The numbers that Mafia Wars and some of these other games grab are really outstanding; great success for those teams." New business models could potentially welcome new customers to the platform, either those entirely new to games or those first introduced via social networks and small platforms. Spencer tells us that the community element behind social games is as important as he business model: "That's why we do things like 1 vs 100 and Joyride and other work; we want to continue to evolve in that space as well," he says. "Everything's not about a $60 retail transaction; XBLA shows that. Summer of Arcade was hugely successful at different pricepoints; you had Shadow Complex, you had 'Splosion Man, you had Trials HD -- those are my first-party games, really did really well. Entertainment across multiple prices is important." There's much more in our full Gamasutra feature interview with Spencer, including first-party strategy and the role Project Natal plays in the company's internal goals (no registration required, please feel free to link to this feature from other websites).