Phil Spencer Suggests Allowing Other Game Stores on Xbox

Phil Spencer, the CEO of Microsoft Gaming has an idea to make Xbox consoles exciting again: Allowing alternative game stores on the Xbox platform and letting Xbox players choose where to buy their games.

The gaming exec shared this idea in the last part of his with Polygon at the Game Developers Conference. This was in response to a question about the possibility of seeing other stores like Itch.io and Epic Games Store on Xbox consoles.

“Yes,” Spencer said. “[Consider] our history as the Windows company. Nobody would blink twice if I said, ‘Hey, when you’re using a PC, you get to decide the type of experience you have [by picking where to buy games]. There’s real value in that.”

At first thought, Spencer seems to be contradicting what he said in the previous part of the interview I covered yesterday: “I don’t get any luxury of not having to run a profitable growing business inside of Microsoft. And we are that today,” the exec said.

As you probably know, the business model of video game consoles is to sell hardware with razor-thin margins and to make money from software sales. That’s why consoles still remain “walled gardens,” with companies like Microsoft and Sony taking a 30% cut on all game sales. That’s also why these same companies are requiring console players to pay a subscription like Xbox Game Pass Core (previously Xbox Live Gold) to play multiplayer games, as it also helps to recoup costs resulting from this hardware subsidy model.

However, Spencer argued in the interview that with a stagnating console market, it may be time to try a different playbook. And for Microsoft, that may include making Xbox consoles work a bit more like PCs.

“[Subsidizing hardware] becomes more challenging in today’s world,” Spencer said. “And I will say, and this may seem too altruistic, I don’t know that it’s growing the industry. So I think, what are the barriers? What are the things that create friction in today’s world for creators and players? And how can we be part of opening up that model?”

In some way, Spencer’s comments echo what Microsoft said two years ago when it detailed its Open App Stores Principles for PC and Xbox consoles. On the Microsoft Store for Windows PCs, game developers are free to use the payment system of their choice, and they’re also free to communicate directly with their customers. In practice, that means that more money can go into the pocket of game developers.

In 2022, Brad Smith, the President of Microsoft said that Microsoft wanted to apply the same Open App Store principles to the Microsoft Store on Xbox consoles. “We recognize that we will need to adapt our business model even for the store on the Xbox console,” Smith said, adding that it was still important to move forward “in a way that protects the needs of game developers, gamers, and competitive and healthy game-console ecosystems.”

While Phil Spencer made no mention of these Open App Store principles in the interview, what he suggested goes even beyond allowing other payment systems on the Microsoft Store for Xbox. But it’s still hard to imagine how alternative game stores would work on Xbox.

Consoles are designed to provide a gaming experience that “just works.” And that’s only possible because companies like Microsoft and Sony perform serious quality control.

You may remember that Sony didn’t hesitate to remove a game like Cyberpunk 2077 from its PlayStation Store because it didn’t perform as advertised. But if Microsoft ever decided to allow alternative stores on Xbox consoles, would games shipping on other stores need to meet the same quality standards that the Microsoft Store on Xbox currently requires? That includes features like cloud saves, Xbox achievements, and other things Xbox gamers now take for granted.

Unless Microsoft started requiring the same “notarization” process that Apple implemented for iOS apps distributed on alternative app stores in the EU, things could become messy and confusing really fast. Anyway, it doesn’t seem the Xbox team already has a well-thought-out plan for opening up the Xbox platform to other stores. And it’s also not clear how Microsoft would make money from selling consoles if the majority of Xbox players start purchasing games from other stores.