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Tim Stuart, Xbox chief financial officer, discusses the opportunities allegedly created by AI for developers and gamers, the acquisition of Activision Blizzard, and how Microsoft measures its success in gaming.

Today Xbox chief financial officer and corporate vice president of finance and operations Tim Stuart spoke about the application of AI to the gaming business, the acquisition of Activision Blizzard, the business model based on Game Pass, and how Microsoft measures success in gaming, at the Wells Fargo TMT Summit.

During the livestreamed conference, Stuart mentioned that he has "never been more excited about a technology shift in the gaming landscape" as he is with AI, comparing it as an "inflection point" for Microsoft to the shift from discs and consoles to online games and games-as-a-service like Fortnite and Minecraft.

He then described what he sees as the advantages of AI for developers.

"On the developer side, you think about the millions and millions of dollars in a game spent on localization, script, how you think about players moving from point A to point B and you have non-player characters have dialogue.

AI can take care of all that. You now say "I need the player to get from A to B" and instead of having to write thousands of lines of scripting or code, you just have the AI get you from A to B. Things like localization and putting things in new languages.

When we think about game testing, a million AI bots can run through a level of Minecraft and find where players get stuck, where they spend money, how they think about the level. So, this is -pun intended- game-changing for the developer."

On the consumer's side, Stuart brought up as an example a player in Minecraft meeting Hermione from Harry Potter driven by AI running through Hermione's scripts, and having a "nice unique moment."

Moving back to the development side, Stuart mentioned that if there are 100,000 game developers in the world across all companies, with AI you can generate code, instances, games, and art assets opening up the ability for "anyone in this room to be a game developer."

That, according to Stuart, changes things from 100,000 game developers to millions and millions.

"The barista at your local Starbucks has an awesome idea for a game and they can now use Copilot and AI to go create a great mobile experience."

Moving on to the recently completed Activision Blizzard acquisition, Stuart explained what it's all about and that the pace of the integration between the two companies is considerable

"But really, at the highest level, it's leveraging what Activision is so good at, which is consoles, and PC, and mobile... How do we take that great DNA, make it an accelerant to the IP that we have, leverage the great assets that they have and the expertise that they have?

And thankfully we both talk a gaming language and even the few months since we've been a entity, the speed of which we've integrated and the speed at which we've worked together is really impressive."

Microsoft is expanding its "operating leverage." First-party, subscriptions, and advertising are all high-margin businesses that the company wants to expand into.
While he's "not announcing anything broadly," Stuart explains that Xbox's mission is to bring its first-party experiences and subscription services to every screen that can play a game.

"That means smart TVs. That means mobile devices. That means what we would have thought as competitors in the past, like PlayStation and Nintendo. We're going to Nvidia's GeForce Now, their gaming subscription service."

Interestingly, he concluded by talking about how Microsoft measures success in gaming. He explained that it's a big and growing market where Microsoft wants to grow its share.

"Success for us is we can keep growing that content and services revenue double-digits. [...]. If we can grow faster than the market is growing, we are taking share in the gaming market.

And that's where we want to be. It's a 250 billion dollar market. We are not 250 billion dollars.

Early on we walked into Satya's office, Phil Spencer who runs Xbox and I. We had both taken our jobs about the same time and we've known each other for a decade before that.

We're like, let's go do this gaming thing. We walk in Satya's office: "Hey, we're going to spend 2 and a half billion dollars on this thing called Minecraft. Jokingly, he says, "A blocky game, you chop down trees... 2.5 billion dollars for this thing?" It turns out one of the best acquisitions ever made in history.

But he said: "I don't want to talk about Minecraft. Tell me why we're in gaming." We put down the deck that we had for that acquisition, and that was a moment for Satya, Phil, myself, and Amy Hood, of why is Microsoft in gaming.

That was eight or nine years ago, and the answer really is why is Microsoft in any business? It's a big and growing market that we have an ability to take and win share.

And that's why we do gaming at Microsoft. Of course, we can leverage assets and of course, we need consumer brands at Microsoft that are meaningful.

In my opinion, you can't just be all commercial-led. You have to have a good consumer lens too. But in the end, it's grow share in a big and growing market and that's what we're here to do."

Lots more stuff from the interview in the linked article down below.

Xbox CFO Discusses Opportunities with AI, How Microsoft Measures Its Success in Games, and More

Xbox CFO Tim Stuart discussed the application of AI gaming, the acquisition of Activision Blizzard, Game Pass, and how Microsoft measures success in gaming.

techraptor.net

 

[Porticus]

This guy should think about finance because he doesn't know jack shit about gaming development.

Microsoft games are already soulless as they can get, lets add a bit more sprinkle of AI and lets fuck it all.

 

[IDKFA]

Microsoft is expanding its "operating leverage." First-party, subscriptions, and advertising are all high-margin businesses that the company wants to expand into.
While he's "not announcing anything broadly," Stuart explains that Xbox's mission is to bring its first-party experiences and subscription services to every screen that can play a game.

"That means smart TVs. That means mobile devices. That means what we would have thought as competitors in the past, like PlayStation and Nintendo. We're going to Nvidia's GeForce Now, their gaming subscription service."

Interesting

Anybody think Microsoft will just leave the console business at some point, or does this just mean Activision games on PS and Nintendo consoles, rather than say Halo, Forza etc.

 

[StueyDuck]

Microsoft is expanding its "operating leverage." First-party, subscriptions, and advertising are all high-margin businesses that the company wants to expand into.
While he's "not announcing anything broadly," Stuart explains that Xbox's mission is to bring its first-party experiences and subscription services to every screen that can play a game.

"That means smart TVs. That means mobile devices. That means what we would have thought as competitors in the past, like PlayStation and Nintendo. We're going to Nvidia's GeForce Now, their gaming subscription service."

Interesting

Anybody think Microsoft will just leave the console business at some point, or does this just mean Activision games on PS and Nintendo consoles, rather than say Halo, Forza etc.

i think the highlighted is just referring to their 10 year cod deal, which they are gonna yank as soon as possible because you don't spend 70Bil for nothing, and their legacy support games like D4 and ESO and F76

 

[Thirty7ven]

“When we think about game testing, a million AI bots can run through a level of Minecraft and find where players get stuck, where they spend money”

 

[T-0800]

Anybody think Microsoft will just leave the console business at some point, or does this just mean Activision games on PS and Nintendo consoles, rather than say Halo, Forza etc.

If they put Sea of Thieves on PS5 I would buy it day one. I'm not buying a new Xbox and/or signing up to gamepass to play it.

 

[SimTourist]

 

[Heisenberg007]

"On the developer side, you think about the millions and millions of dollars in a game spent on localization, script, how you think about players moving from point A to point B and you have non-player characters have dialogue.

AI can take care of all that. You now say "I need the player to get from A to B" and instead of having to write thousands of lines of scripting or code, you just have the AI get you from A to B. Things like localization and putting things in new languages.

When we think about game testing, a million AI bots can run through a level of Minecraft and find where players get stuck, where they spend money, how they think about the level. So, this is -pun intended- game-changing for the developer."

Look what AI did to Forza Motorsport localization here. It's hilariously bad:

---

While he's "not announcing anything broadly," Stuart explains that Xbox's mission is to bring its first-party experiences and subscription services to every screen that can play a game.

"That means smart TVs. That means mobile devices. That means what we would have thought as competitors in the past, like PlayStation and Nintendo. We're going to Nvidia's GeForce Now, their gaming subscription service."

Third-party here we go!

---

"But he said: "I don't want to talk about Minecraft. Tell me why we're in gaming." We put down the deck that we had for that acquisition, and that was a moment for Satya, Phil, myself, and Amy Hood, of why is Microsoft in gaming.

That was eight or nine years ago, and the answer really is why is Microsoft in any business? It's a big and growing market that we have an ability to take and win share."
I can't imagine Satya, Amy, and Stuart being happy with the fast-declining market share of Xbox then.

 

[T-0800]

 

[Zathalus]

Whatever your thoughts on Microsoft he is right that AI assisted coding is the future. Hell it's the present, I use it extensively to assist me in scripting and pipeline deployment.

 

[shaddam]

AI could be used for great things, why do I feel like it will be only used for costcutting?

 

[Dick Jones]

Check the accounting books. This fucker probably asked AI to send him the financial data. Instead of countless hours auditing the books, he wrote "AI audit books"

 

[StealthGoblin]

That answer about why they are in gaming is the root of all their problems. It's about taking share. That's it.

No heart.

 

[kruis]

i think the highlighted is just referring to their 10 year cod deal, which they are gonna yank as soon as possible because you don't spend 70Bil for nothing, and their legacy support games like D4 and ESO and F76

I think MS is going third party sooner than we think.

 

[nowhat]

I'm guessing AI also does internal reviews at Microsoft, that would explain Redfall.

 

[Chukhopops]

Whatever your thoughts on Microsoft he is right that AI assisted coding is the future. Hell it's the present, I use it extensively to assist me in scripting and pipeline deployment.

I think people focus too much on the content generation aspect of AI (voice acting, procedural generation, etc) when there are so many other use cases, from automated testing to interpretation of telemetry data. They’re just not as visible when you’re on the consumer side.

Stuart likes the Game Pass model because it's a paid annuity instead of having to bet on big game launches every quarter or every year, smoothing the industry's seasonality out. He also talked about "business model diversity."

Gamers can subscribe to Game Pass, buy games digitally, or have advertising fund their gaming, and however they want to monetize, Microsoft is trying to find a way for them to spend money within the Xbox ecosystem. That's a "very good accelerant in the content and services landscape."

Interesting that they mention « have advertising fund their gaming », are they considering some ad-supported GP? Or is it simply MS wanting to be a platform for F2P streaming like they did with Fortnite?

At the end of the day GP is the cheap entry ticket to Disneyland and the rest of the revenue is made inside the ecosystem, that seems to confirm that it’s working for them.

 

[mitch1971]

How Microsoft Measures Its Success in Games?​

Depends on what month it is.

 

[GHG]

"When we think about game testing, a million AI bots can run through a level of Minecraft and find where players get stuck, where they spend money, how they think about the level."


Wonderful stuff.

 

[damidu]

can't wait for ai to replace these morons

 

[UltimaKilo]

This just confirms that Microsoft no longer sees itself as a hardware competitor, only offering Xbox hardware as an ends. The goal is like Apple with Apple TV: subscribe.

Risky and capital intensive. Activision acquisition is not enough for that. They need to start creating new studios.

 

[AJUMP23]

There are good things about AI and there are ways to abuse it. We are going to go through a lot of abuse before we find the right way to use it.

 

[ChorizoPicozo]

this explains a lot of things.

They want to succeed without putting in the work and expect rewards without real commitment to the medium.

damn, Steve Jobs was right.

 

[ChorizoPicozo]

About A.I.

 

[Phase]

"That was eight or nine years ago, and the answer really is why is Microsoft in any business? It's a big and growing market that we have an ability to take and win share.
And that's why we do gaming at Microsoft. Of course, we can leverage assets and of course, we need consumer brands at Microsoft that are meaningful.
In my opinion, you can't just be all commercial-led. You have to have a good consumer lens too. But in the end, it's grow share in a big and growing market and that's what we're here to do."

And this is why they're failing. Instead of prioritizing the creation of great games which will in turn lead to a bigger share of the market, they focus solely on the share first. "We have money, and we can create more of it because of that." Keep burning it then.

 

[Bumblebeetuna]

I think people focus too much on the content generation aspect of AI (voice acting, procedural generation, etc) when there are so many other use cases, from automated testing to interpretation of telemetry data. They’re just not as visible when you’re on the consumer side.

Interesting that they mention « have advertising fund their gaming », are they considering some ad-supported GP? Or is it simply MS wanting to be a platform for F2P streaming like they did with Fortnite?

At the end of the day GP is the cheap entry ticket to Disneyland and the rest of the revenue is made inside the ecosystem, that seems to confirm that it’s working for them.

When he said ad supported gaming I think he’s just referring to F2P mobile games.

 

[Three]

A person I know that worked in AI in a different field is getting hired by ABK to study behaviour and where people are spending money. It's sad really.

 

[Bumblebeetuna]

I read the full article and I don’t understand the posts complaining about a lack of “heart” or “effort”. He talks about expanding first party and growing with a good eye on the consumer. To me that means making good games. How will any of this work without quality games? It won’t. Hundreds of games in GamePass won’t matter if they’re all bad.

 

[Mr Reasonable]

I wonder if Sony and Nintendo are looking at where people are spending money or if they just set a course, cross their fingers, close their eyes and hope it works out?

 

[Three]

When he said ad supported gaming I think he’s just referring to F2P mobile games.

Why? Do you think they consider PC, Console and cloud as too sacred for ads or something? If people warm up to it and don't push back on those full page ads they will take over in those places too just as mtx infiltrated PC and consoles already.

 

[digoutyoursoul]

With all that investment you should be doing so much better. I keep reading from fellow fans on how console sales are not a big deal to them, what kind of attitude is that then? How do you expect people to buy your products if what you paid 400-500 bucks for is something of a afterthought? Why should a consumer invest in the hardware if it’s not a high priority?

Even Spencer once said their console audience spends the most money and time in their ecosystem.

Seeing them praised for bare minimum is nauseating. It’s not helping the brand improve and the end result time and again isn’t growing their marketshare.

 

[Bumblebeetuna]

Why? Do you think they consider PC, Console and cloud as too sacred for ads or something? If people warm up to it and don't push back on those full page ads they will take over in those places too just as mtx infiltrated PC and consoles already.

Anything can happen in the future but he was talking currently.

 

[Three]

How Microsoft Measures Its Success in Games?​

Depends on what month it is.

Yeah this was a funny quote:

"Stuart also talked about the fact that six or seven years ago Microsoft stopped announcing the number of consoles it sold, but that was making a point saying that the business is about content and services"

and yet they stopped sharing MAUs and subscriber numbers too later down the line. so what exactly are they suggesting the business is about this month? no more console sales reports, no more MAU reports, no more subscriber count report, no profit reports...

 

[Chukhopops]

When he said ad supported gaming I think he’s just referring to F2P mobile games.

That’s possible indeed, although revenue in the mobile gaming market comes primarily from in-game sales and not so much from ad revenue - CPM ad revenue is way too low for any game to survive that way.

I read the full article and I don’t understand the posts complaining about a lack of “heart” or “effort”. He talks about expanding first party and growing with a good eye on the consumer. To me that means making good games. How will any of this work without quality games? It won’t. Hundreds of games in GamePass won’t matter if they’re all bad.

Indeed it shouldn’t be a big surprise that a CFO would look at a division from a financial perspective.

 

[ChuckeRearmed]

I am still surpised that AI translations hasn't reached close to native level. Guess, context and situations are difficult to translate.

 

[Elysium44]

Look what AI did to Forza Motorsport localization here. It's hilariously bad:

It's pretty fucking ridiculous. 'tune' is translated to 'melodie' (melody)

Incredible, but there are still people who get triggered when I say Turn 10 are lazy developers.

 

[Elysium44]

I am still surpised that AI translations hasn't reach close to native level. Guess, context and situations are difficult to translate.

I'm not really surprised, garbage in, garbage out. Computers, AI are not clever, they are as dumb as a box of rocks. All they are good at is doing sums faster than we can. While there may be some useful applications for AI, predictable work which is very very simple to do but extremely time consuming and laborious, we can already see it's being used for stuff it's hopeless at, and I expect this to continue.

 

[Jigsaah]

"On the developer side, you think about the millions and millions of dollars in a game spent on localization, script, how you think about players moving from point A to point B and you have non-player characters have dialogue.

AI can take care of all that. You now say "I need the player to get from A to B" and instead of having to write thousands of lines of scripting or code, you just have the AI get you from A to B. Things like localization and putting things in new languages.

When we think about game testing, a million AI bots can run through a level of Minecraft and find where players get stuck, where they spend money, how they think about the level. So, this is -pun intended- game-changing for the developer."

Every human working for Xbox Games right now:

 

[eNT1TY]

... we can already see it's being used for stuff it's hopeless at, and I expect this to continue.

It's hopeless at stuff until it hopefully isn't, and it can only stop being hopeless at stuff if it continues to be used at the hopeless stuff.

 

[NickFire]

"The Communications Workers of America (CWA), one of America's largest unions, believes Microsoft's acquisition of Activision Blizzard will "transform" the video game and technology labour market."

US union praises Microsoft Activision Blizzard deal closure

The CWA believes Microsoft's acquisition of Activision Blizzard will "transform" the video game and technology labour market.

www.eurogamer.net

(to be fair, I suppose an argument could be made that Activision would have looked to replace devs with AI regardless of the acquisition).

 

[Horseganador]

But man, don't say that you're going to use AI to know where you can get more money from the players, it's ugly.

 

[Heisenberg007]

Incredible, but there are still people who get triggered when I say Turn 10 are lazy developers.

"Melody your car for the best performance!"

 

[mckmas8808]

AI could be used for great things, why do I feel like it will be only used for costcutting?

Because you are smart.

This just confirms that Microsoft no longer sees itself as a hardware competitor, only offering Xbox hardware as an ends. The goal is like Apple with Apple TV: subscribe.

Risky and capital intensive. Activision acquisition is not enough for that. They need to start creating new studios.

There is no way MS can succeed this way. They NEED to able to sale hardware at some point. It can't mainly be about subscribers. This is a losing situation. Tesla, Apple, Samsung, etc are where they are because they can get people to buy their hardware. Then after that they stay to spend money in the ecosystem.

Yeah this was a funny quote:

"Stuart also talked about the fact that six or seven years ago Microsoft stopped announcing the number of consoles it sold, but that was making a point saying that the business is about content and services"

and yet they stopped sharing MAUs and subscriber numbers too later down the line. so what exactly are they suggesting the business is about this month? no more console sales reports, no more MAU reports, no more subscriber count report, no profit reports...

MS has lost the narrative. Somehow most of the western media still falls for the lie. The Xbox team is failing at their objectives,hence why they spent $80 billion over a 3 year period. It's hailmary time!

 

[DryvBy]

i think the highlighted is just referring to their 10 year cod deal, which they are gonna yank as soon as possible because you don't spend 70Bil for nothing, and their legacy support games like D4 and ESO and F76

They spend $70b to buy it up for 3rd party. There's no way MS keeps pushing hardware after this or next gen.

 

[Gamerguy84]

Oh yea I forgot they invested 10 billion into chatgpt.

 

[NickFire]

Because you are smart.



There is no way MS can succeed this way. They NEED to able to sale hardware at some point. It can't mainly be about subscribers. This is a losing situation. Tesla, Apple, Samsung, etc are where they are because they can get people to buy their hardware. Then after that they stay to spend money in the ecosystem.

MS has lost the narrative. Somehow most of the western media still falls for the lie. The Xbox team is failing at their objectives,hence why they spent $80 billion over a 3 year period. It's hailmary time!

I disagree with your second point. You're spot on that hardware is vital to Apple. But it is not vital to Apple TV at all.

Between console audience, PC audience, and mobile, MS Gaming can thrive regardless of how well Xbox hardware sells. GP in its current form obviously benefits from more Xbox sales, but even if GP remains a priority MS could brute force GP onto more high end consoles in the coming years if it chooses to. One or two "Nice Guy" interviews with throw away comments about games being something they would sell on any platform which allows them to offer both subs or sales would spread like wildfire and kind of force the other side to accept an off-platform version of GP. It would be like when Fortnite basically forced Sony to allow cross-play.

Also - MS already signaled they aren't beholden to selling consoles anymore. The day 1 on PC for all of their games kicked that door wide open.

 

[geary]

Risky and capital intensive. Activision acquisition is not enough for that. They need to start creating new studios.

Xbox has a lot of problems in their strategy, but the lack of studios is not one of them.

 

[Torrent of Pork]

Being able to shut the lights off at the end of the day, tell the AI to play test a few million times for bugs, and have the actual play testers come back in the morning to the flagged issues could cut thousands of man-hours off of dev cycles.

AI in game development doesn't just mean bland text, and stolen artwork.

 

[mckmas8808]

I disagree with your second point. You're spot on that hardware is vital to Apple. But it is not vital to Apple TV at all.

Between console audience, PC audience, and mobile, MS Gaming can thrive regardless of how well Xbox hardware sells. GP in its current form obviously benefits from more Xbox sales, but even if GP remains a priority MS could brute force GP onto more high end consoles in the coming years if it chooses to. One or two "Nice Guy" interviews with throw away comments about games being something they would sell on any platform which allows them to offer both subs or sales would spread like wildfire and kind of force the other side to accept an off-platform version of GP. It would be like when Fortnite basically forced Sony to allow cross-play.

Also - MS already signaled they aren't beholden to selling consoles anymore. The day 1 on PC for all of their games kicked that door wide open.

The bolded can only happen if Sony allows it to happen. And imo Sony would need some type of admission that their Xbox hardware business is going away before they allow Gamepass on PlayStation. No way they allow MS to compete against their subscription service on a Playstation console "AND" still be in the hardware business.

And Fortnite didn't force crossplay on Playstation. Sony got proper compensation through contracts first. Only then did they do the cross play stuff. Remember all the hate Sony got for demanding money during those negotiations? It was all over GAF. Sony isn't stupid when it comes to leveraging their Playstation business. They don't allow other companies to eat off of it without them getting something substantial in return first.

 

[NickFire]

The bolded can only happen if Sony allows it to happen. And imo Sony would need some type of admission that their Xbox hardware business is going away before they allow Gamepass on PlayStation. No way they allow MS to compete against their subscription service on a Playstation console "AND" still be in the hardware business.

And Fortnite didn't force crossplay on Playstation. Sony got proper compensation through contracts first. Only then did they do the cross play stuff. Remember all the hate Sony got for demanding money during those negotiations? It was all over GAF. Sony isn't stupid when it comes to leveraging their Playstation business. They don't allow other companies to eat off of it without them getting something substantial in return first.

I agree Sony made sure to get compensation. But I do think they were forced to negotiate because they couldn't afford to piss off the Fornite audience. Just a hunch though.

On the other topic, I haven't really taken competition with PS+ into account. I'm not sure I agree that Sony would pass up revenue because of said competition since the games wouldn't be the same. But I might be underestimating how valued PS+ (with catalogues) are to their long term goals.

 

[Salty Popsicle]

I read the full article and I don’t understand the posts complaining about a lack of “heart” or “effort”. He talks about expanding first party and growing with a good eye on the consumer. To me that means making good games. How will any of this work without quality games? It won’t. Hundreds of games in GamePass won’t matter if they’re all bad.

Microsoft and Nintendo are the only two console makers who make an effort to publish games in a wide variety of genres and dedicate resources to non-AAA games. Games like Pentinent, Hi-Fi Rush, or even Pikmin for example are game experiences that have received wide acclaim and break from formulas that have traditionally been "safer" for publishers to get behind. Unfortunately, a large segment of this forum regards anything that isn't a derivative 3rd-person action/adventure game as not worth looking into.