Microsoft’s Gaming Chief On the Future of Xbox

Microsoft made some big announcements about the future of the Xbox gaming platform this week at the annual E3 conference. Among the top headlines were two new pieces of hardware: A slimmer version of the company’s current console called the Xbox One S, as well as a turbocharged “Project Scorpio” model coming next year.

TIME sat down with Xbox Chief Phil Spencer to talk about the company’s future gaming plans. What follows is a lightly edited transcript of our conversation.

Project Scorpio is designed to run games at 4K, the latest and greatest television resolution. But most people don’t have a 4K TV yet. Do you think there’s an audience there?

I think you’re hitting on some things that were critical to us to talking about Project Scorpio this year, and to some extent Xbox One S, which supports 4K video for streaming services, UHD, Blu-Ray, so you have a 4K Blu-Ray player as well. People say, “Hey, what Xbox One should I buy?,” we’ve got the existing Xbox One that’s in market for $279.99, which I think is a great value for the box that’s currently in the market, and if you don’t have a 4K television and you never plan to get one, I think that’s a great console for people to go buy. Xbox One S is, at $299.99, the standard price for the entry-level version of it, it’s a great value, it plays all the Xbox One games you already have, and if you’re interested in 4K video and streaming it’s a great box for that.

Project Scorpio is over a year away, but we see on the PC side that 4K gaming as an experience is something that people are gravitating towards. Most of the big games are coming out in 4K, and I can go into Costco and watch how many of the TVs on the floor support 4K, and it’s a pretty high number now, and the prices have come down. The adoption rate of TVs take a while. So I didn’t want to get to a point where you somehow demand a 4K TV in order to get the right experience for an Xbox One.

So we have this great opportunity, if you have an Xbox One now and you’re happy with it, keep buying and playing, we love that. If you’re thinking about, “Hey, what’s the most cost-effective way for me to get in?,” the promotional price we’re running on the original Xbox One is great, and the lineup will scale up with you. If and when you decide that 4K gaming is right for you, all of the library of the games that you’ve been purchasing on Xbox One will move with you.

Could a developer revisit an existing game and do little tweaks once Scorpio is out?

Absolutely. A game like Halo 5 takes advantage of what we call “dynamic scaling,” so while the game is running on an Xbox One, as the scene gets more complex, it will scale down the resolution a bit in order to maintain 60 frames per second, so it always feels consistent. When that game is run on Project Scorpio, it’s effectively going to run at its max resolution the whole time. The game already has this dynamic scaling capability built into it.

But yeah, if teams look and say “Hey, there are things I would like to make better in the games that are out there to take advantage of Scorpio,” we’d be completely supportive of that. That said, it’s important for everybody to understand that new games that are going to come out are going to run on the original Xbox One, Xbox One S and Scorpio. We’re committed to making sure the library grows for everybody and nobody gets left behind. The console experience with those games has to be complete across every member of the family.

That sounds like a very consumer-friendly attitude, but what about the business side?

The margin for console is not a device margin business. A cell phone is a little bit different. The reason the cell phone manufacturers want to upgrade you as often as they can is they make margin every time on the device sale itself. The console business is much more about . . . getting consoles in place, and that’s not really a big profit driver for the business. It’s usually a place we invest money in, actually, to gain customers. Because the business is really about selling content and the service that we have.

So if you bought an Xbox One from us three years ago and you continue to play that and buy games and use the service, I love you, you’re one of the best customers. But I also want to make sure that as you find new experiences like 4K that I’ve got the right product for you as well.

Is there a virtual reality part of this plan? What about mixed reality, given Microsoft’s work with the HoloLens?

When we went out and talked to studios about the capability that we needed in Scorpio, focusing on 4K is the really important experience that we saw from PC that we wanted to bring to the console. Six teraflops is the point the developers told us we needed to hit, and that’s the design we put into place. And then obviously looking at price, because we want to make sure the console comes out at a good consumer price point.

As VR has been gaining traction on the Windows side, and people are starting to build higher-end VR experiences . . . we also integrated in the design point for VR into Scorpio knowing what the graphics capabilities would need to be there to support the high-fidelity VR experiences our console gamers are going to expect.

On mixed reality, our focus on HoloLens is untethered, so it’s a standalone device that all of the computing power is in the head-mounted display itself. If you fast forward five years, and I don’t think I can predict the future, I do think these things will merge over time, mixed reality and virtual reality. I do think the untethered experiences in the end are probably just going to be easier. But the tethered experiences on VR right now is really what we thought about as part of our Scorpio 4K design point.

Do you think the resolution wars will die down a little bit in the 4K era?

I would hope so, but . . . gaming has always been at the forefront of technology adoption. Whether it’s artificial intelligence, or 3D graphics rendering, or physics, so I think it’s part of the enthusiast gamer and the things that are interesting to them, if I’m building my own PC rig and I want to make sure I get all the balance of everything exactly right. I think it’s in a lot of ways, I think wanting to understand the technology behind the games I play is a great thing. Not to take it to a weird place, but there’s the idea of kids and their interest in STEM education and the math behind what happens when they’re playing. I love that whole side of it. As a kid who grew up playing video games and went to the University of Washington for computer science, that resonates with me.

But the console worry side of it, the “I’m better than you because I have three more Ps on my picture than you do,” in the end the content and gameplay is going to be . . . infinitely more important than the resolution of the game. I do think that 4K itself, you see as one of these natural inflection points. You and I probably remember the first time we were watching our 4×3 television and we were watching sports and all of a sudden you go to the store and you see that same sports broadcast in HD and you’re like, wait a minute. That was jaw-dropping. 4K has some of that same capability in terms of depth of scene, you can see it in Forza Horizon.

It’s interesting when I go and I’m watching at Best Buy or Costco, the 4K TVs aren’t as expensive. Many of them are below $1,000 now. I think a lot of us watched 3D television and was that really going to catch on, 4K is something that feels like it’s got motion, you see people like Netflix experimenting with it, you see things like 4K Blu-Rays, I think it’s a when, not an if. And we want to make sure we have the consoles right for you if and when you make that decision.

How do you bridge the gap between Windows PC gamers and Xbox gamers?

In order to succeed here we have to take somebody who doesn’t even want to learn how to spell “console” and “Xbox” and just plays on PC and build an ecosystem that works for them. I’m not trying to sell PC gamers on Xbox. If they want to play on their television on Xbox, I think I have a great console for them, if they want to keep playing keyboard and mouse games or even controller games on their PC, I want to do that for them as well. It’s even things like our new controller with Bluetooth, because I know a lot of people just want to use that controller on their PC. Our whole library of first-party games are shipping on Windows, and ignore the fact that you also have an entitlement on Xbox One. We really need to deliver the needs of the PC gamer in order for this to work.

What you’re doing with cross-platform play makes life easier for me, because I can carry around something like a Razer laptop and play my Xbox games there like it’s a portable Xbox.

Sure, but in a way I’d prefer if you didn’t call it a portable Xbox, because it’s a Razer. I think of Xbox as the service, and your content library, and you’re bringing Xbox to Razer. I’m not trying to turn PCs into consoles either. Really what I want you to be able to do is, you can sit down and you can play Gears of War or Forza or Spellbound. You’re playing on your couch when you’re at home, and when you’re on the road coming to E3 or something else, and you’re sitting on the train and you want to flip up the laptop to play those same games from the same point you were in, I want to enable that. That seems like something that’s very straightforward, and I don’t want to make it sound like we invented this. This has been around, especially in the PC space, for a while — Steam Boxes do this. I’m not saying we invented something here, but it’s definitely something we want to embrace.

What I’m seeing a lot lately is this friendliness between companies. Is there a place for Steam in this new platform that you’re enabling?

I’m not probably supposed to say this, but I sat down before this show with the leaders of Valve, and I showed them Scorpio and what we’re doing . . . Valve and Steam specifically is a massive part of the PC gaming community today, it’s growing like crazy, it will continue to grow. I think it’s got a long, great future ahead of it. I think as the platform holder of Windows, I think there are things we should be doing to make Windows 10 a great gaming experience. Valve applauds us. As [Valve co-founder] Gabe [Newell] says, there are going to be areas where we compete and areas where we cooperate and in the end of both of those are good for gamers. I want to build a store, and people can look at that and say, you focusing on Windows Store is competition for Steam, I kind of laugh right now when I look at the numbers and people say I’m competitive with Steam at all, but we’re selling our first-party content. I think gamers having choice for where they want to buy games and game developers having choice for where they want to sell games is fundamentally good. The only way we’re going to build that capability is by doing, we learn by doing.