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Phil Spencer at the E3 2018 Xbox Briefing. (Xbox Wire Photo)

The cloud will increasingly enable you to play the game of your choice on any device of your choice. So suggested Phil Spencer, head of Microsoft’s gaming division, at Barclays Global Technology, Media and Telecommunications Conference on Wednesday, where he spoke in detail about expanding monetization and cloud technology as it relates to games.

“If you think about content transformation, technology transformation, and business model transformation, they’re all happening simultaneously,” Spencer said. He used the massively popular game Fortnite as an example. Fortnite started on the PC platform and then expanded to other devices, but Fortnite players are all connected no matter which device they use.

“The game, much like every other form of media, natively lives in the cloud, and the on-ramp to that experience is the consumer’s choice,” Spencer said. Microsoft is paying close attention to those choices with Minecraft, another hugely popular game that the company acquired in 2014. Like Fortnite, Minecraft is available on multiple platforms, and Microsoft can look at players’ habits and device choices when playing.

Spencer referred to Microsoft’s Project xCloud as the strategy the company is taking for multiple uses, including games. “We’re really looking at the body of content that we have on our platforms today. We look at cloud streaming as a way over years where we’ll be able to bring content to customers on any device that they have, regardless of the local computing capabilities.”

Latency can be a huge issue, especially for games, and that’s something Microsoft is tackling as well with Azure.

“The Azure team has really built a global strength in terms of where our data center and our edge nodes are. And we’re putting them close to places where people will want to go play, and specifically players we don’t reach today,” Spencer said. “Putting data centers closer to the players is how we work on latency among other kinds of magic software solutions that we put in place, but the global scale of Azure is a huge benefit to us in this space.”

The other changing landscape in gaming is monetization. Where there used to be only one way for companies to make money selling games, now there are three.

Spencer again used Fortnite as an example of one type of gaming monetization. A player can purchase or earn “V-Buks,” the in-game currency, on one device and use that money on any other device on which they play the game. This form of monetization, also known as microtransactions, has become popular over the last 10 years with the rise of “free-to-play” games. But more traditional monetization strategies are still successful.

Fortnite is one of the most popular games today. It uses the relatively new “free-to-play” business model. (Epic Games Image)

“The great thing about gaming today is all forms of monetization are actually growing and are very healthy, even the traditional retail model,” said Spencer.  The traditional model Spencer is referring to is the development of a game that’s sold for a one-time cost. In most cases today, that price is $60.

Another form of monetization that’s still applicable is the subscription model, which was first made popular by games like World of Warcraft. Microsoft is having success with that model with its “Game Pass” service. With a subscription, players have access to more than 100 games, including all new first-party releases, for a monthly fee.

Spencer said the gaming division at Microsoft is flourishing. “We had our highest revenue year last year with over $10 billion in revenue in the gaming category,” he said. “We’re seeing software and service growth in double digits, and the business is performing very well. It is an activity that the youths on the planet love.”

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