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To Understand the Metaverse, Look to Video Games

Xbox head Phil Spencer discusses how the gaming industry is already peeking into the metaverse with avatars, virtual worlds and online economies.

theme song

When you walk in the room, do you have sway?

kara swisher

I’m Kara Swisher, and you’re listening to “Sway.” Two decades ago, Microsoft, once a boring software company, rolled out the Xbox in what would be a big bet on video gaming. It certainly paid off. Gaming was already on the upswing, but during the pandemic, the industry went gangbusters. Sales soared to over $150 billion in 2020. I’ve never played a video game. Okay, I played one or two. But I am deeply interested in the industry, less for its astronomical profits and more because I think the gaming business is, in many ways, on the frontier of tech and always has been. They’ve built out 3D virtual worlds in which people can interact freely, co-create content, and trade in virtual economies. And the industry has grappled early and continually with issues of trolling, content moderation and sexism, which plague much of tech. I wanted to talk to a leader in the gaming space about where the industry is going and how it thinks about its powerful role in tech. So I called up Phil Spencer, the head of Xbox and executive vice president of Gaming at Microsoft. Phil, welcome to “Sway.”

phil spencer

Hey, Kara. Thanks for having me.

kara swisher

I was joking about not playing video games. I have played video games. I just don’t do it a lot. But my sons do it a lot. But I wanted to start off with this idea of video games as virtual gathering places. It’s gotten so much attention lately. People watch professionals play World of Warcraft and other esports. AOC is getting out the vote on Twitch. Talk a little bit about the virtual worlds aspect. Because a lot of people are now paying attention to this metaverse idea, which has been going on in gaming for quite a while.

phil spencer

Yeah, that’s exactly right. And one of the things, even going back to maybe some of the origins of gaming, think about video arcades of people coming together in a physical place with a room of a bunch of video game machines around that we were pumping quarters into. And as gaming moved into the home, there was a real desire to bring that sense of community, belonging, togetherness that we had in the arcades. And our experiences that we built kind of mirrored that, as you talk about massively multiplayer games, people playing World of Warcraft, people playing Ultima Online Minecraft together. The sense of community and being together is just kind of a native part of what gaming is today.

kara swisher

So when you look at the idea of the metaverse that’s coming, there’s a lot of talk — thanks to Mark Zuckerberg, who didn’t invent it. Though I think he would like to think he did, but he didn’t. Is the metaverse just an extension of the virtual worlds already in video games, or is it something different?

phil spencer

Yeah, I definitely see it as an extension of what gaming has been doing. I think what we learned early in gaming is if you put players together in a virtual space, you can, one, level the playing field for everyone. Everybody feels equal. But yet, we can have our own identity, what my screenname is, what my character looks like. And I think as we look at the workplace going online, hybrid work environments, where we might have some of our coworkers that are together in one place, others that are on the other end of a call, we look at these virtual spaces and some of the things that we’ve learned in video games of people coming together to cooperate together to achieve tasks. And as we talk about it inside of Microsoft, it’s very much, can we take from learning of that and think about what the next evolution of Teams might be? And the learning that we have over the years, not only with what you’d say is today’s Teams or Zoom users but also thinking about Gen Z, there’s a whole generation that are growing up where their social connection to the world is through video games. It’s not just about the play itself, but it’s about, where do you hang out after school? Where do you meet your friends? What are those shared experiences that you like to go do together? For the generation that’s growing up, that being a natural way to get things done with your coworkers is going to be much more native than it is for my generation of people, who will seem like kind of a bolt-on to the experience that I’ve had.

kara swisher

Right. So talk about that idea of — you mentioned it just briefly, but the pandemic was an accelerator for all of this. So do you think it has been good for business at this point?

phil spencer

It’s hard to say a global pandemic has been good for business. It’s hard for me to rationalize in that way. But what I will say is there’s been natural growth in gaming for decades. And we saw an acceleration of the growth during the pandemic.

kara swisher

How did you think about it when it was starting to develop, in terms of what it meant for your business?

phil spencer

Well, for me first started with my teams, the teams here at Xbox and how those teams — keeping our teams safe, how we were going to get our work done. I will say the swell in usage in gaming was a surprise to us. Back in — what would it have been — March, April of 2020 — we sold out of consoles, which we never do, in April and May. Because you had this sudden swell of usage. Our networks were tapped as people were coming on. And the team worked hard to fulfill that demand. And in some ways, we’re still trying to do this. When you think about trying to go get an Xbox or a new PlayStation right now in the market, they’re really hard to find. And it’s not because supply is smaller than it’s ever been. Supply is actually as big as it’s ever been. It’s that demand is exceeding the supply for all of us. At this point, we’ve sold more of this generation of Xboxes, which is Xbox Series X and S, than we had any previous version of Xboxes. So it’s our job to get the supply there to meet that demand.

kara swisher

So tell me if this — one of the things that’s hindering a lot of these things is by being able to buy devices. Does this supply-chain crunch factor into what you’re thinking about?

phil spencer

It definitely factors into our day-to-day work. It’s almost less an entertainment job and more a supply-chain job at this point, which isn’t really what my background is. But we’re spending a lot of time thinking about how do we move consoles from A to B location and securing chips. It’s like water flowing through a pipe. Once you’re working on supply chain, you work all the way at the manufacturing end. But it seems like every time you free up any bit of capacity to move inventory through, you hit the next thing, shipping. Okay, then when you get to shipping, you have to get it to the stores. Once you get it to the stores, there’s so much demand. How do you actually manage so that real customers are buying our consoles and it’s not a bunch of scalpers and bots that are securing the capacity? It’s multi-step and it’s kind of a 24-7 job for the team right now.

kara swisher

But does the future of Xbox come in a box? You’re focused on streaming, obviously.

phil spencer

Yeah. We want you to be able to play Xbox on any device, a device that you might already own, a phone, a tablet, a smart TV. You should be able to play on your Mac. You should be able to play on your PC. And we’re investing in a lot of different technologies. One is, as you say, the cloud. Xbox Cloud is our product that allows people to stream Xbox games to any device.

kara swisher

It’s essentially — your cloud gaming model’s a Netflix for video games, correct?

phil spencer

From a streaming standpoint, it is. I’d say the difference for us is in the business model of — you can buy every game that’s available on the subscription, which is a little different than a music subscription or a movie subscription. But the technology itself to any person that hasn’t experienced it would feel like I’m watching a video. But if I click, the character on the screen actually moves. But yeah, it feels like Netflix. But we do — I think the option of allowing people to buy, it’s just been a traditional part of gaming. The retail market continues to be very strong and grow. So let’s make sure we offer our customers choice between subscriptions and transactions. That’s probably the only difference between us and some of the video subscriptions.

kara swisher

Which one of those businesses are bigger right now?

phil spencer

Transaction is bigger than subscription. Subscription is growing faster, just because it’s relatively new. And with Game Pass, we were one of the first movers in that space. But the transaction business is very large. We still sell physical disks.

kara swisher

So speaking of Netflix for video games, why is the Xbox the obvious choice to play on? How do you look at those?

phil spencer

Yeah, I think the video game business — like you said, 150, probably $200 billion when you include global and hardware — is going to be a business that a lot of big tech companies look at. And we see more and more of the big tech companies looking at gaming as a place to come in, including Netflix. I think for us, our strength is we just passed 20 years of Xbox being in the market, we have thousands and thousands of game-developer relationships, creators who are already building on our platform. And the other one is the social networks that we have with Xbox Live. We have millions of people who come on to Xbox Live every month. Those friends relationships that are on the network are incredibly important. I think cloud is critical. And Netflix clearly has cloud. Amazon has cloud. Google has a real cloud capability. But without content, community and cloud, I think getting into gaming right now — and you see this in what Netflix is doing. I think it’s smart what they’re doing. They’re buying some studios. They’re learning about the creative process of interactive entertainment. And I think it’s a very smart way for them to move into the space. For us, we just started this many, many years ago.

kara swisher

Yeah. So speaking of which, collecting data on your users, what are you doing with it right now? How do you look at that space? Because obviously, it’s getting a lot of attention from Washington and from users themselves.

phil spencer

Yeah. When you sign up and log in to Xbox for the first time, you go through some questions about the data use that we have. And we’re very transparent about the use of that data, assuming people opt in to the different kind of rings of data sharing that we have. One of them that we use is with our third-party partners that build content on our platform, that they want to know, what experiences are people having in their games? How far did they get in the games? Did they own the previous version of those games? So this is more of a creative outlet and business outlet to allow our partners to be smarter about the people who play. But that’s an opt-in our network. And the same thing with any — we have child accounts on our platform. So if a child is on our platform, your children, I would encourage anybody out there to create a child account on Xbox Live. You can manage that with your mobile phone and get real detailed data on what your kids are doing, who the friends are on the network that they play, block people that they play, block spending. All of that is critically, critically important. It’s one of the reasons I think networks should have child accounts. This idea that certain networks out there just assume that everybody on their network is over the age of 13 I think is not a responsible way to run a network. I’m not saying we figured it all out, but I love that we’re public about what we stand for and what our goals are.

kara swisher

It’s a really interesting challenge for a lot of these — But you’re right. They should know better. So let’s, thinking of which, talk about community. Because these virtual worlds that get created also emboldened people by hiding behind avatars. Here, I’m thinking about trolls. We saw this very clearly in 2014 with Gamergate. Thousands of gamers started to heckle, dox and threaten women gamers. Caitlin Dewey in the Washington Post called it, quote, “a misdirected lynch mob.” What did the industry learn from Gamergate?

phil spencer

The point you bring up about the anonymity on the internet and what behavior that that unlocks for people who want to leverage those for — I’ll call them evil reasons, I think is a great learning. One of the benefits we have on Xbox is that same account that you’re using to log in and create your identity is the same account that all of your games are tied to. It’s the same account your console is tied to. And what we find on our network is when people are misbehaving, we have a report function that’s built right into the social connections that people create on our platform. If we ban somebody’s account, we really have the ability to impact somebody’s gaming identity and what availability they have. Now, there’s work for us to continue to do in this space. I’m not trying to position this as a done effort. But it’s somewhere we continue to invest. Even in the fall we just bought a company, Two Hat, that builds a product called Community Sift that is automated moderation tools on our network. So as all of the millions and millions of conversations are happening, as you can imagine, at some point in order for us to moderate this an effective way, it really needs to be driven by the compute and cloud power that we have. And when we find bad behavior, we can ban, we can pause people’s accounts. And there can be a real ramification of that, in terms of the gaming experience they have on our platform.

kara swisher

So speaking of evil, Steve Bannon learned something from Gamergate, too. He saw political opportunity, saying, you can activate that army. They come through Gamergate or whatever and then get turned into politics and Trump. Do you see a connection between gaming and polarization?

phil spencer

I think what’s happened as gaming has grown is its social capability has become the kind of native place where people communicate and socialize. We see all positives and negatives of the human condition. We have people who propose to each other and get married on Xbox Live. We also have conversations about politics and other things that happen. One of the things we’ve stated about our social network is we’re not a free speech platform. We’re a platform around interactive entertainment and video games. And we’re not there to allow all kinds of social discourse to happen on our platform. That’s not why we exist.

kara swisher

So tell me what you mean when you say, I’m not a First Amendment platform. Meaning not everything goes, correct?

phil spencer

That’s right. We’re not there to allow any conversation to happen on our platform. I’m not to say it never happens. We’re not a place — it’s very difficult to come to Xbox Live and say, Okay, I want to go create a political party on the platform. You could kind of twist the tools and try to get there, but it’s just not set up for general-purpose conversations or community. It’s really set up for community around interactive entertainment and the games that run on our platform. And that’s the way we invest. And I’m not judging what other networks do. It’s just not what our network is about. Xbox —

kara swisher

All right, but I’d like you to judge that. Who do you think is doing a better job on content moderation, the gaming industry or social media companies, like Facebook and Twitter?

phil spencer

[LAUGHS] I think we all have a long way to go. You could tell me that’s a lame answer. That’s all right.

kara swisher

That’s a lame answer. [LAUGHTER]

phil spencer

We do. I will say —

kara swisher

That’s a layup. Come on.

phil spencer

No. I will say, for gaming, I love the transparency of our business model. If you like what you’re doing, you’re going to buy a disk or buy a game or buy an item in a game. And that means that my business thrives when people are happy and they’re playing on our platform and they’re investing in the content that’s there. That’s very different if I have a passive business model that maybe my customer doesn’t even understand. And I think some the pure ad-driven platforms that are out there, they get themselves stuck in this model. Because some of the most tumultuous topics that they can put out there are the things that drive the most clicks. And those clicks are the things that actually drive the monetization. We don’t get paid on Xbox by how many times you click on something. I get paid by how many times your kids like playing Minecraft. And I do think that transparency in the gaming space means that we have to be very, very consistent with our customers. Because we almost more have a subscription relationship with our customer, that if you logged into Minecraft tomorrow and had a bad experience, you might never come back.

kara swisher

Yeah. What Phil was just saying, everybody, was that enragement equals engagement over there at the social networks. And they don’t do that over here.

phil spencer

Well, I’m sure you get — like on gaming, it doesn’t help me for — having people enraged about Halo, it’s a death strategy for me, right? They might get enraged at each other as they’re playing in healthy competition. That’s all fine. But yeah. For us, it’s about enjoying what’s happening in video games, competing hard in what’s happening but enjoying the medium itself.

kara swisher

Talk about the process when someone gets harassed on Xbox Live or whatever. What is the process? And is there a way to design these platforms to avoid these toxic problems?

phil spencer

So we have a couple of things. In the background, we can monitor the sentiment of a conversation. And the A.I. does a good job of kind of highlighting when a conversation is getting to a destructive point. We have automated tools that will actually flag a message thread. And we will give the people in the thread a note that says, hey, this is getting to a point where we see it’s becoming destructive. So either calm it down or we’re going to shut down the conference. There’s a Report A User button that’s built right into the user interface. So if our behind-the-scene tools aren’t following or if somebody says something that we don’t catch and you want to report, you report it. That comes into our systems. We have a full team of policy and enforcement that follows up on those. But I think that Report A Message, Report A User, Report A Conversation, just really, really critical to help the community — I won’t say police itself, but at least report on itself.

kara swisher

You mentioned AI.., which I noticed Twitter started to do. They’re like, this conversation feels intense. Do you want to keep going? I’m like, hell, yes. But is there any other examples that you see elsewhere, Discord, anywhere else that you’re like, that’s a really great way of handling it?

phil spencer

This will sound egotistical. I think we’ve invested, as Microsoft, in so many of these technologies. We share these technologies with other gaming partners out there. I don’t think gaming wins by one platform being safer and other platforms not being safe. Because to the uninformed, gaming is gaming. It’s a monolithic activity. Areas where I think we need to continue to make progress, when I think about video and pictures and our ability to detect what’s happening in a video conversation — we don’t have as much of that that happens on Xbox Live because it’s not what it’s about. But just as I think as an industry, voice conversations and how do we monitor quickly, that’s an investment that we have a lot of work going on right now.

kara swisher

For people who don’t play, people can talk to each other.

phil spencer

That’s right. Something I would love us to be able to do — this is a hard one as an industry — is when somebody gets banned in one of our networks, is there a way for us to ban them across other networks? Or at least as a player, for me to be able to bring my banned user list, because I can always block people from my play. And I’d love to be able to bring them to other networks where I play. So this is the group of people that I choose not to play with. Because I don’t want to have to recreate that in every platform that I play video games on. [MUSIC PLAYING]

kara swisher

We’ll be back in a minute.

If you like this interview and want to hear others, follow us on your favorite podcast app. You’ll be able to catch up on “Sway” episodes, you may have missed, like my conversation with Jaron Lanier, and you’ll get new ones delivered directly to you. More with Phil Spencer after the break.

So I also wanted to talk about how anyone with an Xbox can self-publish their own game in the Xbox Marketplace. This is a really interesting area, obviously. It’s called the Xbox Live Creators Program. It’s existed for a while. It’s a little like Twitter’s aspirations with Bluesky, which would basically let users choose their own recommendation algorithms, et cetera. It’s a really interesting idea. Essentially, it’s like letting the animals run the zoo kind of thing. How do you look at this Creators Program? Because it can come up with some amazing creativity from people too, at the same time.

phil spencer

Yeah, well, first, I’d say the content moderation that we do in the Creators Program is equal to what we do on our network. So nothing gets presented in the Creator Program without us looking at it. But the thing — now, again, I’m an old guy who’s been in the game industry maybe too long. But I remember when the industry was locked down by who had literally shelf space at Egghead. And that was the thing that dictated who could actually build a game. And today, you and I could go build a video game, put it on Xbox without having a publisher, and our game could literally be sitting right next to, in our digital store, a game that was built for $100 million, and frankly, do just as well. When you think about a game like Among Us or you think about the origins of where Minecraft came from, a small team in Stockholm, this ability to allow anybody to create and publish on our platform — you’re absolutely righ t— definitely puts more requirements on us in terms of the curation of the content. But it really frees up access. And we’re seeing games from Brazil. We’re seeing games from India. We’re seeing games from China show up on Xbox. And anybody in the planet can go play those games.

kara swisher

Right. That is something that’s happening more and more. But still, the companies are large, right? And they’re built in cultures. Now, let’s talk about the culture of these gaming companies. Activision Blizzard, of course, has been in the news most. They have a popular game called Call of Duty, also full of very disturbing images for me as a mother. But nonetheless, I let my kids play it. But actually, the company itself had some very disturbing sexual assault allegations swarming around the company, a lot of investigations. What did you make of these allegations when you first heard them?

phil spencer

I always feel for people working on any team, my own teams, other teams. I think people should feel safe and included in any workplace that they’re in. I’ve been in this industry long enough to maybe feel more ownership for what happens in the video game space. And I’m saddened and sickened when I hear about workplace environments that cause such distress and destruction of individuals and teams. And it’s something that as an industry, I think we can continue to make the investments that we need to go make. But this should be an entertainment business. It should be about fun and competition and cooperation. And to hear stories of people working on teams that are destructive is just really hard.

kara swisher

Call of Duty became huge largely because of your online platform, Xbox Live. And you told your staff you were, quote, “deeply troubled by these allegations,” that you were, quote, “evaluating all aspects of Xbox relation with Activision.” What did that mean, evaluating all aspects? And has it resulted in any action?

phil spencer

The work we do specifically with a partner like Activision is something that, obviously, I’m not going to talk publicly about. We have changed how we do certain things with them, and they’re aware of that. But I also — this isn’t about, for us as Xbox, virtue-shaming other companies. Xbox’s history is not spotless.

kara swisher

No. I think at Xbox, there was an issue at the Game Developers Conference where women were hired to dance on platforms.

phil spencer

And I have no problem being very public about th — our GDC dance party moment. That was a painful moment in our history of Xbox. Some of the things that make me proud of that is how we came out of it. The work that we did as a team, I believe we’re stronger now because of that event, not that I would choose to repeat that event if I had that choice. I love the fact that my own team was some of the strongest voices out there on social talking about how this wasn’t right. And then the work that the team did to come out of that and say, this moment won’t define what Xbox means but rather will be a catalyst for us being better and growing. And I really, honestly, I apply most of my energy in that space. And any of the partners that are out there, if I can learn from them or I can help with the journey that we’ve been on on Xbox by sharing what we’ve done and what we’ve built, I’d much rather do that than get into any kind of finger-wagging at other companies that are out there.

kara swisher

So finger wagging doesn’t work? Is it not — I just don’t understand what you mean, evaluating all aspects of what Activision — what do you do when you have a partner like this? Because this is not simple stuff. One female employee said she was raped multiple times by a male supervisor. Another reportedly killed herself after a picture of her private parts was circulated at a company party. This is over and above. Now, what do you do when you have a problem like this within the gaming industry?

phil spencer

Well, I think the first thing we need to be able to do is have people feel like they can report and talk about what’s happening. That goes to, like I said, the safety for people. And I have more capability of that on my own team. But I’ll just say in general, having open lines of communication where people can report on their lived experience on our teams, it’s got to be so critical. And to get there, it’s a cultural effort of how do you build that trust so people feel like when they whistle blow, when they raise their hand about topics that are going on, that they won’t face repercussions. Rather, they’ll see action. In terms of work that we do with other companies, again, I would rather help other companies than try to get into punishing. I don’t think my job is out there to punish other companies.

kara swisher

I don’t mean to be rude, but what’s wrong with punishing them for that? Like, we don’t want to do business with you unless you cleaned up. Now, again, these issues were back several years ago too, but under the same leadership, Bobby Kotick, who’s the long-time Activision C.E.O.

phil spencer

I think in terms of interactions with other companies, the things that we choose to do with our brand and our platform, in coordination or not with other companies, is the avenue that we have to have an impact. I would say in terms of individuals that are in leadership positions at other companies, it’s not obviously our position to judge who the C.E.O.s are. Like, C.E.O.s are chosen by shareholders and boards. At Xbox, I know who I’m accountable for here in terms of the business and the operations. It’s my teams here, my management chain. And that’s the thing that we continue to focus on, is to try to grow. And whether that’s us sharing, again, the experiences that we have with other partners, if we can help them on their own journey or on the things that happen in our own teams.

kara swisher

But one of the things — obviously, there are tons of women gamers. More than 40 percent of gamers are women, which I think surprises people. Do you think you, as an industry, not you, Phil Spencer, has to — or maybe, you Phil Spencer, also — has to think about this more?

phil spencer

Oh, absolutely. Yeah, there’s no question. Phil Spencer needs to think more about it. The industry needs to think about it. The representation on our teams, who the voices that are making decisions, that are leading, is critical to not only our long-term team dynamic but the long-term business dynamic. And those two things are tightly linked. And if you’re talking about now video games telling stories and sharing empathy between different groups based on me being able to tell my story through my lens and you can play that game, the voices that are telling these stories, that are making decisions about what content shows up, about what content is right, has to be diverse in the broadest sense of that word in order for us to achieve the goals that we have in gaming.

kara swisher

Do you think your future lies more in those games or in the big Call of Dutys?

phil spencer

The thing in the gaming space is something that starts small can take over. Because it’s not necessarily the production budget that leads to gaming success. It’s actually the creative capability, gameplay capability of the team. So one of the reasons I love these small games — if we want to call them that — that come in is it’s almost certain that the next big game will start as a small game. If I look at some of the top games that are played on our platform — Roblox, Minecraft, Fortnite, Among Us right now — these are games that didn’t start with a $100 million budget and 1,000 people working on them. They started much smaller than that. And I will say — again, maybe a little different than Netflix, but similar to Netflix. Like, “Tiger King” I don’t think was created to be the number one show on Netflix. And all of a sudden, it ended up there. That’s what happens in gaming as well. And these things have staying power of multiple years. We celebrated the 10th year of Minecraft, which is kind of crazy.

kara swisher

Which, Microsoft owns Minecraft now.

phil spencer

Yes, we do.

kara swisher

Correct?

phil spencer

Yeah.

kara swisher

Yes, you do. [LAUGHS] That you’re mentioning a lot. You own Halo and Minecraft.

phil spencer

I apologize. Yeah. I’ll pick somebody else’s game that’s not working.

kara swisher

All right, all right. OK, so I want to finish up on gamification and addictiveness, certainly a complaint of many parents. Is that your responsibility or people’s? I mean, obviously, all of social media is addictive, a lot of online stuff. I’m addicted to Twitter. What is the responsibility of the companies versus government, for example? Because in China, there’s been a pullback on teens using it. It hasn’t happened here. It could. They could do it by legislation here. So talk about what you imagine is going to happen, with the backdrop of what’s happening in China?

phil spencer

Yeah. I do think as platforms, we have responsibilities for giving families and players tools for moderating their own activity and behavior on the platform, or the behavior of your family. And we do that. We have timers now that you can set for your console where it’ll literally just turn off. So your Xbox won’t work anymore for the day.

kara swisher

Yep, I’ve done that.

phil spencer

So you can limit how often your family plays and even the kind of content they play. And I do think it’s important for us as an industry to give tools to players so that they can help moderate. In the end, people can go buy somebody else’s platform and play. I don’t think any one individual platform is going to be the thing that moderate all of this.

kara swisher

But it’s a serious question. Like, this is more around addiction and that these aren’t useful things to be doing with your life, essentially. I think that’s the message there. And what could happen in this country? When you look at China doing that, what do you think?

phil spencer

I think our job as an industry is to understand that moderation of any activity is a good thing. And we don’t try to build systems in our platform that keep people playing 24/7. We actually don’t think that’s a good business outcome in the long run because exactly for the reasons that you said. If we’re a destructive part of a family’s life, we don’t think — maybe there’s a short-term exploit for a company, but it’s not something that Microsoft is going to be interested in. If it turns into something that’s more of a vice and if you don’t see it as a constructive part of what your family is doing, I think our days are numbered as a broad media industry. That’s the industry that we want to be a part of.

kara swisher

But again, you’ve avoided what I’ve asked about China. What do you think about what’s happening there, what they’re doing?

phil spencer

What do I think specifically about what’s going on in China? I think that’s a broad, broad question.

kara swisher

Which is cutting off teenagers using video games.

phil spencer

I have not found that is an effective way to get people to stop doing something that they want to do, is to just say, stop doing it altogether. Through the power of VPN networks, I think people will find gaming content that they want to interact with, regardless of what country they’re in. So I would say, let’s work with the players to constructively build systems that allow them to do the things that they want to do and give families and individuals control over that experience so it happens in the way that they see as constructive for them.

kara swisher

Are you expecting regulation? Obviously, some of the tech industry is facing all kinds of legislation. Is it going to affect you or industry at all? Do you see anything coming down the pike, you’re like, oh that’s going to be a problem for us?

phil spencer

I don’t see anything coming near term that has — we have a lot of conversations with policymakers about the role that video games play, both on the industry side as well as the usage side. But I think this conversation about, hey, I really love playing these video games. How do they get created? What are the artists and mathematicians and other people that are behind the creation? Is that can be a healthy part of what this industry is about.

kara swisher

It’s ironic, because everyone used to be mad at video games. Now they’re mad at social media sites. They’re not mad at video games. [LAUGHS] Remember they’re mad at music and video games?

phil spencer

That’s right. I think that sine wave, though, is something that I think is just part of the relevance of — I think the opposite of that is apathy, which makes you kind of irrelevant. But we have to then be able to see the issues, name the issues, work the issues as an industry. I think the outcome of that work is a better place for people. I love the way that gaming can create friendships across the planet. I play video games maybe too many nights. But the people I’m friends with online are not people I would meet in my sheltered upper-northwest corner of the United States world with Amazon and Microsoft here. Whether it’s a construction worker in New Jersey, whether it’s somebody who works at a funeral home in Arkansas, these are people I play online with almost every night. And I think about, what other social construct would put us in the same place?

kara swisher

You should all meet together in real life. I don’t know if you heard of it “in real life.” But you can’t do that now. Omicron, you can’t.

phil spencer

No.

kara swisher

Let’s hope we get rid of this. I don’t mean to say I want your business to go down. But I would really like this pandemic to be over and all of you stop making money from it would be great.

phil spencer

I would like the pandemic to be over as well.

kara swisher

All right, Phil, thank you so much. We really appreciate it.

phil spencer

Thanks for the conversation. [MUSIC PLAYING]

kara swisher

Sway is a production of New York Times Opinion. It’s produced by Nayeema Raza, Blakeney Schick, Daphne Chen, Caitlin O’Keefe, and Wyatt Orme. Edited by Nayeema Raza, with original music by Isaac Jones, mixing by Sonia Herrero and Carole Sabouraud, and fact-checking by Kate Sinclair and Michelle Harris. Special thanks to Shannon Busta, Kristin Lin, Kristina Samulewksi, and Matt Frassica. [MUSIC PLAYING] If you’re in a podcast app already, you know how to get your podcasts, so follow this one. If you’re listening on The Times website and want to get each new episode of Sway delivered to you — on time, unlike the latest version of Halo — download any podcast app, then search for Sway and follow the show. We release every Monday and Thursday. Thanks for listening.

When it comes to the metaverse, Phil Spencer could give Mark Zuckerberg a run for his money. The head of Xbox and executive vice president of gaming at Microsoft, Spencer says popular games like Microsoft’s Halo and Minecraft — and competitors like Roblox and Fortnite — are already creating virtual worlds similar to the metaverse. And he says that video games, whose sales have soared during Covid, could offer lessons for the workplaces that have moved online in the pandemic: “We look at these virtual spaces, and some of the things that we’ve learned in video games of people coming together to cooperate together, to achieve tasks.”

[You can listen to this episode of “Sway” on Apple, Spotify, Stitcher, Amazon Music, Google or wherever you get your podcasts.]

In this conversation, Kara Swisher and Spencer discuss the elements of the metaverse that are mirrored in gaming and whether Xbox aims to become the Netflix of gaming. They also talk about what the gaming industry learned from Gamergate, how Spencer views the sexual misconduct allegations at Activision Blizzard (the publisher of Call of Duty and a close partner of Xbox), and how Microsoft is handling harassment by players on its own games. And while discussing the content moderation problems that are shared by gaming companies and social media platforms, Spencer explains why he thinks stoking enragement would be a “death strategy” for Xbox.

(A full transcript of the episode will be available midday on the Times website.)

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Credit...Courtesy of Microsoft

Thoughts? Email us at sway@nytimes.com.

“Sway” is produced by Nayeema Raza, Blakeney Schick, Daphne Chen, Caitlin O’Keefe, Elisa Gutierrez and Wyatt Orme, and edited by Nayeema Raza; fact-checking by Kate Sinclair; music and sound design by Isaac Jones; mixing by Carole Sabouraud and Sonia Herrero; audience strategy by Shannon Busta. Special thanks to Kristin Lin and Mahima Chablani.

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