Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Friday, we’re looking at Xbox chief Phil Spencer’s comments during his wide-ranging interview at the WSJ Tech Live conference and what it means for Microsoft’s gaming ambitions.

Xbox boss Phil Spencer sets the stage

Microsoft has an ambitious plan to grow its gaming business from primarily Xbox consoles to cloud services, subscription platforms, and screens of all sizes. And if the Game Pass platform is the engine to make it happen, the acquisition of Activision Blizzard is a major source of fuel.

On Wednesday, Xbox boss Phil Spencer took the stage at the WSJ Tech Live conference where he made news on a series of strategic areas for Microsoft, including Game Pass, cloud streaming, and the company’s approach to pricing. Spencer, a master of blending off-the-cuff demeanor with especially astute interview answers, made clear that while regulators are concerned over its nearly $70 billion Activision bid, the company is relentlessly focused on growing its audience beyond the stagnant console market.

Spencer came prepared to make news. Speaking to reporter Sarah Needleman, Spencer doled out some key figures and announcements around areas Microsoft is particularly focused on in gaming.

• He disclosed that Game Pass is in fact profitable and accounts for at most 15% of the Xbox business’ content and services division, which would give Game Pass annual revenue of around $1.9 billion.
• “Game Pass as an overall part of our content and services revenue is probably 15%,” Spencer said, as transcribed by The Verge. “I don’t think it gets bigger than that. I think the overall revenue grows, so 15% of a bigger number, but we don’t have this future where I think 50-70% of our revenue comes from subscriptions.”
• Spencer has tempered his language around Game Pass, clarifying more recently that while Microsoft would like an Xbox app on every device, it will also more realistically need to rely on a diverse revenue stream. In other words: It’s not putting all its eggs in the Game Pass basket.
• Spencer also said Game Pass growth is slowing on console, “mainly because at some point you’ve reached everybody on console that wants to subscribe,” Spencer said, while growth on PC has been “incredible.”
• On prices, Spencer said Microsoft is keeping them at current levels through the holiday season, but that it expects it will have to raise console, game, and subscription prices.
• “We’ve held price on our console, we’ve held price on games … and our subscription. I don’t think we’ll be able to do that forever,” he said. “I do think at some point we’ll have to raise some prices on certain things.”

Spencer was speaking to players, but also to Sony and regulators, too. The most formidable critic right now to Microsoft’s acquisition of Activision Blizzard is the U.K.’s Competition and Markets Authority, which has expressed concern that Microsoft will use the deal to harm PlayStation.

• But in his comments Wednesday, Spencer tried to make clear that he's not so much interested in snatching away Sony customers. Instead, the Xbox boss wants to further unshackle Microsoft’s business from the console market and grow beyond it — primarily to mobile.
• “This opportunity is really about mobile for us,” Spencer said of the Activision deal. “When you think about 3 billion people playing video games, there's only about 200 million households on console."
• “It’s definitely true today that the largest gaming platform on the planet, which is a mobile phone, is controlled by two companies: Google and Apple,” he added. “It’s imperative for our business. There’s no way that you succeed as a gaming company without access to mobile players.”
• “In developing markets like Latin America and Southeast Asia, mobile represents access to a wide audience, especially consumers who don’t have the ability to buy a console or PC or don’t have access to stable bandwidth,” Dennis Yeh, gaming insights lead at analytics firm Sensor Tower, told me.
• “I also still believe that cloud gaming is in the cards for the future, even with the recent shutdown of Google Stadia, and accessibility in developing markets will be a key aspect for potential viability,” Yeh added.

The growth of Game Pass depends on big acquisitions. While Microsoft has a pipeline of games coming from its internal studios, many of its biggest upcoming releases are games from companies it acquired, including Bethesda’s Starfield, Arkane’s Redfall, and an upcoming Elder Scrolls installment.

• In regulatory filings and public statements, Microsoft and Spencer have stressed the importance of using content acquisitions to make Game Pass more appealing and to help it compete better with market leader Sony, which has more than twice the install base of the Xbox platform.
• “By delivering even more value to players, we hope to continue growing Game Pass, extending its appeal to mobile phones and any connected device,” Spencer wrote in a public plea to regulators last month.
• Additionally, Activision Blizzard operates a number of hugely successful mobile games, including Call of Duty Mobile, Candy Crush, and Diablo Immortal. In a response to U.K. regulators, Microsoft characterized its position in the mobile market — the largest sector of the global games industry by a wide margin — as “nowhere.”
• “Mobile expertise in a rapidly changing environment is invaluable,” Yeh said. “With King, Microsoft obtains a premier gamemaker with extensive experience in live ops and free-to-play monetization, as well as the data that comes with it.”
• “We have to break that duopoly of only two storefronts on the largest platforms. We’ve also invested a lot in our cloud streaming,” Spencer said at WSJ Live. “But if you take a long-term bet, which we’re doing, that we will be able to get access to players on the largest platforms players play on … we want to be in a position with content, players, and storefront capability to take advantage of it.”

Sony and regulators aren’t Microsoft’s only concern. The Xbox business faces a number of key challenges to achieving Spencer’s dream of putting Microsoft games on as many platforms as possible.

• For one, with Game Pass user acquisition approaching the ceiling on consoles, Microsoft is missing its targets.
• The company grew the service in fiscal 2022, which ended in June, by 28%. That fell far short of the 73% goal that dictates company executive performance bonuses, as reported by Axios yesterday. That’s the second year in a row that Game Pass has missed its growth target.
• One obvious culprit is major game delays. Earlier this year, Microsoft delayed Bethesda's Starfield and other exclusives to 2023. These delays contribute to subscriber churn as Game Pass members decide to let their subscriptions lapse until the catalog improves in the future.
• Part of Microsoft’s ambition to grow Game Pass beyond Xbox is cloud streaming, but the company put a streaming hardware product on ice earlier this year and decided to partner instead with Samsung for a smart TV app.
• “Keystone was the codename of something we were incubating internally, which was ... a streaming console, so there’s no local gameplay, low-cost, plug it into a TV, and you’d be able to stream Xbox games,” Spencer said at WSJ Live. “Will we do a streaming device at some point? I suspect we will, but I think it’s years away.”
• Without dedicated streaming hardware, Microsoft has to rely on devices controlled by the very duopoly Spencer said his company is trying to break, and Apple has only grown bolder in recent months with regard to collecting its App Store fees from developers despite mounting regulatory pressure.

Spencer covered a staggering amount of ground in a single interview, and it’s clear Microsoft sees clear benefits in having the most high-profile public face of Xbox reiterate the company’s gaming positions amid a fierce regulatory battle.

It makes sense: If Game Pass is profitable and yet growth is slowing, perhaps regulators may see more credibility in Microsoft’s argument that it needs fresh content to expand. And if mobile is truly the next frontier for Xbox, and not just the stale console market, then Microsoft may seem less like a multitrillion-dollar tech titan bullying the competition and more like an underdog trying to play catch-up against incumbents.

It is, in some ways, a matter of perspective. But Spencer’s savvy contextualizing of the gaming business is all about ensuring that Microsoft’s point of view looks as convincing as it can be.

— Nick Statt

A MESSAGE FROM AT-BAY

In 2021, there were 236 million cyberattacks worldwide. If there’s an opportunity to enter a business’s premises undetected, cybercriminals will find it. In the digital age, no organization is safe from cyberthreats. Size doesn’t matter.

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Thoughts, questions, tips? Send them to entertainment@protocol.com. Enjoy your day, see you Tuesday.

The Consumer Financial Protection Bureau kicked off a rule-making process Thursday to give consumers more control over their financial data, a step toward an open-banking concept that director Rohit Chopra told Protocol he hopes initiates a "race to the top."

"Our country has always benefited when markets were more decentralized, when they're not dominated by a handful of incumbents," Chopra said in an interview Thursday. "I want a financial market where consumers can switch products more seamlessly, and where financial companies have to constantly compete to keep them.”

Chopra announced the kick-off of the long-awaited rule-making process in a speech on Tuesday at the Money20/20 conference in Las Vegas. Congress tasked the CFPB with creating the data-sharing standards under the 2010 Dodd-Frank law, but the agency had yet to activate its authority.

“Our goal is to accelerate the shift toward open banking and ultimately give more leverage to consumers to find the products best for them," Chopra said.

The CFPB released a 71-page outline of its priorities in the rule-making process, which starts with a review by a small business panel, as required by law. A formal proposal would come next year and could be finalized by 2024.

The rule would focus on transaction accounts, such as deposit accounts, credit cards, and digital wallets. As described in the outline, one goal is to allow consumers to move their data as needed, including pulling transaction history from one account to another.

Fintech trade groups cheered the announcement, while banks have offered support for open banking in concept but insist there need to be equal standards for all players. Some financial institutions have already taken steps to ensure secure data sharing, as the American Bankers Association trade group said in a statement Thursday.

"I think [financial institutions] rightfully have raised concerns about certain ways in which data is scraped or harvested," Chopra said. "And so our goal would be to create a consistent set of safeguards and rights for consumers to be able to take their data and use it in ways that really benefit everybody."

Chopra said the CFPB wants to build off what the market is already doing well, "and at the same time, we also want to make sure that incumbents who hold a lot of data aren't playing any games when it comes to sharing."

The details of that will be driven by the review process, he said. Security is of top concern, Chopra added, and extends beyond just preventing data breaches.

"I think it's also a question of: What are people doing with the data once they get it?" Chopra said. "Are they actually using it to provide a product or underwrite a loan? Or are they going to monetize it by reselling it or resharing it? Making sure that people are only using it for the limited purpose that the consumer wants it to be used for is a key question for us."

The rule-making effort comes as the CFPB is facing a significant legal threat. A federal appeals court ruled last week that the CFPB's funding mechanism is unconstitutional, potentially undermining several of its most important rules.

Asked about the decision's potential impact on this rule-making effort, Chopra said the agency is forging ahead.

"This is a dormant authority that's over a decade old," Chopra said. "I think it's one of the most important rules the CFPB is working on, or will ever work on in its history. There's a lot of appetite from all across the industry and the advocacy community to get this one done. We're reviewing every court case that involves the CFPB. We've been doing that since day one. But we're forging ahead with this one."

The CFPB also announced this week in a press conference with President Joe Biden new guidance aimed at cracking down on "junk fees," including overdrafts. Chopra said there are connections between the battle against junk fees and the open-banking push.

He pointed to a recent Federal Deposit Insurance Corporation report that found that unbanked U.S. households reached a decade low but still totaled about 6 million.

The report "cites some reasons about why people don't want to have a bank account in the first place, and some of it relates to junk fees," Chopra said. "I think in a world where there's more seamless switching, you'll see a race to the top when it comes to customer care, when it comes to fees, and when it comes to new features that really help people.”

It's international climate talk season, which means it's international climate report season. Amid a flurry of analyses ahead of negotiations set to take place in Egypt next month, the International Energy Agency dropped its annual World Energy Outlook.

This year's report is colored, like most everything else, by the war in Ukraine. Russia's invasion has completely upended the energy market, affecting everything from gas to critical mineral prices. With tension mounting between the U.S. and China, and oil production cuts by OPEC+, pressures on the energy system will only grow. Oh, and the whole "we need to address the climate crisis" thing. Yeah, that's also having an impact.

The IEA's report goes deep on all these underlying conditions and what they've wrought to date, as well as what the future could hold. Among that depth, these are three key themes that have emerged that could shape the climate tech landscape over the coming decade.

The world needs more clean power. A lot of it.

Electrifying everything will completely reshape demands on the power grid. The IEA found that up to 214 million new electric vehicles could hit the road by 2030. Heat pumps will play a more significant role in heating and cooling as they replace gas furnaces, spiking energy demand even higher. And green hydrogen is expected to emerge from a fledgling industry today into one that could consume as much electricity as all aluminum production used in 2010.

Beyond electrifying new technology, some places will become wealthy enough to access traditional tech like air conditioning. All of which is to say that, according to IEA estimates, the world will add up to 7,000 terawatt-hours of electricity demand by the end of the decade. In (somewhat) more relatable terms, that's equivalent to the current demand of the U.S. and Europe combined. Ensuring that we don't fry the planet will mean that the world not only needs to retire existing fossil fuel infrastructure and replace it with renewables — it'll need to go above and beyond.

Supply chains need to diversify

If the war has made one thing clear, it's that relying on a single country for anything is a danger. Russia has dramatically cut methane gas deliveries to the EU in retaliation for its support of Ukraine. The EU, meanwhile, has taken drastic measures to reduce gas demand as winter sets in, raising the risk of power shortages and high home-heating bills.

Gas is hardly the only supply chain concern. The IEA found that the critical mineral supply chain that's crucial for the energy transition is also dangerously concentrated. To take one example, just three countries produce 91% of the world's lithium. The IEA warned that the lack of diversification coupled with volatile (and largely rising) prices poses a serious geopolitical risk while also endangering battery and other technologies. Remember, we're going to need more batteries, wind turbines, and solar panels to meet rising electricity demand.

There are signs that countries that have largely ignored a diverse clean energy supply chain are suddenly paying attention. Notably, the U.S. has launched a slew of programs and incentives, including many as part of the Inflation Reduction Act to encourage a homegrown clean energy industry, from mining to manufacturing.

Net zero goals don't drive up energy prices

The grumbling that net zero goals and policies to reach them drove the huge uptick in energy prices seems to be unfounded; the report found that "there is scant evidence for this." Places with more power generated by renewables "correlated with lower electricity prices." Implementing policies that improve home energy efficiency through fairly mundane measures like installing heat pumps and improving insulation are also saving people money. In fact, the report warns governments are doing "far from enough" on the energy efficiency front to protect people where energy costs are rising.

It's international climate talk season, which means it's international climate report season. Amid a flurry of analyses ahead of negotiations set to take place in Egypt next month, the International Energy Agency dropped its annual World Energy Outlook.

This year's report is colored, like most everything else, by the war in Ukraine. Russia's invasion has completely upended the energy market, affecting everything from gas to critical mineral prices. With tension mounting between the U.S. and China, and oil production cuts by OPEC+, pressures on the energy system will only grow. Oh, and the whole "we need to address the climate crisis" thing. Yeah, that's also having an impact.

The IEA's report goes deep on all these underlying conditions and what they've wrought to date and what the future could hold. Among that depth, these are three key themes that have emerged and could shape the climate tech landscape over the coming decade.

The world needs more clean power. A lot of it.

Electrifying everything will completely reshape demands on the power grid. The IEA found that up to 214 million new electric vehicles could hit the road by 2030. Heat pumps will play a more significant role in heating and cooling as they replace gas furnaces, spiking energy demand even higher. And green hydrogen is expected to emerge from a fledgling industry today into one that could consume as much electricity as all aluminum production used in 2010.

Beyond electrifying new technology, some places will become wealthy enough to access traditional tech like air conditioning. All of which is to say that, according to IEA estimates, the world will add up to 7,000 terawatt-hours of electricity demand by the end of the decade. In (somewhat) more relatable terms, that's equivalent to the current demand of the U.S. and Europe combined. Ensuring that we don't fry the planet will mean that the world not only needs to retire existing fossil fuel infrastructure and replace it with renewables. It'll need to go above and beyond.

Supply chains need to diversify

If the war has made one thing clear, it's that relying on a single country for anything is a danger. Russia has dramatically cut methane gas deliveries to the EU in retaliation for its support of Ukraine. The EU, meanwhile, has taken drastic measures to reduce gas demand as winter sets in, raising the risk of power shortages and high home heating bills.

Gas is hardly the only supply chain concern. The IEA found that the critical mineral supply chain that's crucial for the energy transition is also dangerously concentrated. To take one example, just three countries produce 91% of the world's lithium. The IEA warned that the lack of diversification coupled with volatile (and largely rising) prices poses a serious geopolitical risk while also endangering battery and other technologies. Remember, we're going to need more batteries, wind turbines and solar panels to meet rising electricity demand.

There are signs that countries that have largely ignored a diverse clean energy supply chain are suddenly paying attention. Notably, the U.S. has launched a slew of programs and incentives, including many as part of the Inflation Reduction Act to encourage a homegrown clean energy industry from mining to manufacturing.

Net zero goals don't drive up energy prices

The grumbling that net zero goals and policies to reach them drove the huge uptick in energy prices seems to be unfounded; the report found that "there is scant evidence for this." Places with more power generated by renewables "correlated with lower electricity prices." Implementing policies that improve home energy efficiency through fairly mundane measures like installing heat pumps and improving insulation are also saving people money. In fact, the report warns governments are doing "far from enough" on the energy efficiency front to protect people where energy costs are rising.

Welcome back to our Workplace newsletter. Today, we take another look at why it’s so hard to recruit talented senior HR leaders right now. Plus, we hear from the CEO of Sollis Health about what lured him away from Peloton after six years.

— Allison Levitsky, reporter (email | twitter)

Wanted: CHROs

On Tuesday, we spoke with HR leaders and headhunters about companies scrambling to find qualified chief people officers. The pressures of the last two-and-a-half years — from public health concerns to building remote teams, from rapid hiring to conducting layoffs — have largely fallen on the shoulders of CHROs, driving some to retire, take career breaks, or switch gears to roles in consulting, VC, or private equity.

But that’s not the whole story. Some people leaders who have left in-house CHRO roles and gone into consulting or private equity say burnout didn’t drive them to change gears.

• Tracy Keogh left her role as the CHRO of HP Inc. last year, after a decade with the company. But she didn’t make the move in pursuit of more work-life balance: She’s currently the chief people officer of the $4.65 billion private equity firm Great Hill Partners, where she does in-house HR and works with portfolio companies.
• Keogh said more opportunities are opening up for people leaders in private equity — though Great Hill was founded in 1998, the firm never had a chief people officer until she joined. Keogh is a member of a network of HR leaders in PE — it recently had to break into regional chapters because it got too big to coordinate nationally.
• Chris Tobin, who stepped down from his role as SVP of People at Intercom in July, also said his departure was a long-planned transition away from being a full-time HR leader within a company. Now focused on advising, Tobin is far from burnt out, he told me, despite the “very atypical and nonstop” demands of the last two-and-a-half years.

In other cases, HR execs are simply hunkering down at their companies and ignoring calls from recruiters. Kathy Zwickert, who retired from her role as chief people officer at NetSuite in 2017, has noticed this as a board member at tax software company Avalara, which struggled to find an experienced CHRO who was willing to move to Seattle.

• Zwickert attributed the slow recruiting process not to an exodus of HR leaders, but to a pandemic-era hunkering down.
• “When the return to the office started happening, people were deciding they didn’t want to and they were going to leave. That was a huge challenge for HR,” Zwickert told me. “I think it made [senior HR leaders] more attached to their company. They just felt like they’d been through a war together, and a lot of them are just sticking around.”

At the same time, the pipeline of strategic, business-oriented HR talent is weak, some people leaders told me. Part of the reason for that is the move away from “academy companies” known for training up HR talent, such as GE, Sun Microsystems, Cisco, Yahoo, Intel, and HP.

• Younger HR pros are now staying at these companies for only a couple of years before moving on to a startup and learning in a “trial-by-fire” environment, said Robert David, executive director of the nonprofit Community for Strategic HR Partnership.

Some HR leaders are still putting emphasis on training the next generation. At HP, Keogh touted the fact that more than 40 of her employees had gone on to lead HR organizations at other companies.

• Tammy Polk, the CHRO of Formstack, said she has her team do yearlong rotations through different specialties within HR: recruiting, learning and development, HR insights, total rewards, benefits and compensation, HR business partner generalist roles. Part of the goal here is to teach HR pros to handle complexity, she said.
• “Most people leaders cannot manage the gray areas. They’re very black and white,” Polk said. “If you can train people to live in risk, they’re going to be a much stronger business partner.”

Bye, Peloton

Brad Olson’s six years as an exec at Peloton were “formative in [his] career, fast-paced and exciting,” he said. But a call from a recruiter seeking a CEO for Sollis Health left an impression, partly because Sollis lives with multiple sclerosis and spends “more time than most in doctors’ offices.”

Protocol news writer Nat Rubio-Licht sat down with Olson to hear about how he decided to leave Peloton to become a first-time CEO for Sollis Health, along with the biggest lesson he learned at Peloton.

Read the full story.

A MESSAGE FROM BAMBOOHR

Low pay is the top reason employees decide to quit, followed by a lack of opportunities for advancement. Learn how an effective compensation plan can help combat these two major reasons.

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Zzzz

Here’s one possible reason your Slacks are going unanswered: 42.7% of workers say they take naps during the workday, according to a new survey from Sleep Foundation.

• Managers (52.6%) were more than twice as likely to say they napped during the workday than individual contributors (21.8%) were.

• Managers also tend to go to bed 50 minutes earlier than ICs (9:56 p.m. vs. 10:46 p.m.), and start work 22 minutes earlier on average.
• Employees who start work later receive more negative judgment from ICs than they do from managers, however. Almost two-thirds of managers said they respect colleagues who start later than they do, compared to 54.9% of ICs, the survey found.

Some personnel news

Anyone else having a bad case of Great Resignation whiplash? It’s hard to keep up with which tech companies are growing, shrinking, floating, or sinking. We’re here to help.

⬆️ Elon Musk told Twitter employees that he’s not going to cut 75% of the company’s workforce, Bloomberg reported.

⬇️ Zillow laid off around 300 employees, but told TechCrunch that it continues to hire in “key technology-related roles.”

⬇️ The NLRB put out a complaint against Amazon CEO Andy Jassy over his comment that Amazon employees would be “better off” without a union, Vice reported.

⬇️ Fitness and wellness app maker Mindbody cut staff, according to several reports.

For more news on hiring, firing, and rewiring, see our tech company tracker.

A MESSAGE FROM BAMBOOHR

Flexible work and resignations are at historic highs and employees are questioning if their compensation matches their worth. What are business and HR leaders supposed to do about this? BambooHR surveyed full-time, salaried employees and discovered the top 2022 trends surrounding compensation and what employees really want.

Read the takeaways

Around the internet

A roundup of workplace news from the farthest corners of the internet.

IT outsourcing companies in India are cracking down on moonlighting in order to protect corporate secrets. (FT)

Is your company ready for climate risks? (Harvard Business Review)

So-called long social distancing has kept an estimated 3 million people out of the workforce, costing the U.S. economy $250 billion in the first half of the year. (Bloomberg)

Winter is coming for Big Tech, and young tech workers should be prepared. (Insider)

Thoughts, questions, tips? Send them to workplace@protocol.com.