Phil Spencer says making great games wouldn’t be enough for Xbox to claw out of third place in the console race.

In an appearance on the Kinda Funny Xcast published today on YouTube, Spencer laid out the reason for the company’s pursuit of subscription services like Game Pass and cloud gaming technology.

“We’re not in the business of out-consoling Sony or out-consoling Nintendo,” Spencer said. “There isn’t really a great solution or win for us.

“And I know that will upset a ton of people, but the truth of the matter is, when you’re third place in the console marketplace and the top two players are as strong as they are and have in certain cases a very discrete focus on doing deals and other things that kind of make being Xbox hard for us as a team – that’s on us, not on anybody else…”

Spencer said Microsoft is invested in making sure Xbox owners have a great experience and feel catered to, but seemed to acknowledge it can’t beat Sony or Nintendo using a traditional console strategy.

“I see it out there, I see commentary that if you just build great games, everything would turn around,” he said. “It’s just not true that if we go off and build great games, all of a sudden you’re going to see console share shift in some dramatic way. We lost the worst generation to lose in the Xbox One generation, where everybody built their digital library of games.

“This idea that if we just focused more on great games on our console, that somehow we’re going to win the console race, I think doesn’t relate to the reality of most people.”

Spencer said around 90% of people who buy consoles each year are already in one of the three main console ecosystems, and the switching costs are higher now that people have established digital libraries they can carry forward from a prior generation.

“This is the first generation where the big games they’re playing were games that were available last gen, when you think about Fortnite and Roblox and Minecraft,” Spencer said. “The continuity from generation to generation is so strong. I see a lot of pundits out there that kind of want to go back to the time when we all had cartridges and discs, and every new generation was a clean slate and you could switch the whole console share. That’s just not the world that we are in today. There is no world where Starfield is an 11 out of 10 and people are selling their PS5s. That’s not going to happen.

Spencer stressed again that the console is “the core” of the Xbox brand and Microsoft will continue to focus on that despite its differing strategy.

“But I know some people want to hold us up as being a better green version of what the blue guys do, and I’m just going to say there’s not a win for Xbox in staying in the wake of somebody else. We have to go off and do our own thing with Game Pass, with the stuff we do with Xcloud, and the way we build our games.”

Spencer also addressed the recent release of Arkane’s Redfall, one of the higher-profile first-party Xbox releases in recent memory. He acknowledged technical issues with the game and a critical response that had Metacritic averages double-digits beneath Microsoft’s expectations from its mock reviews.

He also pointed to misleading marketing efforts as a problem.

“I’ll even go back to the Redfall videos on IGN, of showing videos of the game running at 60 on PC, at the point knowing that the game was going to be around 30 frames per second at launch on console,” Spencer said. “Like, we have to be transparent about what we’re showing, that what we’re showing is representative of what our console customer, our most committed customer to our brand, financially committed, what they’re going to see, what they’re going to play. And our transparency just has to be better.

“And I’m not pointing at anybody but myself. At some point I’ll have enough knocks against me that it’s somebody else here, but I think it’s transparency in what we’re building, what our aspiration is for the game, what it’s going to look like, what the features are. And it drives me crazy when we [have] self-inflicted wounds of putting things out there and communication that’s confusing or misleading about what the actual end product is going to be.”

Spencer also suggested Microsoft might be more hands-on with games in the future when it acquires them or their studios mid-development.

“I think we need to improve on engaging in games that are midway through production when they become part of Xbox,” he said. “I do think there’s a different expectation for a game and even a team when you’ve been third-party and all of a sudden you become part of first-party.”

Spencer added, “We didn’t do a good job early on in engaging with Arkane Austin to help them understand what it meant to be part of Xbox and part of first-party, and use some of our internal resources to help them move along that journey even faster.”