Phil Spencer’s Praise Sealed Peter Molyneux’s Microsoft Partnership

Peter Molyneux is back in storytelling mode, and this time he is talking about the wild ride from scrappy Lionhead to Microsoft-owned studio, plus his soft spot for Phil Spencer. It is candid, a little messy, and very Molyneux. Here is the good stuff, straight from a new Edge interview, with some context so it does not feel like inside baseball.

When Lionhead was big, broke, and building Fable II

Before Microsoft bought Lionhead in 2006, the studio had ballooned to around 350 people and was burning cash fast. Molyneux says the pressure was brutal, even as Fable II looked promising but still needed real work to get over the line.

'Lionhead was 350 people, with a burn rate that meant I had to change my underpants twice a day.'

So when Microsoft came knocking with an acquisition offer, he was relieved. And, yes, flattered. He freely admits he is the kind of person who runs on praise.

Microsoft then vs. Microsoft now (as Molyneux remembers it)

Molyneux paints a picture of a very different Microsoft in that era. In his telling, the company was nursing a bruised ego from Windows Vista and leaning on its games division as the one shiny thing people still liked. Whether you agree with the exact timeline, that is how he felt on the inside looking out.

He also remembers the culture shift after the acquisition as mostly positive for Fable II, just not exactly calm. Bigger budgets, more oversight, and a lot more Microsoft in the room.

On Phil Spencer: massive praise and a little office-sharing trivia

Phil Spencer was effectively running most of Microsoft Game Studios through the Xbox 360 generation, later stepped up to head of Xbox partway through the Xbox One era, and is now Microsoft’s VP of gaming. Molyneux rates him extremely highly and says Spencer even worked out of Lionhead’s offices for a stretch, which meant they spent a lot of time together.

'He is one of the best people I have ever worked with... someone that absolutely loves the game industry, and is unbelievably smart. But he has worked at Microsoft his whole life.'

According to Molyneux, Spencer once told him he wanted to use Molyneux’s talents more widely across Microsoft. That hit Molyneux right in the ego, in a good way.

Praise as rocket fuel (and a selective memory about EA)

Molyneux says the compliments kept coming, and Microsoft wanted to make him a partner. That kind of validation short-circuited his better judgment about big-company life, especially given how much he had disliked his stint as a senior vice president at EA.

'When he said, We want to make you a Microsoft partner, I thought: Fantastic, they really like me! ... So I let myself forget how awful it had been, being [senior vice president] at EA.'

The Phil Spencer of 2025 is a tougher sell to fans

Fast-forward to now and Spencer is a more divisive figure. Under his watch, Microsoft has axed multiple projects and bumped Game Pass prices by 50%. Molyneux still backs him, though. He is not pretending Spencer is perfect; he just really believes Spencer is a true games person doing a hard job.

The what-ifs: Fable 3 and a Lionhead game we will never play

• Molyneux says he should have fought for more time on Fable 3, which landed with a split audience and never quite matched its ambition.
• And in classic lost-project heartbreak, he mentions a Lionhead battle royale concept that never made it because Xbox shut the studio down. Another one for the vault.