Spencer - who is the Head executive of Microsoft's Xbox division - insists the company must do more to become a go-to destination on gamers' phones, otherwise its influence and market share will diminish.
Spencer insists that Microsoft's proposed $68.7 billion acquisition of Activision Blizzard - which owns the 'Candy Crush' franchise, created by its King division - is directly linked to its mobile gaming strategy rather than a desire to own the rights to 'Call of Duty' and preventing it from being playable on Sony PlayStation.
Speaking to The Verge’s Decoder podcast, he said: "The idea that Activision is all about 'Call of Duty' on console is a construct that might get created by our console competitor.
"I don’t think anybody needs that quote from us to understand how irrelevant we are in mobile. Anybody who picks up their phone and decides to play a game would see that on their own.
"In terms of the Activision opportunity, and I keep saying this over and over, and it is true, it definitely starts with a view that people want to play games on every device that they have, and in a funny way, the smallest screen that we play on is actually the biggest screen when you think about the installed base in phone.
"That’s just a place where if we don’t gain relevancy as a gaming brand - we’re not alone in seeing this - over time, the business will become kind of untenable, for any of us. If we’re not able to find customers on phones, on any screen that someone wants to play on, you really are going to get segmented to a niche part of gaming that running a global business will become very challenging."
Spencer says trends indicate that console and PC gaming growth has flattened out, whilst mobile gaming revenue continues to grow year on year.
Without a presence on smartphones, Spencer is adamant that Microsoft will cease to be a major business in the gaming market.
He added: "As a percent of the overall gaming business, the console business is shrinking, because the overall business is growing and console stays relatively flat as a business, same thing with PC.
“And then when you look at the largest gaming companies out there, Tencent being the biggest gaming company in the world, so much of their revenue comes from mobile, and then they put their business success that they’ve earned through the work that they’ve done into the market acquiring other studios at a very fast rate.
“That puts a lot of us out there who are maybe traditionally segmented to one screen and one device, in a position of, OK, if you play this out over 10 years, if console itself is not going to grow, and PC will grow in certain years and not [other] years, and mobile continues to grow, how do you continue to run the business and stay competitive with others that are out there either acquiring talent, building new business models, new distribution, building new franchises?
“It’s critical that if you’re trying to run an at-scale global gaming business that you meet your customers where they want to play, and more and more, mobile is the place people want to play.”
Microsoft's proposed $68.7 billion purchase of Activision Blizzard would be the game industry’s biggest-ever deal, surpassing the previous record $12.7 billion that was completed when Take-Two and Zynga merged earlier this year.