Microsoft’s Xbox business is heading into a painful reset only weeks after a showcase built around Halo, Gears of War, Fable and other fan-favorite franchises.
The pressure burst into view after new Xbox chief Asha Sharma warned staff that the gaming division would need to make “hard choices.” Reports suggest the weeks that followed brought discussions of layoffs, possible studio closures and game cancellations, with Ninja Theory among the teams said to be at risk despite recently revealing a new title.
The problem, according to Microsoft’s own memo, is that Xbox spent heavily without getting the return executives expected. Sharma and Xbox content chief Matt Booty wrote: “Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.”
Microsoft’s $68.7 billion Activision Blizzard deal sits outside that figure, but the wider strategy has still put Xbox under scrutiny. Game Pass has about 30 million subscribers, well below Microsoft’s earlier ambition of reaching 100 million by 2030.
The reset follows years of mixed messaging around what Xbox is: a console, a subscription service, a cloud platform or a brand spread across multiple devices. Sharma has moved to simplify that message, including dropping Microsoft Gaming branding and moving away from some AI features.
But reports suggest at least five studios could be affected, including Arkane and Double Fine Productions. For developers inside Microsoft’s gaming empire, the next announcement may decide whether their teams survive the reset.
