I’ve swung back and forth on Xbox’s prospects over the years. As Microsoft’s gaming division seemed to be finding its feet with a new subscription-based model, I thought that had huge potential to be a new frontier in gaming. I was even a Game Pass subscriber myself for several years – until excessive price hikes convinced me to pull the plug. But at the same time, Xbox’s hardware has been losing the home console race for well over a decade – and that trend has not only not been reversed, but has accelerated since 2020.
Across 2026, Xbox has been laying off staff amidst a big restructuring of the entire business. And, if reporting is to be believed, that restructuring may have been necessary to keep Xbox alive. As harsh as these layoffs seem – especially for a corporation like Microsoft, with near-limitless resources – the Xbox division of the corporation has been burning through money. Xbox has been run so inefficiently that there were multiple superflous layers of management in between the developers doing the work and the studio heads making decisions. Some titles were given way too high a budget for the amount of money they would’ve ever realistically made. And, despite my personal belief that a subscription model is the perfect fit for gaming, Xbox seems not to have known how to handle what had been its biggest asset.
Before we go any further, I want to give an important caveat. Everything we’re going to get into today with Microsoft, Xbox, and their various subsidiaries and studios is the *entirely subjective, not objective, opinion* of just one person. I don’t have any “insider information,” I’m not a “leaker,” and I’m not trying to claim that all of this is rock-solid fact. This is my analysis and my opinion based on my read of a complex and evolving situation – and based on news reports and publicly-available data.
I worked in the games industry for close to a decade, so I like to think I have *some* credibility when it comes to how the industry works! But that was a long time ago, and I only worked in junior roles on the marketing side of things – so it’s entirely possible I’m way off base with my analysis of the Xbox situation! I give these caveats because I don’t want to mislead anyone, to seem like I’m claiming to be 100% right, or to have knowledge of the situation that no one else does. I think everything we’re going to discuss is credible, if not plausible… but things change, and I’ve been wrong before!
The recently-announced changes at Xbox – combined with other issues facing Xbox and Microsoft – have led me to a conclusion that I haven’t seen anyone else draw: this could signal the beginning of the end for Xbox in the gaming realm. At the very least, this feels like Microsoft giving its gaming wing one very last chance to prove its worth to the corporation at large. Failure to do so… well, it could mean Xbox is about to disappear.
Xbox Game Studios – a.k.a. the flagship game development and publishing part of Xbox – is basically a shell company right now. Under its broader umbrella, Xbox has the likes of Activision-Blizzard, Bethesda, Mojang, and a couple of smaller teams that mainly focus on individual titles or series. But most of their other brands are gone: either sold off, shut down, spun off as independent studios, or incorporated into one of Xbox’s other brands.
Which begs the question: why?
I get why a studio like Compulsion Games would be spun off and regain its independence. A smaller team focused on narrative experiences… but whose latest game wasn’t a commercial hit. Xbox hasn’t lost a lot, to be blunt about it, by parting ways with Compulsion.
But closing Halo Studios/343 Industries – Xbox’s in-house development team for what is arguably the brand’s flagship franchise – only to give that franchise to Activision? That’s weird. That’s *very* weird. The same for moving RPG legend Obsidian over to Bethesda.
Unless… Xbox is planning a potential sale of Activision and ZeniMax (Bethesda’s parent company) in the near future. Building up those subsidiaries, giving them access to more franchises and IP… well, it suddenly starts to make a bit more sense. Activision is more valuable an asset with Halo than without, and Obsidian is probably worth more to Xbox as a ZeniMax subsidiary than it would’ve been alone.
Let’s take a diversion and talk hardware. Trust me, it’s related!
Earlier this year, I tried to make the case for a delay in the announcement and release of next-gen hardware. Why? Because component prices are *insane*, and hardly anyone is going to want a $1,300 PlayStation 6 or an Xbox Project Helix for $1,450. But both Sony and Microsoft seem intent on rushing ahead with unnecessary and expensive next-gen consoles.
But is Project Helix a commercially viable product at prices north of $1,000? And if it isn’t… why are we bothering? Literally what is the point in launching new hardware that’s out of reach of most players? Waiting another year or two could mean prices will start to come back down as the A.I. situation begins to settle, but rushing in too soon could make new hardware a complete and total failure.
And if Project Helix fails… I think we all realise that’s gonna be curtains for Xbox.
In January 2001, Sega announced that production of its Dreamcast console was going to cease after low sales. That came after the Sega Saturn had also been a flop – and as a result, Sega got out of the hardware industry altogether, refocused its efforts, and became a games publisher. Microsoft has now had two consoles in a row that were, at best, underwhelming – a third will surely tank the brand’s hardware division, at the very least.
But there was also news earlier this year that Microsoft had considered going even further – spinning off Xbox altogether and effectively getting out of the games industry. Xbox does not have the financial stability to survive on its own, without the backing of its parent corporation, so that would effectively mean no more Xbox, no matter how that news might’ve been reported at first.
That original plan doesn’t seem to be going ahead, but executive changes within Microsoft and Xbox have definitely shaken things up – and seem to have put Xbox on a ticking timer to either turn things around… or disappear.
The upcoming launch of Grand Theft Auto VI – one of the games industry’s most-anticipated releases in years – could move the needle for Xbox. Xbox still has the cheapest home console on the market in the form of the Series S, so it’s not a lie to say that the least-expensive way to play GTA 6 for folks who don’t already have a console will be on Xbox. And just as a general rule, games like that have a tendency to shift consoles. Launching in the holiday season is also a big plus!
But if the only bright spot for an entire console and publisher is one third-party game… I mean, you can see why Microsoft is concerned. Several recent Xbox games that the company invested a lot of money in haven’t performed as well as Microsoft wanted or expected. Starfield, Call of Duty: Black Ops 7, Halo: Campaign Evolved, Forza Motorsport, Hellblade II, and The Outer Worlds 2 are just a few examples. A company can survive one or two high-profile flops… but not this many, and not all at once.
My gut feeling is that Xbox is panicking, and in doing so, they’ve squandered their biggest asset: Game Pass.
Game Pass was growing, but it was taking longer than Microsoft may have been initially promised for the service to become as profitable as they’d hoped. And hitting the panic button meant massive price hikes… and the predictable massive wave of cancellations that followed. Current Xbox leaders seem to want to return to the digital sales model, with the high-profile Call of Duty series the first to be taken away from Game Pass on day one. I expect to see more of that to come… before the service is presumably shut down entirely.
When you make a subscription service, you’re naturally going to see fewer sales or individual rentals. That’s not a bug, that’s a feature! You want to rope people in and get them to stay signed up, and that obviously means that they aren’t gonna *buy* a game like Starfield if they can play it as part of their subscription. But platforms like these take time to develop, grow, and become sustainable – and Microsoft, it seems to me, didn’t give Game Pass the time it would’ve needed to get there. A game like South of Midnight was never gonna be a system-seller, but it’s exactly the kind of smaller, mid-sized, AA-type of game that made Game Pass feel like a worthwhile subscription to stick with.
But if that’s not the approach any more, you can see why studios like Compulsion Games and even the venerable Obsidian no longer hold much appeal to a crop of Xbox executives who, in their own words, want the brand to focus on big, tent-pole franchises at the expense of smaller titles.
So that’s how I see it right now. Xbox has been losing money, or not making enough profit – which are the same thing to a corporate overlord, sadly – and rather than stick with what could’ve worked if it had been allowed more time, Microsoft is panicking and pushing for immediate, large-scale changes in the hopes that such changes will lead to faster growth and profitability.
My instinct is that it ain’t gonna work, and while Xbox may get a short-term boost as a result of getting rid of so many members of staff (as well as the bounce that a massive game’s launch this November will provide), the fundamental problem the company has is that… no one wants an Xbox. Most folks would rather play on PlayStation 6 or PC… or Nintendo Switch 2. And given where prices for components are right now, a new console that could easily cost $1,200, 1,300, or even 1,400 won’t sell anywhere near enough units for us to be able to say “Xbox is back!”
Moving and merging several major studios and developers leaves Xbox with very little of its own any more; its biggest brands and franchises are owned by its subsidiaries. And any one of these – even the biggest, like Activision-Blizzard – could be spun off or sold off almost at any moment. With Sony potentially losing the likes of Bungie in the near future, they might be interested in a developer with first-person shooters like Halo and Call of Duty. And despite recent failures and disappointments, there’ll always be someone who has faith that Bethesda can still succeed with the sequel to Skyrim. Those companies just got a lot more enticing… if the goal is to increase their value and sales appeal.
I still think Xbox has one last chance. But it increasingly feels like the *absolutely final* chance that the brand’s gonna get. Microsoft has been impatient, and wasn’t willing to wait for the Game Pass model to grow and develop. And fair enough, you may say! But I wonder if, a few years from now, we’ll come to see that impatience as a mistake and wonder what might have been if Xbox had instead doubled-down on Game Pass, perhaps even beginning not to sell games on day one – or at all – in favour of bringing them to its subscription platform.
If Xbox does end up getting out of the home console space, though… I don’t think that’ll be something to celebrate. It’ll give Sony an effective monopoly on cutting-edge games on home consoles, because Nintendo remains off to one side doing its own thing. There’ll be less choice for players, no one to counterbalance PlayStation or offer genuine competition, and monopolies are no good for anyone. PC will remain an option, of course, but PC is still, for many folks, not an adequate or like-for-like replacement for a home console that can be plugged into a TV and played on the couch.
These moves, though… they don’t feel like a typical restructuring to me. It seems to me as if Xbox is fattening up Activision-Blizzard and ZeniMax ahead of a potential sale, and that could indicate that Microsoft is planning to jump out of the home console space – if not gaming altogether – before the end of the decade.
This really could be the beginning of the end.
All titles discussed above are the copyrights of their respective developers, studios, and/or publishers. Xbox and Xbox Game Pass are the copyright of Microsoft. This article contains the thoughts and opinions of one person only and is not intended to cause any offence.
