Xbox has been losing the home console war for… what? Thirteen years, give or take? The launch of the Xbox One was where it all went wrong, and this generation’s Series S and Series X consoles haven’t been able to win back players en masse. So Microsoft clearly has to do *something* to reinvigorate its gaming division. But are Microsoft’s recent moves the right ones? Is killing off multiple studios just days after announcing their latest titles a sign that Xbox is getting a grip… or are they finally losing the plot? With Microsoft’s A.I. investments also helping to drive hardware prices through the roof, what does the future look like for the brand? And could there be a day – perhaps sooner than we think – where there isn’t an Xbox to compete with PlayStation in the home console market?
Let’s break down the latest Xbox news and discuss that today.
If you’re a regular reader, you might recall articles over the past few years which had titles like “What’s Going On At Xbox?” and “I’m Not Sure What Xbox Is Doing Any More” – because this is hardly a new issue. Microsoft’s gaming strategy has been muddled, confused, and contradictory for a long time, and Xbox has seemingly tripped over itself time and time again over the last few years. Sadly, for fans of Xbox… this ain’t new.
The latest news from Xbox, if you haven’t heard, is that huge layoffs are imminent as major studios are set to close. Xbox also pulled out of funding several third-party titles, leaving their futures uncertain. And this comes just a few days after what had been a relatively successful Xbox Games Showcase event, where excitement for new titles – including several that are now either all but cancelled or whose futures are uncertain – had been effectively built up.
Senua, the third entry in Ninja Theory’s Hellblade series, was prominently featured at the Xbox Games Showcase just a few days ago… but Microsoft had already decided to pull the plug. The same is true of State of Decay 3, with Undead Labs seemingly on the chopping block. And other games which had been previously revealed or teased, like Arkane’s Blade adaptation and IO Interactive’s fantasy title, are also seeing funding pulled and may face cancellation as a result.
The word is that Xbox needs to cull “underperforming” or just plain unprofitable studios as part of a scheme to refocus on big, established brands. The likes of Halo, Call of Duty, and – thanks to its TV adaptation bringing in new eyes – Fallout are among the series that Xbox sees a future in. They might actually be the *only* ones, at least right now.
If you just take a surface-level view, that kind of thing makes sense. If a studio has developed a game, perhaps over five-plus years, and that game makes a net loss… why should a corporation trust that studio to get it right next time? That’s the basic argument that a lot of folks have been making in defence of these shutdowns, closures, and layoffs.
But is that really all there is to say?
Microsoft and Xbox’s leadership and executives have to own up to the roles they played in these disappointments. A game like Redfall was always a risky prospect to greenlight, coming from a studio with no multiplayer experience and with the live-service space already saturated. The Outer Worlds 2 saw its marketing catastrophically overshadowed by a desperate attempt to hike up its price. Games like South of Midnight just don’t seem to have been advertised very effectively (I only saw that the game existed because I was subscribing to Game Pass at the time). And so on. In each of these cases, any disappointment is at least as much on management and leadership as it is on the studios, the developers, and the games themselves.
Some of these decisions may be “necessary,” from a corporate point of view, to balance the books and shore up Xbox as a brand. But they’re also undeniably the result of more than a decade’s worth of failures on the corporate side, and there’s no escaping that. Xbox may have recently parachuted in new leadership, who can claim that they weren’t around for any of that, and they’re just here to clean up the mess. But at Microsoft, many of the folks who are ultimately responsible for these decisions remain in place. And it’s pretty galling, as a developer or junior employee, to lose your livelihood because of decisions that were made years ago by people who either remain gainfully employed or who have enjoyed the most luxurious of golden parachutes.
But okay, let’s stop before this turns into another one of Dennis’s anti-corporate rants!
I want to consider what this means for Xbox, and what a slimmed-down, smaller Xbox might look like in a few years’ time when the results of these closures and layoffs becomes more obvious.
This should be obvious, but the most important thing that any video games publisher and hardware manufacturer needs is… *games*. Xbox needs big games, sure, but it also needs smaller and medium-sized games – exactly the kinds of titles that are currently being killed off. Hardly anyone buys an Xbox console entirely because of Hellblade or South of Midnight, but without those kinds of games for folks to play in between releases in some of the bigger franchises… what else is there? Third-party stuff, sure… but then why not buy a PlayStation, a Switch 2, or a PC? Why sign up for Game Pass if there are gonna be fewer of those kinds of titles to dip in and out of? Game Pass is worth it if you get to play a dozen or more games a year… it’s a lot less of a good value proposition if all you’re gonna get is one game in a big franchise every few years. And no Call of Duty to boot.
Xbox’s big brands, too, aren’t as strong as they need to be – and they aren’t as strong as the CEO and executives seem to think they are. Last year’s entry in the Call of Duty series – Black Ops 7 – was a bit of a flop, and there hasn’t been a truly great entry in the Halo series since Reach. Just in the first-person shooter space, then, there’s absolutely a case to be made for a new series, or the return of a long-dormant series, to be given a chance to impress. But Xbox’s executives also killed off the remake of Perfect Dark, didn’t they?
The games industry is changing, and for a lot of players, a handful of games – or even just a single title – is all they’re interested in. Folks will play Grand Theft Auto Online, Fortnite, or Roblox for years or even a decade, and Xbox – like all of the big players in the AAA space, really – has been desperately trying to create “the next Fortnite” or “the next GTA Online”. It hasn’t worked.
By killing off (or selling off) unprofitable or underperforming studios, Xbox may be able to claim a short-term win in its next financial earnings report. Spending less money on these kinds of studios will combine with a slow return of Game Pass subscribers after last year’s exodus, and that’ll probably make Xbox’s balance sheet look reasonable by this time next year. If this year’s inevitable Call of Duty is a success – and if titles like Fable do well, too – that’ll be another boost.
However, I can’t shake the feeling that this is *desperately* short-term thinking from Xbox’s executives. Just like last year’s Game Pass price hike, it’s an attempt to shuffle things around to make the books look better to investors – but not only does it not address Xbox’s real, core issue, it risks making the future of the brand even less secure. By increasing Xbox’s reliance on a handful of massive brands, Microsoft is practically inviting trouble – especially when most of those brands haven’t been performing particularly well for quite a long time.
When was the last genuinely great Fallout game – one that received as close to universal approval as possible? It wasn’t Fallout 4, with its voiced protagonist, annoying settlement system, and degraded role-playing experience. And it definitely wasn’t Fallout 76. So… New Vegas, I guess? And that’s already more than fifteen years ago.
The same is true of Halo. Halo Infinite underwhelmed. The Halo TV adaptation was unceremoniously cancelled. Halo 4 and Halo 5, while appreciated by some fans, definitely didn’t hit the highs of earlier games in the series, and weren’t as widely-played. And the jury’s out on Campaign Evolved – the *second* remake of the first game, which launches in a few weeks’ time.
My point is this: are *these* really the kinds of names that Microsoft and Xbox can rely on and build the future of the brand around? Will a new Halo game deliver the kind of win that Xbox needs, and bring in unprecedented player numbers? What about Fallout? The TV show may have been a success so far, but by the time a new game is ready it could easily have finished its broadcast run. Think about it: Fallout is already two seasons in, and even if a brand-new Fallout game were announced today, with experienced developers and a big budget, you’re looking at a minimum of four years to have it ready to go. Two or three more TV seasons could easily have come and gone by then… and the moment to capitalise on its success will have well and truly passed.
Putting a growing number of eggs in fewer and fewer baskets is basically what Xbox is announcing they plan to do. So if any one of those baskets should fall… you’re looking at a big, eggy mess, if I can stretch the metaphor that far! By reducing the number of studios under its umbrella, laying off potentially thousands of developers, and publishing fewer games in the years ahead, Xbox might be able to show a positive balance sheet in 2027… but how long will it last? And with that dependence on a handful of franchises to prop up its hardware, its ports, and Game Pass, too… is it sustainable?
Speaking for myself, one of the things I enjoyed most about Game Pass – and one of the things I missed when I cancelled last year – was being able to hop onto the app and see what was new. I tried out games I’d never have thought to buy simply because they were there. If Xbox doubles- and triples-down on Call of Duty and Halo, where will that kind of experience go for players? Where will the next South of Midnight come from? That was my “game of the year” in 2025, and while I fully accept it wasn’t a commercial success… it was still a fantastic title. Not every game from every studio can be a massive hit every time. Sometimes you have to learn from failure and do better next time – something which applies to Compulsion Games *and* to leadership at Microsoft.
Or at least it would in an ideal world.
Maybe Xbox’s financial situation really is so dire that it’s either make these cuts now or watch the entire business fold. Perhaps Microsoft’s leadership has basically threatened to get out of the hardware business – or gaming entirely – if Xbox can’t demonstrate that there’s a way back. And if that’s the case, if the ship is sinking so badly that the only thing to do is throw *people* overboard… well, it isn’t the fault of the people being tossed, is it?
Photo: Microsoft/Xbox
From the point of view of players like ourselves, the games industry needs Xbox. Not because of anything Xbox does, has done in the past, or might do in the future. Not because Xbox hardware is fantastic, powerful, or well-designed. And not because any Xbox games – past, present, or future – are must-play “games of the generation.” The industry needs Xbox because, without it, there’s only gonna be PlayStation and Nintendo. Xbox is a balance – not only a one-to-one competitor with PlayStation in a way that Nintendo hasn’t been for twenty-plus years, but a non-Japanese company in the hardware space. If Xbox falls and disappears from the gaming hardware landscape, your only choices for new hardware in the years ahead will be Nintendo, PlayStation… or PC.
Nintendo, since the days of the Wii, has been off to one side, doing its own thing – and, generally speaking, doing it pretty well. But Nintendo doesn’t compete with PlayStation in the same way as Xbox; a lot of current-gen titles don’t even come to Nintendo’s less-powerful hardware, and the brand is arguably more focused on family-friendly titles, casual titles, and a handful of bigger exclusives. Xbox is the counterweight; the competitor that PlayStation needs lest it gets a monopoly on the entire hardware market. And that would be a net negative for players, unfortunately.
Sony has recently announced – to some backlash – that, after 2028, they’re going all-digital. There will be no more PlayStation discs produced after that date (which I have to assume will coincide with the launch of their new hardware, which may very well not even have a disc drive included). Right now, there’s a *chance* – however minuscule it may seem – that Xbox can force Sony to walk that back by offering a competing device that does come with physical discs. Xbox has an opportunity to do to PlayStation what the PS4 did to the Xbox One some thirteen years ago.
But PlayStation clearly feels confident in making this move in part *because* they know that the competition from Xbox isn’t serious. Numbers are difficult to come by, but it’s generally accepted that, for every one Xbox Series console sold since 2020, there have been three PlayStation 5s sold. Sony feels it can act with impunity right now, because of this disparity. But as long as competition exists, there’s at least a chance for Xbox to score a win – and that could force Sony to pull back from some of its unpopular and anti-consumer moves.
Without Xbox, there’s nothing to stop Sony going all-digital. Without Xbox, there’s nothing to stop Sony jacking up the price of PlayStation 6 consoles way beyond the $1,000 mark, or increasing the base price of games to $80, $90, or beyond. With Xbox in the marketplace, Sony might still do that. And given Xbox tried, with The Outer Worlds 2, to force an $80 base price for games, maybe they’d just follow suit. But at least it’s possible for genuine competition to exist… and in a capitalist marketplace, competition is one of the only things protecting us as consumers from the worst impulses of corporations.
I sympathise with the folks being laid off. I’ve been there, I’ve been in that position, and I know how much it can hurt. And given the state of the industry, with job losses elsewhere and an apparent contraction in the market, this could very easily be the last time some of these people will ever get to work in game development. If there are fewer jobs going at fewer studios, and a glut of newly-available workers entering the job market… I mean, do the maths. There may not be a game development job available for all of them. And that’s just awful.
I hope that Xbox’s decision to slim down, streamline, and kill off whole studios will lead to a more stable brand going forward, because the industry needs the competition that, right now, only Xbox is able to offer. But to be blunt with you, I struggle to see how doubling- and tripling-down on a handful of franchises that are arguably way past their own heydays is going to accomplish that, and I fear that Xbox’s leaders are merely shuffling things around to make their balance sheet look better in the short-term… at the expense of the longer-term.
However, with Sony receiving criticism for its all-digital idea, maybe an opportunity has just opened up for Xbox. They might’ve lost the console war for two generations running, but that could change… right? If Sony’s belief that they can get away with those kinds of things is mistaken, it could hand Xbox an opportunity to close out the current generation strongly, and perhaps even make a comeback in the years ahead. I wouldn’t put a lot of money on that, were I someone who liked a gamble. But you never know, I guess.
Today, though, doesn’t feel like a day for that much positivity. And I’m afraid I see way more negatives than positives for Xbox right now. It may be possible for the brand to make a comeback – if Sony presents an opportunity on a silver platter through its own missteps. But it’s more likely, in my opinion, that these closures, cancellations, and layoffs will come to be seen as the beginning of the end for Xbox… not the start of a bright future.
All titles and hardware discussed above are the copyrights of their respective studios, developers, publishers, etc. Some promo images courtesy of IGDB. This article contains the thoughts and opinions of one person only and is not intended to cause any offence.
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