“This cannot continue”: Xbox leaders lay out “hard truths” behind sagging brand

Brutal self-assessment paints a picture of a Microsoft gaming division in crisis.

See full article...

 

[first_citazen]

it’s always the employees that pay for management mistakes. Billions lost in bad decisions and layoffs seem to be the quick answer for most executives

 

[NOT_RICK]

While Microsoft has over-invested in acquisitions and platform spending, Sharma and Booty also admit that Xbox has “not adequately funded” the company’s “industry-defining franchises.”

Bloomberg reports Sharma is planning an unknown number of layoffs across the Xbox division shortly after the June 30 end of the fiscal year, alongside “significant” cuts to marketing and other departmental budgets.

So they're admitting they don't adequately fund game development but then they're going to go and layoff more people? I understand that you don't need marketers for game development, but how does laying more people off after they've already endured multiple rounds of cuts help them actually get to focus on making games? Ugh, the entire game industry is in such dire straits lately

 

[stux]

I do happen to like my Xboxes.

I hope they figure it out without killing it.

 

[AxMi-24]

it’s always the employees that pay for management mistakes. Billions lost in bad decisions and layoffs seem to be the quick answer for most executives

Interesting how the main justification for high management pay is that they shoulder so much responsibility. Yet nobody has ever managed to actually show this shouldered responsibility when things go south.

It's almost like the socio/psychopaths on top are full of it.

 

[sea9]

Per the instructions, I once baked my XBox 360 gently in the oven to fix that red ring of death. Loyal customer here. Maybe Microsoft needs to do some baking too.

 

[the_frakker]

it’s always the employees that pay for management mistakes. Billions lost in bad decisions and layoffs seem to be the quick answer for most executives

Not that it changes the facts you presented, but Microsoft did the right thing by putting Asha in place of Phil. It’s just Phil glides out with a golden parachute while the employees bear the weight of failures they had little to nothing to do with. It’s messed up.

 

[CatNamedHugs]

Damn, better commit more billions to "AI." That'll satisfy the shareholders.

 

[laitpojes]

Executives always get paid like they’re responsible for everything, but they really are never actually held responsible for anything.

 

[Ravant]

So they're admitting they don't adequately fund game development but then they're going to go and layoff more people? I understand that you don't need marketers for game development, but how does laying more people off after they've already endured multiple rounds of cuts help them actually get to focus on making games? Ugh, the entire game industry is in such dire straits lately

Because you have venture capital and larger corporations/publisher consolidations that have taken the flexibility and end-user experience focus out of the game development process, replacing it with the same maximum profit-extraction methods AI and other media companies have been employing. (Commonly referred to as enshittification.)

The reason indie studios do so well isn't because they're small and plucky. It's because indie studios are focused on the product first, the customer experience first, and are happy to make anything at all, not chasing maximum shareholder value.

Microsoft Game Studios are hitting the same thing Ubisoft was. Example: When Red Storm Entertainment was Red Storm Entertainment proper? The games were good, novel, fun, engaging, and actually stood the test of time. When Ubi took over? It wasn't an instant jump to formulaic development, but by the time this most recent round of Red Storm layoffs happened? You have 5 games running on the same game engine, with almost the same gameplay loop, barely deviating from each others' basic story elements. Minimum effort in the attempt to extract maximum profit. Not because the developers themselves wanted that, and not because the writers got lazy. Because Ubi corporate began injecting more and more demands into tighter and tighter schedules.

 

[NOT_RICK]

I just recalled when Amy Hood mandated that Xbox generate 30% profit margin. Microsoft leadership has no idea how the gaming industry works despite being in the market for three decades. That kind of margin may work for selling B2B software and services, but it's an insane target for games. We will continue to see them chase their tails as they don't understand the market they are in, which is terrifying given how large they've grown after gobbling up studios and publishers left and right in the past 10 years.

 

[PhyrePhox]

Layoffs will continue until profitability improves!

 

[antibolo]

Microsoft itself is Xbox's biggest enemy at this point, their AI folly is only making things worse in every way.

 

[fivemack]

Produce games that people are happy to pay $100 for and watch the profit margin go up. Trust your customers and your developers, say that you’re happy to refund the $100 in the first 30 days after purchase.

 

[aikouka]

Speaking with some folks, it's definitely interesting to see how folks commit themselves to specific consoles. I know some folks that were die hard with Xbox until the PlayStation 4, and now, they'd never even consider the Xbox Series S/X. The thing is... I don't think it's even the exclusive games that largely keep these people. My guess is likely that since the consoles are too similar, the idea is that we can stick with something so long as it keeps us comfortable. As soon as we start feeling bad about it, then we start to look elsewhere.

Although, I do wonder if the whole PC game capability might help. One thing that I have heard is interest over the Steam Machine as a low cost gaming-capable PC for a kid. (Albeit "low cost" might not quite be as accurate in today's RAM-pocalypse.) The biggest way that Microsoft could fumble that is if their "PC game capability" ends up being just games purchased from the Microsoft Store, but if the newer Xbox handhelds are any indication, I think Microsoft is well aware of how to approach this.

Microsoft Game Studios are hitting the same thing Ubisoft was. Example: When Red Storm Entertainment was Red Storm Entertainment proper? The games were good, novel, fun, engaging, and actually stood the test of time.

Speaking of Red Storm Entertainment, do you remember their RTS, Dominant Species? No matter how much the game has been lost to the annals of time, I can't forget it because it is one of the few things I've ever won from a contest. (They had some contest to get a free copy, which I ended up winning.) I was never really very good at the game, but I wasn't good at StarCraft either, so that wasn't a huge surprise.

EDIT:

Added a bit about the Xbox above to be a bit more on topic.

 

[pauleyc]

Who knows, maybe having a gaming division with even less money and manpower will finally be able to turn things around for Xbox.

Yes, but imagine the profit margins once you remove the costs associated with manpower!

(Seriously though, it's the perfect ending considering the bleak future ahead of Xbox.)

 

[cfenton]

The reason indie studios do so well isn't because they're small and plucky. It's because indie studios are focused on the product first, the customer experience first, and are happy to make anything at all, not chasing maximum shareholder value.

I think this is a rosy view of indie development. There are certainly indie developers who do very well, but there are many more who put out a game that sells poorly and then the developer has to close. Some of those games a great, but there are just so many games coming out these days you have to get very lucky or make something truly exceptional to stand out.

 

[Louis XVI]

You can’t solve a problem until you acknowledge that it exists, so I see this as a generally positive development.

Microsoft’s stumbling around over the last decade or so has been very bad for gaming as a whole, and we’d probably have been better off if Microsoft had never ventured into the console market. Nonetheless, Sony needs some competition to keep them honest, and a revitalized Xbox is the best candidate to do so. So I hope Microsoft gets its shit together.

 

[chateauarusi]

I was an Xbox guy from the start. Had every console from the OG thru One S. But it got more and more frustrating, and I jumped to PS with the 5. Broke my heart a bit, and the whole industry is a mess so I'm not saying the PS5 is perfect, but overall it's been the right move. I don't know what they could do to win me back at this point. What a cluster.

 

[mark625]

"Who knows, maybe having a gaming division with even less money and manpower will finally be able to turn things around for Xbox."

Ouch. That's going to leave a mark.

 

[PhilipStorry]

The purpose of Xbox, originally, was to make sure that games were being developed for the Windows DirectX APIs rather than competitors like OpenGL.

Secondarily, it was to feed into Microsoft's 1990s vision of a computer in every home, running Microsoft software.

It did a pretty good job of accomplishing those goals.

It cost a hell of a lot though. I seem to recall that the launch marketing budget for Xbox was about half a billion dollars, worldwide. And those are dollars from over 25 years ago, when a dollar bought a lot more. And that's not covering the cost of hardware development, and later on the cost of recalls on dodgy hardware. (Red ring of death, anyone?)

Since then the industry has moved on. And Microsoft has evidently struggled to find a strategic reason to invest in this division.

Gaming has moved towards mobile platforms and the web, you don't necessarily need a computer to game - much less a console.

Xbox is now too big to get rid of (it'd be embarrassing), but not strategically important enough to fund & support properly.

Microsoft needs to either recognise the value it returns and put the money in, or kill it.

Having it limp along is more likely to harm their reputation than anything else.

 

[Jeff S]

Man, it's almost like overpaying for acquisitions is long term bad for business. . .

That said, those are sunk costs. It's especially dumb to spend a lot of money to acquire the likes of Mojang, Bethesda Softworks/Zenimax, and Activision, which acquisitions are largely a combination of brand and talent acquisitions - and then get rid of a lot of the talent you just paid for.

Eat losses until the studios produce some hit games, and then make money on the games. It's not rocket science. Also, if the studios are taking too long to produce those hit games, well, axing staff is most certainly not going to get the games out the door faster.

 

[Ravant]

I think this is a rosy view of indie development. There are certainly indie developers who do very well, but there are many more who put out a game that sells poorly and then the developer has to close. Some of those games a great, but there are just so many games coming out these days you have to get very lucky or make something truly exceptional to stand out.

This is a good thing to keep in mind, sure. But there's a lot of indie devs where the developer closes because the game they put out was never meant to sell well at all. Look at the sheer number of RPGMaker-produced games sitting on Steam. Those were quick passion projects, quick "If I'm learning the basics, might as well put it out there to see if it sticks" projects, projects whose ultimate goal wasn't some smash-hit, but to get back what they paid for RPGMaker.

Edit: Not that there aren't indie studios whose goal is to ultimately make bigger, better games. They exist, too. But the indie space is really the space that's leading in innovative gameplay more than just "Call of Modern Battlefield Warfare Duty 7: The Search for More Money." Is there a bunch of copypasta slop filling out the indie space, too? Yes. But that is not a new thing at all. That has existed since the shareware days of the late 80's.

 

[Dark Jaguar]

On the one hand, requiring 30% across the board is pretty ridiculous. On the other, 3% is VERY slim. And- back to the body of the problem, expecting "growth' year after year is the cancerous attitude plaguing all big business.

Frankly, the fact they're showing ANY sort of profit and aren't just in the red comes as a bit of a shock to me, considering the reckless moves over the past decade. Buying out every single company they can just so they can lay claim to some gigantic set of "exclusives" is that kind of amalgamated growth that's killing a LOT of industries. It was never going to be good for customers when Microsoft started snapping all of these things up. From Activision to Zenimax, oh sure it sounds great to say "We own Warcraft and Doom", but it was never sustainable and I seriously didn't like the notion that this ONE software company owned ALL these licenses, able to hoard them like that.

Back on the hardware side, since MS had to appease the very legitimate concerns about their consolidation meaning less choice, stuff wasn't exclusive to the XBox. That's good for customers of course, and any customer that was upset at them not being more aggressive with making those games exclusives wasn't putting their own priorities first, but it can't be said this was good for Microsoft. No one had a reason to even GET an XBox. They could get a PS5, or invest in a decently powerful PC, and they'd have it all.

I guess they're going half & half on the exclusive thing. It seems they're making some new games exclusive to the XBox console AND Windows. Well, that's fine by me, since I have a decently powerful PC, but it's not great for Playstation players or even those Switch fans who were starting to enjoy a smattering of Microsoft games coming to that system as well.

I don't think that ultimately solves the real problem. XBox as a distinct platform doesn't really need to exist. Hardware isn't distinct enough any more. Their controller's not special, their Kinect failed, and all the features they innovated as far as online service have been adopted by Sony. Further, if someone has a powerful PC, they can play the exact same Microsoft games, but with mods and with FREE online. Heck, I can even get them on Steam instead of the Microsoft Store, and I do. If the rumors are to be believed, the neXtBox is going to be a PC in every sense of the word. I'm alright with this, but it does mean "XBox" as a brand is effectively dead. It won't mean anything. "If everything is an XBox, nothing is."

As much as I like THAT, here's what I don't like. So, Microsoft is going back to their roots, focusing on Windows as their main platform, and selling a "gaming PC" branded as an XBox to run those Windows games. They consolidated so many major gaming houses into themselves they have a VAST library to profit from. But, we see what that does. Every single one of these studios is at risk of being shuttered not just after one failed game, but after a major success. They've done it before, and they will again. No one working at these companies is safe. World of Warcraft's entire community outreach team was shown the door in favor of outsourced solutions (and LLM chatbots), and it's shown. They're incredibly "top heavy", and something's gotta give. They can be profitable, but I think they need to divest a lot of these companies. Not... fire them and hoard the IPs, but actually cut them loose in a way that maintains the integrity of that company and lets them KEEP the IPs. We've seen just what happened to Rare. They are now the "Sea of Thieves" company, which is at least better than when they were the "XBox Avatars" company, but it can't last. Sea of Thieves is doing better than a LOT of live service model games, but that only means they're sustainable. What's left is Microsoft camping on all of Rare's old IPs on the off-chance they can do something with them. We had a decently successful Killer Instinct 3, a brief flash in the pan Battletoads game, and that's it. The Perfect Dark reboot, that "AAAA" nonsense with their "bullshot" trailer that definitely was fully scripted and not reflective of actual gameplay? They sunk SO much money into that just to cancel it. It'll happen again, with a LOT of these. This "complete reset" should scare every single employee working for the vast collection of companies Microsoft foolishly snatched up, but it won't scare the executives.

 

[Meee3]

Total aside: Yes, I know. CEOs have gotta project confidence and dress for the position (especially Gaming CEOs), but....

I thought that Asha Sharma's jacket was pretty cool, and maybe I'd order one for my wife. But no, it's $2,200.

 

[roboninja73]

While I am a gamer, I ironically have never actually played a game on any Xbox console. I had all the Playstations up to 4, but was always mainly a PC gamer who did not see the need to get an Xbox. The exclusives there were never my jam anyhow.

But it is staggering to see how MS has mismanaged things, and not at all surprising after their moves over the past 5 years. They have been hurtling towards this for a long time.

 

[DrewW]

The reason indie studios do so well isn't because they're small and plucky. It's because indie studios are focused on the product first, the customer experience first, and are happy to make anything at all, not chasing maximum shareholder value.

+1 for make anything. I think you need the indies just to throw crazy ideas out there and find the hits. For example, Rare has a weird mobile gardening game called Viva Pinata. Microsoft bought Rare and developed the Xbox 360 version that became a big hit and durable franchise. I can't imagine 2026 Microsoft taking a chance on a platformer based on a weird gardening game. No weird games = no new hits = no new franchises

Maybe since waves of layoffs don't seem to be working Microsoft could invest 5% of their AI budget into hiring a ton of devs to make anything they want. A few of those games will be hits.

 

[TekaroBB]

+1 for make anything. I think you need the indies just to throw crazy ideas out there and find the hits. For example, Rare has a weird mobile gardening game called Viva Pinata. Microsoft bought Rare and developed the Xbox 360 version that became a big hit and durable franchise. I can't imagine 2026 Microsoft taking a chance on a platformer based on a weird gardening game. No weird games = no new hits = no new franchises

Maybe since waves of layoffs don't seem to be working Microsoft could invest 5% of their AI budget into hiring a ton of devs to make anything they want. A few of those games will be hits.

But what if we made another faux-realistic military FPS, a narrative focused third person action game, or an open world with a thousand uninteresting waypoints? Those all seem to do well, and if they don't then it's the devs fault.

 

[GenericAnimeBoy]

That portion of Microsoft is currently only seeing a “3% accountability margin” (read: profit margin), down year over year and well below both the game industry average and the lofty 30% margins that Microsoft is reportedly seeking across the board.

Artist's impression of the exec responsible for setting said performance target:

 

[aapis]

I don't believe anyone employed by MS, nor anyone who works in tech, is capable of making "xbox" less shitty. The status quo is the result of intentional decisions supported by "user research" and millions of spent dollars, this is how they WANT it to be.

They can bring in new business goons to make different, terrible, decisions until the cows come home. They don't want change, they want us to give them more money than the service is worth so they get their bonuses.

 

[omniron]

As a PlayStation user I don’t perceive Xbox as a gaming system, I see it as a Microsoft services portal. And I’m still confused about all the different versions.

And I was a huge Xbox 360 fan— still am.

 

[Mechjaz]

Per the instructions, I once baked my XBox 360 gently in the oven to fix that red ring of death. Loyal customer here. Maybe Microsoft needs to do some baking too.

I don't usually buy the crappy "protect your investment! (hint: a game console generally, or at least historically, not been an appreciating asset)" warranties, but I happened to buy one that time. That let me put walmat on the hook to speedrun through three bad Xbox 360s in a month to finally get to a new one.

More on topic, I'm glad to see that Activision deal is resulting in a rich and stable ecosystem of development and support huge bonuses for the human centipede that made it happen and layoffs for the rest.

 

[The Lurker Beneath]

+1 for make anything. I think you need the indies just to throw crazy ideas out there and find the hits. For example, Rare has a weird mobile gardening game called Viva Pinata. Microsoft bought Rare and developed the Xbox 360 version that became a big hit and durable franchise. I can't imagine 2026 Microsoft taking a chance on a platformer based on a weird gardening game. No weird games = no new hits = no new franchises

Maybe since waves of layoffs don't seem to be working Microsoft could invest 5% of their AI budget into hiring a ton of devs to make anything they want. A few of those games will be hits.

Well, Pssst on the ZX Spectrum - one of Rare's earliest hits (as Ultimate Play the Game) - was a weird gardening game!

 

[Ravant]

+1 for make anything. I think you need the indies just to throw crazy ideas out there and find the hits. For example, Rare has a weird mobile gardening game called Viva Pinata. Microsoft bought Rare and developed the Xbox 360 version that became a big hit and durable franchise. I can't imagine 2026 Microsoft taking a chance on a platformer based on a weird gardening game. No weird games = no new hits = no new franchises

Maybe since waves of layoffs don't seem to be working Microsoft could invest 5% of their AI budget into hiring a ton of devs to make anything they want. A few of those games will be hits.

Plants vs. Zombies. Cuphead. Factorio. AmongUs, Undertale. FNAF. Minecraft. Stardew Valley. Stanley Parable. Outer Wilds. Slay the Spire. And that's just in the last 15 years. If you want to expand that timeframe back to 1996, Valve themselves started as 2 dudes that left Microsoft.

 

[Slothur the Hasty]

It is just not the Xbox I think, the Microsoft name does not really carry trust anymore, so it is a company issue.
I was happy with the One Series S I think the name is (The naming of these consoles alone is enough to grow bald) , from about a decade ago, got a lot of great gaming out of it with my daughter - especially "Unravel".
I recently got PS3 emulation up and running on my PC for a stack of games I do own, and had a lot of fun with older titles, and I think this needs to be the focus for Microsoft - Think less about the hardware, but go back to the basics and make a fun ecosystem with games that are actually fun on a console that you will support.
Let us also own the games, and scale down a bit on the newest hardware possible with a lower cost subscription and they might have a winner. I will never even consider a $1000 console, I got a PC for that with a 4080 Super, and I am also not buying Sony ever again.

The fun things I do miss with a console is just picking up a game with friends on a couch and having fun for a few hours without terabytes of updates before playing anything, so if they can get that - the brand might survive.

 

[user12121]

i don't trust anybody about anything.
Everything is designed to make us scroll one more time to make us view one more ad.
I won't buy ANY game/console/OS in this environment.
They're making things worse on purpose and I refuse to reward it.

 

[jdietz]

layoffs seem to be the quick answer for most executives

Stock price goes up when they do this. It must work.

The reason indie studios do so well isn't because they're small and plucky. It's because indie studios are focused on the product first, the customer experience first, and are happy to make anything at all, not chasing maximum shareholder value.

It is because they're small. If they weren't, they wouldn't exist. Indie has a much smaller share of revenue than AAA. They don't need to do nearly as well to break even.

For my own original thoughts, I think Switch 2 costs too much, but obviously, I am wrong. Probably, PS6, Helix, and Steam Machine will all cost too much, not to mention gaming PCs. How can the future of gaming ever succeed?

 

[xoa]

Speaking with some folks, it's definitely interesting to see how folks commit themselves to specific consoles. I know some folks that were die hard with Xbox until the PlayStation 4, and now, they'd never even consider the Xbox Series S/X. The thing is... I don't think it's even the exclusive games that largely keep these people.

Yeah? There is pretty straight forward economic and real world rationality going on there (as well as straight forward tension in short term vs long term). A piece of hardware does nothing for someone right? Like, sure, efforts have been made to give them some level of industrial design, but effectively nobody is spending $500+ on a game console as a piece of sculpture to have in their living room on its own. The point of it is to run games. So economically it's capital expenditure which is then amortized across the total actual useful load it gets utilized for. It also takes up mental space, physical space and has some physical environmental reqs, which for some people is a non-issue and for others is actually significant. And of course most people are time limited not game limited, there are more good, quality game hours to spend then human leisure time. So within a generation on an individual level the best outcome is to have just a single thing that does everything or as close as possible. The $500 and any time learning how it works gets divided across every game they play, and that's all the games they have time for anyway. Adding more different consoles directly linearly increases the capex by however much those other units cost, but by definition cannot increase the game time they're spread out across because that's maxed out (unless each console had so few games they couldn't fully provide value anyway, which is also a strike).

Of course, in the long term if any single player gets a monopoly they will raise prices, get weird/short sighted, start to mess with games, etc which is all bad. That's a basic tension and cycle we've seen play out repeatedly. I'm glossing over complexities at the edges, including how hardware prices can drop over time (at least, historically, if that trend is broken that's yet another factor) which in turn changes the math later in a gen vs earlier, but a lot of the basics seem pretty sensible?

So sure, there are some soft factors with humans that get involved and complexify things, as well as artificial barriers different players raise around their own ecosystems to varying and dynamic degrees. But I think the "tribal" and "emotional" and so on aspects get overplayed in these discussions. Wanting there to be competition in the abstract and wanting to pick just one thing and get everything for it in the specific are both rational despite being at tension with each other.

My guess is likely that since the consoles are too similar, the idea is that we can stick with something so long as it keeps us comfortable. As soon as we start feeling bad about it, then we start to look elsewhere.

Well again, yeah? These are luxury entertainment appliances who's entire raison d'etre is to making gaming easy and comfortable. And see above, being radically different from each other doesn't necessarily push success in a straight forward way either. It's a tough market.

 

[Danathar]

I can see them moving completely to game pass and just dumping the hardware altogether. They’ll just stream whatever they sell on game pass to whatever hardware they can get streaming software on.