The Xbox we knew is dead
Opinion: The failure of the Xbox project comes at a price, and we're seeing that play out
It’s an unhappy day for the video game industry. Xbox has laid off hundreds of employees across many of its studios, shut one down (The Initiative) and cancelled several projects.
I’ll begin by noting that Xbox isn’t the only games company to have made multiple rounds of lay-offs in recent years. And it isn’t the only one to close studios.
Perfect Dark and Everwild, the two announced games that Xbox has cancelled today, were troubled projects. Sometimes game development just doesn’t work out.
And although Microsoft and Xbox may be delivering strong numbers, it’s fiscally irresponsible to continue investing in things that aren’t working. Not just for shareholders, but existing employees, too.
All of that is true. But what is also true is that the last ten years for Xbox has been defined by a persistent failure to deliver.
Xbox never did recover from that 2013 Xbox One launch, when it lost ground to PlayStation and has continued to do so ever since. In an effort to recover, the company embarked on a strategy that centered on a subscription service (Game Pass), with a new console that featured a higher and lower-end variant (Xbox Series X and S).
But it couldn’t deliver the games. Halo Infinite and Starfield, two important tentpole releases, arrived late and failed to connect with fans. Some of the studio leaders blamed ineffective and small marketing campaigns, which was a consequence of Game Pass eroding the margins on these first-party releases. But the games were also not quite good enough.
You can have the best strategy in the world, but if you can’t deliver hit games, then it counts for nothing.
The Xbox project has failed. And as a result, Xbox is now a third-party publisher. One with a console and a subscription service, but a third-party publisher all the same. It is committed to hardware, but its partnership with Asus on the Xbox handheld, and the news of a Windows-focused future for its platform, suggests a different commitment to the one we’re used to.
Messaging this transition to its loyal and confused fans has been tricky, and the company appears to have adopted the ‘boiling the frog’ approach of gradually releasing more and more games on PlayStation. Xbox gamers may not like it, but hopefully this will help the company deliver better financial results for its games and studios… even if it comes too late to save its console business.
“Microsoft bought Bethesda and Activision Blizzard. And as a result, Xbox is publishing a frankly absurd number of shooters and RPGs. Were these acquisitions really part of the vision?”
Many of the cuts made by Microsoft have been to its newly acquired businesses. And looking at it today, the Xbox spending spree appears frenzied and reckless.
It started small enough, and with some promise. Studios like InXile, Double Fine, Ninja Theory and Obsidian were great game developers, but ones living from publishing deal to publishing deal, crowd-funding campaign to crowd-funding campaign. They were teams constantly putting out interesting, impactful stuff… but perhaps lacking that tiny bit of quality that separates the great from the really great.
Speaking for myself, I was excited to see what these teams could do with the extra time and resources that Microsoft could offer.
I interviewed Xbox a lot around this time. And the likes of Phil Spencer would tell me that he was looking to buy studios and IP that were doing different things to what Xbox was already doing. As an example, he would tell me the firm wanted to buy a Japanese studio so it could appeal more in Asia.
But instead, it bought Bethesda and Activision Blizzard. And as a result, Xbox is publishing a frankly absurd number of shooters and RPGs. Were these acquisitions really part of the vision? Or was it more out of fear that if it didn’t buy them, someone like Google or Amazon might instead?
In acquiring Bethesda and Activision, Xbox transformed itself into the biggest games publisher in the world. Perfect Dark may have been cancelled due to its own problems, but Xbox also doesn’t need it now it has Call of Duty. It’s actually commendable that Xbox is still investing in things like South of Midnight, Keeper and Clockwork Revolution, when it operates so many giant franchises. I am sure under a different organisation, Obsidian would have been asked to turn Avowed into an Elder Scrolls and The Outer Worlds into a Fallout. Xbox didn’t do that.
But maybe that time will come. Xbox right now is a messy division caught between what it was and what it needs to become. It has three publishing teams. It’s developing an abundance of titles, when it probably makes better commercial sense to focus in on the bigger bets. We must not forget that Xbox is part of Microsoft, which has spent north of $80 billion in video game acquisitions. It needs to see a return on that, and that return is going to come from the bigger franchises (and potentially a more integrated approach).
It could be argued that Xbox needs a variety of different titles to bolster Game Pass, but even if that’s the case, it doesn’t need to make the games itself. I wouldn’t be surprised if Clair Obscur: Expedition 33, a third-party title, hasn’t done more for Game Pass than most of the first-party games Xbox has published this year.
“Xbox today is a messy division caught between what it was and what it needs to become”
Should Xbox have walked away from Activision Blizzard when it saw the market take a downturn? Is it wrong to put all its new games day and date into Game Pass? Is releasing its titles on PS5 a wise move? There are many in this industry who have been baffled by Xbox’s decision-making. And after more brutal cuts to studios it promised to take care of, that bafflement is turning into frustration.
Regardless, those decisions have been made now. And the result is an Xbox that’s radically different to the one we’d all come to know. The new Xbox is the company behind Call of Duty, Candy Crush, Minecraft, Elder Scrolls, Halo, Diablo, Forza, Fallout, Warcraft… and it boasts a catalogue of classic brands that go back decades. All those game can be found on almost every platform, and be accessed via Microsoft’s own subscription service, too. That’s what this new Xbox is all about.
But, rather painfully, the old Xbox is still here, too. 15/20 years ago, Xbox was a console that played Gears of War, Halo and Fable. In 2025, it’s still a console that plays Gears of War, Halo and Fable. But the course has been set. That old Xbox is no-longer the heart of this new organisation.
I just hope that doesn’t lead to more unhappy days to come.
The strategy MS is pursuing is fairly obvious, Nadella has never been shy about his distaste for traditional console business driven by exclusivity. Xbox will release PC-based living room console that will have ease of use of console with openness of PC, while releasing all its games on all platforms that can support them. The added value of Xbox will come from precisely that combination of openness + gamepass + convenience and ease of use (and possibly performance). Meanwhile people will be able to play Xbox games anywhere, thus reducing barrier to entry and making big money for MS.
I was genuinely gutted to see Perfect Dark cancelled. As a child of the N64 generation I wanted a proper sequel to the original, not PD0 which we ended up with!