Xbox CEO Asha Sharma has outlined her plan to "reset" the Xbox business, and it includes mass layoffs and selling off studios.
In her memo announcing the dramatic shakeup, Sharma also talked about what led to this moment, and one piece is that the Xbox business is "not healthy" due in part to big bets that have not paid off, like Xbox Game Pass.
She said Microsoft bet on things like Xbox Game Pass, releasing more titles on competing platforms, and a "broader portfolio of content" to help grow Xbox. Those efforts did indeed create "meaningful value," she said, but a publicly traded company like Microsoft is focused on endless growth--and those businesses "did not grow at the pace we expected."
"As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history," she said.
"We must reset Xbox."
Xbox Game Pass, launched in 2017, was a breakthrough, Netflix-like offering from Microsoft promising subscribers all first-party Xbox games and a growing library of other titles for a monthly subscription price. The membership proved popular, reaching more than 34 million subscribers (before dropping back down). But all the while, many fans and experts like have questioned the viability and sustainability of the subscription model.
Strauss Zelnick, the head of GTA 6 parent company Take-Two, has said launching new games into a subscription service like Microsoft does makes no sense.
Millions of lost subscribers
The Wall Street Journal reported that Xbox Game Pass has around 30 million subscribers. If accurate, that would be 4 million fewer than the 34 million paying members that Microsoft reported in February 2024. The company has not released any new subscriber numbers since then, and there is clear reason why.
In a document from the Microsoft-Activision acquisition case, Microsoft predicted it would have 77 million Game Pass subscribers by 2026. That's obviously not going to happen. So what happened? First and most obviously, Microsoft could not convince people to sign up or see the value in Game Pass. Industry analyst Daniel Ahmad said Microsoft's efforts to push PC and the cloud with Game Pass did not pan out as expected.
For a period of time, Microsoft CEO Satya Nadella's pay package included a performance-based incentive tied to Game Pass growth. This incentive was later removed, as Game Pass growth slowed.
In 2025, Microsoft controversially raised the price of Xbox Game Pass Ultimate by a whopping 50%, bringing it up to $30/month. This price hike led to a mass exodus of subscribers, and Microsoft later brought it down to $23/month.
At the same time, Microsoft announced a big change for Game Pass with new Call of Duty games no longer included with the service at launch. Game Pass Ultimate is still more expensive than it was a year ago, and the lower rate is not actually the discount people think it is.
In her memo, Sharma did not provide any specifics on how Xbox Game Pass could change further in the future. The executive specifically calling it out as a bet that did not fully pan out is leading some to believe further changes could be afoot. As for Microsoft's plans for releasing games on rival platforms, Sharma has backed away from that in some ways already by returning to situational exclusives like Gears of War: E-Day and Clockwork Revolution. These games are being sent out to die as exclusives, one expert said.
Finally, regarding Sharma's line about investing in a "broader portfolio of content" being a bet that did not pay off, she said Microsoft will now shift its investment on "higher priority projects" that have the best chance of succeeding (though she did not name any outright). No first-party Xbox games that have been announced have been canceled as part of the "reset."
https://www.gamespot.com/articles/new-xb...orked-out/