Microsoft Seemed to Be Doing Everything Right With Xbox and Game Pass. Now Things Are Going Very Wrong

Sony’s PlayStation and Microsoft’s Xbox have been rivals in the video game console market for a long time. Their initial success was partly attributed to the launch of exclusive titles: If you wanted to play Uncharted or The Last of Us, you had to buy a PlayStation, but if you wanted to play Halo or Gears of War, you had to buy the Xbox.

For years, both companies were evenly matched, but the launch issues with the Xbox One in 2013 gave Sony an edge. As a result, the PlayStation 4 outsold the Xbox One by nearly twice as much (117.2 million versus 58 million).

The competition continues with the PS5 and Xbox S/X Series. While Microsoft has stopped reporting its sales figures, the latest estimates show that Sony has sold 61.7 million next-gen consoles, while Microsoft’s figures are around 21 million.

This means that the Japanese company has sold three times more units than Microsoft. What’s more, in the second quarter of 2024, experts estimate that five PS5s were sold for every Xbox S/X Series, resulting in a complete financial disaster for the company led by Satya Nadella.

To address this, Microsoft focused on Game Pass, a subscription service that offers a wide range of games for a monthly fee.

One of the key features of Game Pass was the ability for subscribers to access original titles from the day of their launch, which was a major draw for gamers. Furthermore, Microsoft made substantial investments in video game development studios, including a $7.5 billion acquisition of Bethesda Softworks in 2021 and, more importantly, a $69 billion acquisition of Activision Blizzard in 2023.

These acquisitions seemed to solidify the future of Game Pass by adding beloved titles to its already excellent lineup.

However, the situation took a turn when Microsoft began making erratic decisions again. Following the acquisition of Activision Blizzard, the company laid off 1,900 employees (8% of the division’s workforce) and announced the closure of several development studios. Additionally, after the acquisition of Bethesda, Microsoft closed Arkane Austin (Redfall), Tango Gameworks (Hi-Fi Rush, The Evil Within), and Alpha Dog Studios (Mighty DOOM). This raised concerns about the fate of these games.

Some games will continue to operate with Microsoft’s servers, while others have been transferred to different companies. Fortunately, South Korean video game publisher Krafton recently acquired Tango Gameworks. Despite all this, uncertainty lingers over the future of other titles, leading to a tense atmosphere within Microsoft’s gaming division.

Sarah Bond, president of Xbox, confirmed these challenges during an interview at the Bloomberg Tech Summit in May, stating that the industry is facing a difficult period despite its growth not being reflected in the numbers. Bond also expressed her intention to evaluate the long-term viability of video games.

“You know, the last year or so in video games, largely the industry’s been flat. And even in 2023, we saw just some tremendous releases, tremendously groundbreaking games. But still, the growth didn’t follow all of that. A lot of that’s related to our need to bring new players in and make gaming more accessible. But all of that has been happening at the same time that the cost associated with making these beautiful triple-A blockbuster games is going up, and the time it takes to make them is going up.

And so, so much of our focus as Xbox is about how we do things to help the industry all up, while also ensuring that our brand, everything that we do, is there through this moment of transition.”

There’ve also been some surprising decisions recently that would’ve been unthinkable years ago. In February, Microsoft announced that four of its exclusive games would be coming to the PS5 and Nintendo Switch, and this strategy seems to be solidifying. Indiana Jones and the Great Circle, one of this year’s most anticipated Xbox exclusives, will be released in spring 2025 and will also be available on the PS5.

It seems like such an attempt is doomed to failure to me…

Let me explain: Microsoft’s move is likely aimed at maximizing revenue. While making its exclusives available on other consoles allows the company to sell more copies of the games, it also undermines the idea of its consoles being a “hardware lock” necessary to play these games. This is good news for gamers and even for Sony or Nintendo, but its impact on Microsoft is harder to determine.

Microsoft’s strategy with its exclusives is also quite puzzling. For instance, many don’t expect the game Starfield to be available on the PS5 soon. However, Indiana Jones and the Great Circle will be released on Sony’s console a few months after its debut on Microsoft’s console. Additionally, games like DOOM: The Dark Ages are set to launch simultaneously on Xbox, PC, and PlayStation in 2025.

The strategy becomes even more confusing when we look at other titles. Obsidian, a studio acquired by Microsoft in 2019, recently released PlayStation versions of Pentiment and Grounded, but surprisingly has no plans, at least for now, to offer a PlayStation version of its next game, Avowed, which is scheduled for release in February 2025 on Xbox and PC. It’s unclear what Microsoft’s intentions are.

This unconventional and unpredictable approach seems to be driven by the potential plans for Game Pass to expand and possibly become available on other platforms in some form.

Meanwhile, Microsoft has announced changes that may not sit well with gamers. Game Pass prices are set to increase worldwide, with significant changes to the service as well. Only Game Pass for PC and Ultimate subscribers will have access to games on their release day, while Game Pass Standard subscribers (replacing Game Pass for consoles) will have to wait a year or longer to access certain titles.

These changes pose potentially serious issues for Microsoft. First, there’s the risk of waning interest in its hardware (aka, its consoles), which is already facing challenges. Second, there’s the even greater concern of decreased interest in Game Pass, a subscription service that’s becoming more expensive and restrictive for gamers.

It remains to be seen how Microsoft addresses these issues, if at all.

Image | Tekeshwar Singh (via Unsplash)

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