Key information
Xbox has faced a difficult period, implementing widespread studio closures and staff cuts as part of a major restructuring. According to an internal memo obtained by Windows Central and reported by Jez Corden, CEO Asha Sharma stated that the prior Game Pass strategy caused Xbox balance sheets to enter a freefall.
The financial strain followed Microsoft's acquisition of Activision Blizzard for $69 billion. Adding Call of Duty to the subscription service increased costs and reduced direct game sales, as players opted for a monthly subscription rather than purchasing titles for $70.
Despite these challenges, Sharma indicated that Xbox has begun returning to growth, expanding at multiples of previous levels. Following the summer layoffs, Sharma previously noted that subscription growth missed expectations, with subscriber numbers falling significantly short of internal projections reported by The Wall Street Journal and revealed during the 2023 FTC trial.
After replacing Phil Spencer, Sharma adjusted the strategy by altering the subscription model and removing Call of Duty as a day one title. Sharma informed Bloomberg that the service recovered after an eight-month decline, returning to growth and improving retention. Future plans remain uncertain regarding day one launches for upcoming major franchises.
