Recent significant layoffs and studio closures at Xbox can be attributed to the failure of Xbox Game Pass to achieve the subscriber numbers necessary to support Microsoft's extensive content acquisition strategy, according to Mike Brown, former creative director of Forza Horizon 5.
Brown, who now leads his own studio Maverick Games, stated on MinnMax that while Game Pass was a "well-meaning, player-focused concept," it did not attract enough subscribers at the required price points to make its business model viable. This shortfall, he explained, ultimately led to the current restructuring and job losses within Xbox.
Microsoft has recently announced plans to cut an additional 1,600 jobs, following an initial reduction of 1,600 staff. Four studios are confirmed to be leaving Microsoft ownership, with another expected to follow. Xbox CEO Asha Sharma described these measures as the most "significant" restructure in Xbox history, asserting that the company's gaming division "is not healthy."
Brown defended the underlying idea of Game Pass, acknowledging that it enabled the creation of games that might not otherwise have been funded and provided jobs for many developers. However, he noted that the service never reached the subscriber milestones that would justify colossal investments like the $69 billion acquisition of Activision Blizzard.
These sentiments echo Sharma's own statements. When announcing the initial layoffs, Sharma admitted that Game Pass had not grown as anticipated. She highlighted that Xbox was operating at significantly lower margins than comparable businesses and that their strategy of betting on Game Pass, multi-platform releases, and a diverse content portfolio had not yielded the expected growth. This led to a weakening of the core business and increased investment in hopes of a better outcome, a strategy that ultimately proved unsustainable given the industry's challenges.
According to The Wall Street Journal, Microsoft had projected Game Pass subscriptions to reach approximately 77 million this year, a target far exceeding the current estimated 30 million members. As revealed during the 2023 FTC vs Microsoft trial, Microsoft's ambition was to reach 100 million subscribers by 2030, a goal that now appears highly improbable.
Despite these challenges, Sharma recently indicated to Bloomberg that Xbox has managed to "reset Game Pass" after an eight-month decline, with the service now showing signs of renewed growth and improved retention. This has led to a strategic shift, with Microsoft reportedly doubling down on its major franchises and a potential reevaluation of day-one releases on Game Pass, a model that has previously seen titles like Call of Duty pulled as exclusive launch content.