Xbox CEO Asha Sharma has reportedly stated that the company's previous strategy for Game Pass sent its balance sheet into "freefall." These comments were made in an internal memo obtained by Windows Central, which detailed the ongoing restructuring at Microsoft's gaming division.
According to the report, Sharma indicated that the issues stemmed from "the damage at both ends to Call of Duty and Xbox Game Pass." After Microsoft's $69 billion acquisition of Activision Blizzard, Call of Duty titles were added to Game Pass. This move is believed to have significantly increased subscription costs, potentially alienating existing subscribers, while simultaneously impacting direct sales of the popular franchise. The calculus for consumers shifted, as buying a month of Game Pass became a more cost-effective alternative to purchasing new Call of Duty games at full price.
Despite these challenges, Sharma expressed optimism about Xbox's current trajectory. The memo suggests that "we're making the right decisions to reinvest in the business, after an all time low, we've started to return to growth, more than 2 to 3 times what we were, and we expect that to continue." This reported return to growth follows substantial layoffs, which saw nearly 2,000 staff cut as part of a significant industry restructure.
Sharma previously set an ambitious goal for Xbox to reach over one billion people daily. While that target remains distant, the financial recovery is seen as a positive step. The success of Blizzard's World of Warcraft: Forever has also been cited as a contributing factor.
Looking ahead, Xbox is reportedly exploring potential changes to Game Pass to make it more accessible. Rumors have circulated about new subscription tiers, including options without day-one game launches and possibly incorporating advertisements. A patent filed by Microsoft also suggested the possibility of suspending gameplay to display ads for additional playtime. If implemented at a competitive price point, such changes could attract new players and expand the service's reach, aligning with Sharma's stated goals for growth.
Sharma acknowledged in a previous statement that Game Pass had not grown as anticipated. "Our business today is not healthy,” she stated at the time, noting that operating margins were significantly lower than comparable businesses. She explained that the bet on Game Pass, multi-platform releases, and a broader content portfolio, while creating value, did not yield the expected growth, leading to a weakening of the core business.
Data revealed during the 2023 FTC vs. Microsoft trial indicated that Microsoft had projected around 77 million Game Pass subscribers for the current year, but the service currently has approximately 30 million. The earlier goal was to reach 100 million subscribers by 2030, a target that now appears increasingly unlikely.
Following her appointment as Xbox CEO, one of Sharma's initial decisions was to adjust the price of Game Pass and remove day-one Call of Duty releases from the subscription. She recently informed Bloomberg that Xbox had "been able to reset Game Pass after an eight-month decline." The service has since "returned to growth and expanding retention," with a renewed focus on connecting with players and the community.
The long-term future of Game Pass remains a subject of speculation. Questions persist regarding whether all first-party titles will continue to launch day-one on the service, and how major upcoming releases like The Elder Scrolls 6 or future Halo installments will be integrated.