Update: Less than an hour after publishing, Asha Sharma has publicly denied that Xbox is for sale. I had no idea this was coming and the timing is nuts. I will say, it's only not for sale until it is and I don't think it's any less likely to eventually happen today than it was yesterday. We shall see.
Remember when a bunch of the games press started handwringing in their usual way over gamers questioning Asha Sharma's appointment as CEO of Xbox? They said we shouldn't care about her total lack of experience in the games industry or even playing games, not even having an Xbox profile until after taking the role or her former role at Microsoft being the President of Product for CoreAI. They said that Phil Spencer's strategy at Xbox obviously hadn't worked--while as usual never digging deeper than surface level to determine why--and said someone with a fresh perspective could be just what Xbox needed.
Come on, she restyled Xbox to all caps after a totally not rigged social media poll (no, I'm not spelling it that way) and gave away a couple hundred limited edition 25th anniversary consoles to fanboys during a major component shortage that saw them raise hardware prices three times in two years. These were obvious signs she wanted to do right by the community and weren't just vapid PR shields. ...Right?
It's been roughly seven months now and aside from the brilliant Disc-to-Digital program which has served as a nice counterpunch to Sony's killing of physical discs, the news out of Xbox has been universally bad. The latest hardware price hike kicked in, even though Microsoft could subsidize consoles with couch cushion money to gain back ground on PlayStation. They've shut down or kicked out several smaller studios and are in the process of axing 3,200 workers into an industry that's unstable to a degree not seen since the crash of the 1980s and that's not even including all the third-party partners that got screwed over in the process. They also effectively destroyed Xbox Cloud Streaming by taking the service no one used already and making it economically ridiculous to consider.
In another announcement this past week of what is supposedly the next stage of their plan, they canned another 268 jobs and said that deals to sell Undead Labs and Ninja Theory have fallen through. The former has now gone independent but had to axe most of their team and almost certainly won't survive past the launch of State of Decay 3, though they did find an oddly unnamed publisher for it. Ninja Theory is likely just screwed. There's also been no buyer found for Arkane Lyon, who will probably join their Arkane Austin brethren in death by year end.
They also announced a major organizational shift and this was the most interesting and suspicious piece to me. After the remake Halo 1's campaign flopped, Halo Studios is being dissolved and a new team to handle future games is being created within...Activision. World's Edge, who looks after Age of Empires and Rare, who have been reduced to the Sea of Thieves studio after having all their other projects cancelled, will also now be reporting to the Call of Duty factory. Obsidian is being moved under Bethesda and Playground Games and Turn 10 are merging, which is less surprising to me as there hasn't been a mainline Forza game in years and Horizon has always massively outsold it. Finally, Microsoft's casual games division which makes many smaller titles, including the undisputed Game of All Time, Microsoft Bubble, will now operate under mobile slop factory King, which is probably the pairing that makes the most sense out of them all.
Some of the cuts have been rather baffling such as slashing half of id Software who hasn't had a miss since DOOM 2016, including most of the team behind the brilliant id Tech engine. They also announced Ninja Theory's closure literally days after debuting their new action-focused Senua game at a Summer showcase. While State of Decay 3 was rumoured to have been in development Hell, it's also supposed to be nearly finished and the first two games were successful so you'd think they'd at least want to wait for it to ship and recoup what they could.
Many have said these cuts are not being made on any sort of creative merit but simply based a stated goal to make a line drop below another line and which studios are furthest away from shipping their next titles or have upcoming releases Microsoft isn't confident in. That's not universally true but when you look at where many of the cuts have happened, there is merit to the theory. This indeed, is exactly why I think Microsoft wanted someone like Asha Sharma in charge of Xbox. No experience in the industry also means no emotional ties or baggage to these teams, studios or franchises.
At the start of this "reset", I said that Xbox was being destroyed for the AI bubble and I stand by that. Microsoft CEO Satya Nadella, a man who has still not learned the virtue of just shutting the fuck up and recently called thousands of layoffs and the loss of some of the industry's best studios "great to see" has staked his entire career and legacy on AI. It's not working out so well and the industry bubble is looking more tenuous than ever as consumers continue to make it clear that they don't want it and businesses are learn that it's not worth the cost, even with massive subsidies. Microsoft has decimated the PC industry that is still their bread and butter through component shortages they played a core part in creating. Windows 11 is arguably their most hated operating system and while I think that's overblown to a point, there's a lot of legit reasons for that sentiment, all of which could be fixed with proper investment and focus.
They continue to pour billions upon billions into the bottomless AI sinkhole despite clear indications that it's a bad strategy. To hold back taking on new debt as Amazon, Google and Meta have, Nadella is cutting every other part of Microsoft to the bone to keep their profits up until the magical day when Big AI suddenly figures out a business model. That's never going to happen but he also doesn't want to be the first one to blink.
This isn't the first boneheaded trend chasing move he's made in his tenure as Microsoft top dog either. Ed Zitron recently said in a podcast that when Microsoft bought Activision-Blizzard for nearly $70 billion, it was as "a Metaverse play". In all the drama around that purchase, I'd never heard that before and thought he was joking but no, they seriously framed it as that. Even as recent tech bubbles go, the Metaverse was one of the stupidest ideas ever and was the first sign that big tech companies had run out of new ideas. Funny how Microsoft and Meta--a company that literally changed its name because of their Metaverse focus--are now all in on AI and have largely left that trend behind. It was whispered that Phil Spencer fought against the purchase internally and it was actually Nadella's idea. That seems more believable now. It was also made during the COVID gaming boom when the supposedly smart people running the industry thought demand would just keep increasing forever, even when the pandemic ended. Man, remember that?
Buying Activision-Blizzard has largely been a disastrous decision for Microsoft, with every Call of Duty release since being considered mediocre to awful and despite still selling many millions, all flopping by series standards. Blizzard has continued to chug along but there is no way that investment has nearly paid itself back yet. When Asha Sharma said Xbox's business was "not healthy" and had margins notably lower than their peers, I think the cost of the acquisition played a big part in that.
Phil Spencer's goal in Microsoft's prior studio buying spree was to bolster their first-party content to feed Game Pass. While Game Pass growth has slowed, it still has millions of customers (myself among them) and without the weight of needing to pay back $70 billion for Activision-Blizzard, I think his strategy could have worked out. That Call of Duty has now been removed as a day one Game Pass release I think adds credibility to the theory.
That's not to say Spencer's leadership was perfect. His methodology of leaving their studios to their own devices resulted in a lot of development Hell and mediocre releases. Bonnie Ross' inept leadership of Halo drove that franchise off a cliff and there was the cancelled disaster that was the Perfect Dark reboot just to name a couple. One could credibly claim Spencer was the opposite of Sharma, overly attached and invested in the studios to the point that it made him blind to a heavier hand that some of them needed. I think that's the lesser of two evils though, especially for a company with near unlimited resources like Microsoft.
I think Asha Sharma was chosen to take over Xbox for two reasons. The first as I alluded to is that her lack of industry experience means she has no ties to it. She doesn't know about the storied legacy and technology of id Software. She doesn't know about the reverance many gamers have for Double Fine or the groundbreaking storytelling and motion capture tech that Ninja Theory pioneered. Her lack of understanding and appreciation for games ideally suits her to make the cold, finance driven choices Satya Nadella is demanding to feed his AI obsession. That she previously led one of Microsoft's AI divisions also means she's probably as deep in business AI psychosis as he is.
The second reason is what I think drove the recent reorganization. As of now, only The Coalition (Gears of War), inXile Entertainment (Clockwork Revolution and Wasteland among other RPGs) and Playground Games (Forza and Fable) remain under the purview of Xbox Game Studios. What do all of these studios have in common? They all have new releases shipping in the next year. I'll predict right now that all three will also get stuffed into Activision or Bethesda after their games ship. The Coalition and Playground will probably to go Activision and inXile to Bethesda or if their titles underperform, they'll just get shut down or spun off. This won't happen to Playground, though the Fable team could be cut if that doesn't hit. Putting Halo under Activision kind of fits because at least it's a first-person shooter but Sea of Thieves and Age of Empires? Those two make no sense to put there but more than the alternative I suppose. At least putting Obsidian under Bethesda fits better because it's an RPG studio.
Why do all this? Because I think Microsoft ultimately wants out of gaming and that Asha Sharma's long-term mandate is to split Xbox into multiple units to either be spun off or sold.
Microsoft has strongly signalled that their next console is effectively a PC for your living room, including support for other storefronts like Steam. That means they no longer care about being the only place or even the main place you buy games from. They also publish a lot on rival platforms and while they've scaled that back a bit, they haven't abandoned it like Sony has with non-live service games on PC. For pretty much the entire life of the console business, the strategy of the big platforms was using exclusive games and unique services to sell more hardware and lock in more players. I'm not entirely sure what Microsoft's strategy is now but I think they've decided they would rather just have a box that takes a piece of everything and that making the games is too much hassle and overhead.
Seamus Blackley, one of the original founders of Xbox claimed that Asha Sharma was "a palliative care doctor" for a division that was being "sunsetted" for AI. He too seems to think putting someone who doesn't care for games in charge of one of the world's largest gaming brands seems intentional.
Between their remaining studios and IP, Microsoft is still sitting on a gold mine worth many billions, even after all the cuts. They're not going to find someone willing to buy the Xbox business wholesale but if they reorganize it into Activision-Blizzard, Bethesda and Mojang, reducing the core Xbox business to just hardware and Game Pass? Suddenly that gets a lot easier. They could even separate Blizzard and King off into their own units as well.
This is exactly what you bring in an outsider like Asha Sharma to do. Think about it. She doesn't care about gaming but is invested in Nadella's AI vision because of her prior role. She gets a directive to trim as much fat from Xbox as possible and restructure the rest to make it attractive to buyers. They get as much of their investment back as they can and free themselves from gaming, which even before AI, never made them much money relative to everything else and is probably seen by Nadella as a burden at this point.
The irony is that thanks to the AI bubble they helped create, most investment capital has been vacuumed out of the games industry, which is why it's in such bad shape. This is arguably the worst possible climate to actually find buyers for this stuff. But, there are a lot of large conglomerates and sovereign wealth funds (mostly controlled by hostile dictatorships like China and Saudi Arabia) who would probably be interested in buying up some of these divisions like they did with EA. Whatever they couldn't sell could instead be spun off into independent, publicly traded companies and left to sink or swim on their own, which would still let Microsoft largely cash out and get them off their books. It's a brutal plan that cares not for Xbox's legacy, for art or for artists and that's exactly why I think Satya Nadella saw Asha Sharma as perfect for the job.
If it wasn't clear already, I hate this and don't want it to happen. If Microsoft no longer cares about gaming, I'd like to see what they have left go to people who do but that's not any the potential buyers who could afford it. I think this is a short-sighted, myopic strategy done to aid in chasing a trend that's already starting to crack and will wreak economic devastation when it does. It will dilute and divide up a huge part of an industry that while never easy to succeed in, is still the biggest entertainment medium by far and continues to grow in spite of the reckoning it is currently enduring.
Like other hyperscalers, Microsoft will not get taken down when the AI bubble pops but they will take a big broadside. My hope is that this happens sooner rather than later and that Satya Nadella gets run out of the company in disgrace like he should have been years ago. If they don't fulfill my prediction of divesting Xbox before then, hopefully whoever comes in after him to right the ship will see gaming as something still valuable and be willing to make smart reinvestments in it, nurturing talent and pro-consumer initiatives to turn it into what it always could have been. I know this is a pie in the sky vision but this industry and medium have survived every crisis thrown at it and I think it can do the same here. It will probably have to get worse before it can finally get better and I just hope the AI bubble pops before it becomes irreparable.
If they could spend a bit of time and money unfucking Windows, that'd be nice too.
