Microsoft Has a Catastrophic Xbox Problem, Self-Inflicted by Game Pass and Culturally Destroying Studios It Acquired

It’s easy to remember a time when Microsoft’s Halo games were incredible and drove the success of the Xbox 360. Unfortunately, those days are over. Many believe Microsoft’s focus on Game Pass, combined with changes in the company’s approach to its game studios, ultimately harmed the very studios they acquired, hindering their goal of total dominance in the gaming world.

A key sign of trouble for Xbox is its recent financial performance. Microsoft reported a 42% drop in Xbox hardware revenue for the quarter ending June 2024 compared to the same period last year. This isn’t a single isolated incident – hardware sales have been declining for six out of the last seven quarters. While Microsoft doesn’t publicly share exact console sales numbers anymore, analysts believe the decrease is significant. For example, Daniel Ahmad estimates that fewer than 900,000 Xbox units were shipped in one quarter, while PlayStation shipped millions.

But what exactly destroyed Xbox as a brand?

Units sold: deep drops, market share erosion

Xbox Series X|S sales in the U.S. reached approximately 2.7 million units in 2024, a decrease of about 29% compared to the roughly 3.8 million units sold in 2023.
Xbox sales in Europe also declined significantly. Some reports show a drop from 550,000 units sold in one year to just 290,000.
In January 2025 alone, Xbox sales were down nearly 48.7% year-over-year.
According to data from Circana, the Xbox Series X|S is selling about 19% slower worldwide than the Xbox One did at a similar point in its lifespan. This suggests the newer consoles aren’t performing as well as the previous generation.
As a big fan of gaming, I’ve been following the console wars closely, and it’s become clear that the Xbox Series X|S hasn’t sold as well as I’d hoped. Current estimates suggest they’ve moved under 30 million units total, which is quite a bit behind PlayStation’s sales figures. It’s a little disappointing, honestly, but I’m still rooting for Xbox!

In contrast, the PlayStation 5 is performing well, and even gaining popularity in certain areas, which is widening the gap between it and the Xbox.

With Xbox sales falling significantly, there’s growing speculation that Microsoft might change its plans for the console. Recent reports suggest these changes could be quite dramatic.

Costco, a large retail chain in the U.S., has reportedly stopped selling Xbox consoles. This could mean retailers expect fewer people will be buying Xbox hardware, so they’re choosing to stock less of it.
There have been reports from some Reddit users and retailers suggesting that stores are stopping sales of Xbox consoles due to poor sales figures.

Although these reports are based on individual stories, Costco’s decision to stop carrying certain products might suggest they don’t expect sales to improve, or even anticipate a decline.

Internal cost cuts, layoffs, and cancellations:

Microsoft has already conducted multiple layoffs within its Xbox and Microsoft Gaming divisions.
Several large gaming projects, like *Perfect Dark* and *Everwild*, have been either canceled or put on hold, suggesting Microsoft might be shifting its focus and investments away from games specifically designed for its hardware.
According to sources familiar with the company, Microsoft’s CFO, Amy Hood, has reportedly set very challenging financial goals for the Xbox team, which is creating difficulties for the Xbox hardware business to remain profitable.
Microsoft CEO Phil Spencer has acknowledged that their gaming hardware sales are currently struggling and are expected to continue to decrease in the short term.

Xbox’s recent struggles with its consoles aren’t simply due to poor sales figures. A combination of factors – including decisions the company made, how the Xbox brand is seen by the public, mistakes within the company itself, and changes in how people play games – have all contributed to a decline in Xbox’s reputation and popularity. Here’s a look at some of the key reasons behind this shift.

This is gonna be a wild ride.

— Grummz (@Grummz) October 6, 2025

For years, Microsoft has been focusing on Xbox Game Pass, aiming to make Xbox less of a traditional console and more of a gaming subscription service. This approach has both advantages and disadvantages.

Although Game Pass makes it easy to try new games on day one, it could potentially weaken players’ loyalty to the console itself. If people are mainly playing through a subscription service, they might not feel as much of a need to buy a high-end console.
Some developers and industry observers are worried that the way Game Pass works might discourage investment in big-budget games and support for smaller, independent titles. The creator of Arkane Studios even spoke out, stating that Microsoft’s method could be damaging to the gaming industry.
Microsoft believes releasing *Call of Duty: Black Ops 6* on Game Pass could result in around $300 million less revenue, as fewer players would buy the full game at its regular price.

So, although Game Pass is a key part of Microsoft’s plans, focusing on it might have weakened their reputation for great hardware. And it’s not just Game Pass that hasn’t been entirely successful…

Successful gaming consoles usually stand out thanks to games you can’t play anywhere else and a clear, recognizable style. However, over the years, Xbox has lost some of that unique identity.

As a big movie—I mean, *game*—lover, I’ve noticed Microsoft’s been sharing the wealth lately. They used to have these games you *had* to get an Xbox to play, but now a lot of them are showing up on PC, and even on consoles that aren’t Xbox. It kind of takes away the idea that you absolutely *need* an Xbox to experience those titles, you know?
Recent leaks and rumors indicate that Xbox’s plans aren’t always clear, and there’s confusion about who’s making key decisions and how quickly they’re moving forward with new hardware.
The repeated cancellation or postponement of highly anticipated games like *Perfect Dark* and *Everwild* is eroding trust in Xbox’s plans for the future.
Some people believe Xbox may have hinted too early that its current consoles are almost at the end of their lifespan, which could be discouraging customers from buying them now. This situation is similar to what’s known as the “Osborne effect” – when excitement about upcoming products actually reduces sales of current ones.

This situation gives the impression that Xbox isn’t entirely focused on creating powerful gaming consoles, which could discourage people from buying them. However, many believe the biggest issue for Xbox has been linking its games and studios to controversial social issues.

This is who Microsoft just chose to put in charge of their Halo franchise. RIP.

— End Wokeness (@EndWokeness) October 7, 2024

🌈 Happy Pride Month 🌈

Show your support for love, diversity, and inclusion in Halo Infinite this June by unlocking the special Unity ‘24 armor coating, nameplate, and emblem.

Let’s celebrate and support our LGBTQIA+ community, working towards a future where everyone is accepted and united. #Pride2024

— Halo (@Halo) June 1, 2024

Xbox’s console business is currently facing significant challenges. The consistent drop in sales and revenue indicates this isn’t a short-term problem. Reports of reduced production, retailers ordering fewer consoles, and changes within Microsoft suggest the company is rethinking its reliance on consoles as the main focus for Xbox’s future.

Despite current challenges, Microsoft isn’t beyond repair. The company still has significant advantages, including its financial resources, robust cloud technology, a wealth of patents and acquired technologies, and established subscription services. With the right strategy – a clear focus, innovative devices, renewed support for developers, and a compelling vision – Microsoft could stabilize its position and even regain momentum.

As a movie and gaming fan, I’ve seen brands rise and fall, and reputation is everything. Once people start thinking a console is losing steam – that it’s weak or unsure of itself – it’s incredibly tough to win them back. Xbox needs to be consistently great, take some real risks with its games and hardware, and really figure out what it stands for in a crowded market. But honestly, the big question is whether Microsoft can change things from the inside – can they shift the culture within the company and at all their game studios? Right now, it doesn’t seem very promising, and that’s a little disheartening.

2025-10-06 06:01

Read More