Xbox as we know it is about to look very different, CEO Asha Sharma announced Monday in a publicly distributed memo detailing the company’s new plans. 3,200 layoffs. Four (maybe five) studio divestments. Sweeping changes to management structures. And broad implications about how Xbox will approach its business over the next 12 months.
Amid it all, Game Pass, Xbox’s games-on-demand service and the linchpin of its strategy in the post-COVID era, was curiously absent from today’s announcement, at least explicitly. In her memo to staff, Sharma mentioned “Game Pass” just once, in a paragraph that can most generously be read as a skewering of former CEO Phil Spencer’s decade-long regime:
“Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected. As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset XBOX.”
In that reset, Game Pass isn’t going anywhere. Xbox still plans to invest in the service, Game File’s Stephen Totilo reported, citing a source familiar with the company’s plans (in addition to the fact that Game Pass generates $5 billion a year in revenue). But a year from now, Game Pass will likely look much different.
The most immediate likely impact is to a longtime perk for the service: For years, Xbox has put its first-party games available day one. But with fewer companies making first-party games, that perk will have less going for it.
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