Background information
Xbox is facing its biggest upheaval ever
by Philipp Rüegg
Is Xbox on its last legs or mounting a comeback?
6-3-2026
Translation: Patrik Stainbrook
A change in Xbox leadership has received mixed responses. Some are hopeful, others see Xbox nearing its downfall. Despite officially announcing a new hybrid console, the future is uncertain. How its reputation began to falter, however, is quite clear.
Phil Spencer is retiring. After almost 40 years at Microsoft and 12 years as the head of Xbox and Microsoft Gaming, one of the industry’s most influential personalities is calling it a day. His direct subordinate and former Xbox boss Sarah Bond is also stepping down. Only Matt Booty, the third member of this former Xbox management team, remains. He’s been promoted to Head of Content.
Asha Sharma is the new head of Microsoft’s gaming division as a whole. 37-year-old Sharma claims she’s had little to do with gaming before now. Until a few days ago, she headed Microsoft’s AI division. Alarm bells for Xbox fans.
Source: Microsoft
Xbox cofounder Seamus Blackley is convinced that Sharma was brought in to give Xbox a gentle send-off. In the meantime, however, the new boss surprised many by announcing the next console generation. It’s being developed under the name Project Helix and will be a hybrid console that can play both Xbox and PC games.
The future of Xbox remains uncertain, the consequences of a downward trend that began a long time ago. 13 years ago, to be precise, and not on Phil Spencer’s watch, but on former Xbox boss’s Don Mattrick.
An Xbox to bring everything together
«Xbox, go home.» With this sentence, Don Mattrick ordered the Xbox to pack it up many years ago. At the Xbox One unveiling on Microsoft’s Redmond campus in 2013, he and his team debuted a new voice control system for the console. By speaking the command above, you could switch to the home screen. This was made possible by a new Kinect sensor, which was able to recognise voice and movement. What the sensor couldn’t parse was the many faces at this presentation wondering why there was so much talk about TV features and so little about games.
With this successor to the extremely successful Xbox 360, which sold 84 million units worldwide, Microsoft embarked on a new path. Like its predecessor, a pioneer in many areas, the Xbox One would once more look into the future. An all-in-one system bringing everything together: games, movies, music, internet and now Skype and live TV – the one place where you’d be at the centre of your entertainment.
Mattrick proudly showed off the many new features coming to the third Xbox generation. One thing united them all: you needed an internet connection. Not optional, mandatory. Microsoft even went one step further. Physical games were also tied to your account after purchase. Swapping games? Impossible. Welcome to the future. This caused an uproar in the community you could hear all the way to Redmond. But Mattrick had an answer for these critics too: buy an Xbox 360.
Sony’s reaction to Microsoft’s online-only constraint was much better received.
As if this focus on entertainment, voice control and online exclusivity weren’t strange enough, the console cost 500 US dollars at launch. That was 100 dollars more than Sony’s PlayStation 4, which was launched at the same time. On top of that, the PS4 was faster. This made it the leading development platform in the years that followed. As a result, games were better optimised for the PS4 and more review codes went out for Sony’s platform. This only fueled the marketing machine more.
Microsoft only removed its Kinect sensor from the Xbox One bundle a year later and matched the purchase price of the PS4. The main person responsible for this decision was new Xbox boss and Mattrick’s successor Phil Spencer. But the damage had already been done. There are many indications that Xbox still hasn’t recovered from this setback. And this despite having overtaken its competition eight years before with the Xbox 360, despite a disastrous hardware fault.
The Xbox 360 golden era
Before Microsoft introduced the Xbox in 2002, its development team was ridiculed internally and externally. What does the Windows and Office group know about game consoles? But thanks to solid hardware and Halo as the killer IP bar none, Microsoft took over Sega’s vacated position at the top of the console charts alongside Sony and Nintendo.
Microsoft rigorously developed its console concept further, introducing the Xbox 360 in 2005. Among other things, the company wanted to use this name to avoid appearing inferior to the upcoming PlayStation 3. While they backed the wrong horse with the HD-DVD drive and a costly hardware error revealed itself in the Red Ring of Death, Microsoft laid some important foundations with the software.
Thanks to the Xbox Live online service, players were able to play with and against each other online, as well as buy movies, music and games. Xbox Live Arcade was also a goldmine for indie cult hits such as Fez, Super Meat Boy and Castle Crashers. Nowhere else could you find such a unique range of games. Then there was the introduction of achievements for accomplishing certain goals in games.
In the USA, the Xbox 360 clearly outperformed the PS3, which was released a year later. Blinded by the incredible success that was the PS2, Sony made some painful missteps with its next generation. First and foremost, the price.
That announcement at E3 2006 was the opposite of a mic drop moment. 500 US dollars, or 600 for the model with more memory, were hard to stomach. Then there was the underlying technology, which studios struggled with, especially early on. Sony was also lagging behind Microsoft in terms of software. Achievements were only introduced in 2008 and only applied to some of the games. It took Sony years to close the gap to the Xbox 360 – at least globally. In the USA, the Xbox 360 remained the undisputed leader – behind the Nintendo Wii, of course, released in 2006.
Just throw money at the problem
The tide turned once more in 2013. Sony stayed humble and played to its strengths. The PS4 impressed with its price, design and software. The Xbox One, meanwhile, stumbled at its name already. While Microsoft still wasn’t able to grasp this concept with the Xbox Series X/S, the rest of this generation has been sound. In an interview two years ago, Phil Spencer admitted it was too late for a new twist. The digital transformation had began with the Xbox One and PS3 generation. Players had built up their libraries and would find it difficult to part with them.
Nevertheless, Microsoft left no stone unturned in its attempt to steal a march on Sony. Under Phil Spencer, record sums were spent on acquiring new studios. Bethesda, Playground Games, Obsidian, Double Fine and the almost 70 billion US dollar icing on the cake: Activision Blizzard King.
All to no avail. While the Xbox Series has sold 34 million units, the PS5 is in a completely different ballpark with 86 million. And despite acquiring countless new studios, a considerable number of major Xbox games were only released last year. This likely contributed significantly to the lack of sales. Same with the complete absence of an exclusive launch title. Halo Infinite was planned, but didn’t come out until 2021. Other major projects such as Bethesda’s Starfield also failed to bring the desired success.
Source: Bethesda
Still, you can’t blame everything on the Xbox One. In his 12 years as head of Xbox and later head of Microsoft Gaming, Spencer had many opportunities to turn things around. We’ll never know how many of his decisions were commands from the very top. One positive achievement was certainly the backwards compatibility of the Xbox Series, reaching from the Xbox One all the way back to the very first Xbox – including upscaling and HDR. Xbox fans had a more mixed view of the Play Anywhere initiative. Since 2016, you can buy Xbox games and play them on PC as well as other compatible platforms. The PC community was delighted, since this also meant that practically all new Xbox-exclusives would be released for Windows. However, the Xbox brand was slowly diluted at the same time.
The Netflix of gaming
The introduction of Game Pass was much more significant. A logical step for a company that’s increasingly switched from one-off sales to constant revenue from services and subscriptions over the past ten years. A Netflix-like game subscription fits perfectly into this concept.
With all this in mind, Microsoft debuted Game Pass in 2017, including a curated selection of games. In 2018, Sea of Thieves was the first official Microsoft game to be released simultaneously on Game Pass and in stores. The subscription grew into a gamer’s wet dream. More and more exciting titles found their way into Game Pass. Especially in its first few years, the value for money was unbeatable and clearly set the Xbox apart from the competition.
Source: Rare
The Netflix model hasn’t worked out financially yet for Microsoft. And while the prices for its many confusing subscriptions have risen massively recently, the targeted growth still hasn’t come. Microsoft’s goal was to attract 100 million subscribers. They’re a long way from that. Even initial milestones were missed, as documents from the court hearings during the Activision Blizzard King takeover show. Microsoft was looking to hit 35 million subscribers by 2022, and 50 million by 2025. As of today, it’s still only 34 million, trending downwards.
A long-standing criticism of Game Pass has been that it devalues game. Instead of paying full price for a product, you try it out briefly «for free» and skip to the next one. Even the inclusion of Call of Duty was unable to attract permanent users. Data from market research institute Antenna revealed that larger games only lead to short-term subscriptions.
Source: Antenna
Game Pass has evolved from a saviour to a harbinger of doom. Any achievable goals are out of reach, and deviating from the promise that all games from Microsoft studios will be included is no longer possible. On the other hand, Xbox management has proven time and again how quickly they can manage a U-turn.
Cross-platform instead of exclusivity
After the successful takeover of Activision Blizzard King in 2024, pressure from Microsoft CEO Satya Nadella increased. One of the first and possibly most serious measures was the decision to publish Xbox-exclusive games on the PlayStation and Switch. The first four titles were Sea of Thieves, Hi-Fi Rush, Grounded and Pentiment. The floodgates were open. While Spencer once said that Halo didn’t fit the PlayStation, we now know that Master Chief will soon also be hunting aliens on Sony’s console.
As if that wasn’t enough for a bleeding Xbox fan’s heart, last year’s Xbox campaign rubbed salt in the wound. Under the slogan «This is an Xbox», various devices such as laptops, handhelds and smartphones were advertised as Xbox devices. Thanks to cloud gaming, a.k.a. parallel releases on PC and the expanded Xbox Android app, Xbox games can be played on a bunch of devices. Cynics rightly clapped back: «If everything’s an Xbox, nothing is.»
Source: Microsoft
Sales figures for the Xbox Series have also been declining for two years. The Content and Services division initially generated more profits following the takeover of Activision Blizzard King. But by the fourth quarter of 2025, they were again down from the previous year. Q1 2026 appears to be continuing in the same vein. Even the much-touted cloud gaming never took off. Xbox hasn’t had a clear strategy for a long time.
In recent years, the Xbox division has primarily generated profits in one way: mass redundancies. Thousands of employees were let go and renowned studios such as Arkane Austin and Tango Gameworks were closed.
Maybe even Spencer couldn’t follow his own mantra any more – listen to the community and things will get better at some point. Last autumn, he announced internally that he wanted to step down. Microsoft officially announced this on 20 February.
A return to its roots or AI to the bitter end?
The loss of identity that the Xbox brand has experienced since the Xbox One is unlikely to reverse. But that’s what new boss Asha Sharma has been tasked with. A major challenge: the number of gamers is stagnating and increasing profits can only be achieved by squeezing more out of this existing community.
Instead of regularly buying new games, a growing segment is content to play the same titles over and over again. Many of them are free-to-play, such as Roblox, which was even available exclusively on Xbox consoles from 2016 to 2023. According to the latest figures, the ten most-played titles are almost all ten years old or older. Even Microsoft’s evergreen hit Call of Duty was beaten by Battlefield last year. The annual bestseller still shifts millions of copies, but fell far short of expectations.
Source: Roblox
Sharma seems confident in her first appearances. She makes no secret of the fact that, unlike Phil Spencer, she isn’t a gamer. Still, she says she’s determined to get back to Xbox. The way this starts is with the console itself, the hardware. Sharma, who previously worked for an online shopping company, an insurance company and Meta, has only been with Microsoft for a few years. She was previously employed by Windows and Xbox from 2011 to 2013.
Before taking over the reins at Xbox, she led Microsoft’s Core AI team for two years. However, there won’t be any «soulless AI garbage» under her leadership, according to her. Sharma also hasn’t ruled out a return to Xbox-exclusives, as she explained in an interview with Windows Central: «Right now, I need to learn, candidly. About the 'why' of these decisions, what we were optimizing for, and what the data says about the Xbox strategy today. That’s the honest answer. I’m looking at lifetime value, not just what happened in a previous moment, or in short-term efficiencies and things like that. The plan’s the plan until it’s not the plan.»
Sharma doesn’t reveal too much concrete information. Not surprising with so little time in the hot seat. The future of the Xbox remains uncertain. It’s obvious the brand is at a crossroads. Will it return to its former greatness with significant exclusives that can’t be played on the PlayStation and Switch instead? With a technically impressive console that still appeals to the masses? Or will Xbox go the same way as former console giants Atari and Sega, sticking to game development and publishing? We’ll see. Not today, not tomorrow, but at the latest when the next Xbox is launched – or when it’s discontinued.
We talked more about this topic in our Swiss-German A Tech Affair podcast.
Philipp Rüegg
Senior Editor
Philipp.Rueegg@digitecgalaxus.chAs a child, I wasn't allowed to have any consoles. It was only with the arrival of the family's 486 PC that the magical world of gaming opened up to me. Today, I'm overcompensating accordingly. Only a lack of time and money prevents me from trying out every game there is and decorating my shelf with rare retro consoles.
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