Microsoft Denies Rumors of Considering Xbox Shutdown in 2021
Recent speculation from The Information suggested that Microsoft CEO Satya Nadella faced a critical decision in 2021 regarding the future of Xbox. According to the report, Nadella contemplated either winding down Xbox or doubling down with large-scale investments, including the $68.7 billion acquisition of Activision Blizzard and the earlier acquisition of Bethesda/ZeniMax.
Microsoft has firmly denied these claims, reiterating Nadella’s previous public statements that Microsoft is “all-in on gaming.”
Xbox’s Financial Performance Under Scrutiny
Despite Microsoft’s bold investments, the gaming division reportedly fell short of growth expectations. Microsoft’s gaming business achieved 5.8% growth in 2024, missing the 11% growth target required to trigger Nadella’s bonus. It was reportedly the only division at Microsoft to fall short of its performance goals.
Investor and Analyst Reactions
Investors and analysts expressed mixed sentiments about Microsoft’s strategy:
Denny Fish, portfolio manager at Janus Henderson Investors, noted disappointment with the Activision acquisition:
“It’s a business that had consistency over a three-to-five-year period but was highly volatile from year to year, reliant on major releases like Call of Duty.”
Michael Pachter, gaming analyst, remains optimistic about Game Pass:
“They might lose money in the short term, which is fine, as long as they can prove that in the long run Game Pass is a solid source of recurring revenue.”
Gus Zinn of Macquarie Science and Technology Fund offered a dissenting view:
“I just think the majority of the game market doesn’t really want a Game Pass.”
Game Pass: A Divisive Model
Microsoft has heavily marketed Game Pass as a transformative subscription service. While some developers hail it as a beneficial platform for visibility and user engagement, others argue that it cannibalizes premium sales. Former GamesIndustry.biz head Christopher Dring claimed developers could lose up to 80% of premium sales on Xbox consoles if their game is available on Game Pass.
Despite boasting about record numbers, Microsoft has not updated the Game Pass subscriber count since February 2024, when it reported 34 million subscribers—far short of its 2030 goal of 100 million.
On a related note, Microsoft recently implemented small-scale layoffs in its gaming division, among others, following last year’s significant 1,900+ job cuts in January 2024. The company emphasized that the current cuts were minor and part of broader operational adjustments.
What are your thoughts on Microsoft’s strategy with Xbox and Game Pass? Do you believe it’s the future of gaming or a misstep? Share your perspective in the comments below!
