There was a time when 2024 looked like a golden opportunity for Microsoft’s Xbox. I’ve never considered getting its latest console, the Xbox Series X, but I still thought 2024 could be “the year of Xbox” as recently as March.
Let’s set the scene. Sony, despite the success of the PlayStation 5, announced upfront that they would not release any big-budget exclusives this year — which is kind of like Disney announcing that they wouldn’t be releasing any animated movies. Nintendo was in hibernation, awaiting the inevitable announcement of the Switch’s successor. That left the market wide open for Microsoft to dominate with a slate of compelling Xbox exclusives and promising announcements.
And yet, 2024 is almost over, and it has not been the “year of Xbox.” In fact, that prodigal year may never come. In order to understand what could lead Xbox to failure, we must first understand their biggest recent success.
Fast Pass
Xbox Game Pass, for the uninitiated, is essentially the video game equivalent of Netflix. I am perhaps the billionth person to make this comparison, but it’s an effective one: The pay-per-month streaming service allows a consumer to stream a cavalcade of games across genres without owning them.
Game Pass launched in 2017 and has been a decent success thus far, with a player base of roughly 34 million subscribers. Its rival, PlayStation, has stopped sharing subscriber numbers for its service, PlayStation Plus — a fantastic sign for Microsoft.
There’s just one problem. The Xbox Series X and S — the Series S, for our purposes, is just a cheaper and all-digital Series X — have only sold about 28 million units. Even if we assume every single person who bought a Series X or S also subscribes to Game Pass, we’d still have a discrepancy of six million users who don’t have an Xbox Series X or S but subscribe to Game Pass anyway. Subscribers on Xbox One make up this difference somewhat, but the real strength of Xbox Game Pass may not even be on Xbox itself.
Xbox Game Pass for PC is exactly what it sounds like, and it’s simultaneously a startling success for and a massive threat to Microsoft. While Xbox has declined to share the division of subscribers on its distinct platforms, it’s intriguing that this PC service could be nearly as popular and profitable as the Xbox consoles themselves. If the Game Pass for PC is indeed that popular, an obvious question follows: Why even bother making consoles in the first place?
It doesn’t help that Xbox has never been the market leader in the console space. The original Xbox was vanquished by the PlayStation 2, and while the Xbox 360 and PlayStation 3 were neck-and-neck throughout the seventh generation, the PS3 ultimately won out. Then came the last generation, where it wasn’t even close; the PlayStation 4 won without breaking a sweat. As Series X sales continue to lag slightly behind the PlayStation 5, it’s increasingly hard to justify the hardware.
But if Xbox’s hardware could be doomed, there’s one natural solution: software! All Xbox needs to justify its continued existence is a series of killer apps — and it’re so close to this possibility that the reality is mind boggling.
Studio Setbacks
Xbox Game Studios is one of the most valuable entertainment companies in the world. It might not seem like it, but a shopping spree Microsoft has been riding for nearly a decade has led to a staggering collection of talent and intellectual properties that they can exercise however they want.
The spree began back in the summer of 2018 when Xbox bought four studios and created a new one. Later, a duo of knockout punches landed as Xbox completed a $7.5 billion purchase of Bethesda Softworks in 2020, followed by the mammoth $68.7 billion purchase of Activision Blizzard in 2022. These studios are two of the biggest publishers on the planet, and they control some of the most iconic gaming franchises. Xbox buying both of them was seen as a huge power move and a direct shot at Sony’s otherwise dominant PlayStation brand.
However, it seems that these purchases have not yet borne fruit. The four studios bought in 2018 have combined to produce just three games in the years since its purchase. Bethesda finally debuted its first Xbox-exclusive game, “Starfield,” in 2023. It was a hit, but it didn’t even crack the top 10 on the year-end sales chart — a blow made even worse by the fact that PlayStation and Nintendo’s tentpole games, “Marvel’s Spider-Man 2” and “The Legend of Zelda: Tears of the Kingdom” both managed to make it in.
Xbox has a tough time succeeding with its own studios. This isn’t a generalization — it’s a near-constant reality.
Let’s start with the studio that is supposed to be the most stable in its arsenal. The recently renamed Halo Studios run the — you guessed it — “Halo” franchise for Xbox, and the last few years for them have been worryingly newsworthy.
The last entry in the series, the 2021 entry “Halo Infinite,” is infamous for its rocky development history: In the span of less than a year, three different directors left or were fired. A wave of layoffs and the abandonment of the studio’s in-house game engine snowballed into a complete “internal reboot,” which included the name change. While Halo Studios are now trending in the right direction, they took a long road to get there.
Xbox also seems to repel some of its best studios from success. Tango Gameworks, a Bethesda studio previously known for making spooky games like “Ghostwire: Tokyo,” shocked the industry in 2023 with its breakout rhythm-action hit “Hi-Fi Rush.” However, just a year and some change later, Xbox announced the studio would shut down. That studio would later be resuscitated under third-party publisher Krafton, but the sting of that decision remains.
Then there’s Toys for Bob, an Activision subsidiary that Xbox bought in 2022. The “Skylanders” team reached new heights in 2018 with a vivid remake of the iconic “Spyro” trilogy of platforming action games, then delighted longtime gamers everywhere with the 2020 legacy sequel “Crash Bandicoot 4: It’s About Time.” After just one original game, “Crash Team Rumble,” the studio abruptly announced it was spinning off from Xbox earlier this year.
Both of those studios have retained some partnerships with Xbox, but it’s hard to tell what that will mean, exactly — and it would be hard to blame the studios if they didn’t end up meaning much.
Activision Blizzard, the expensive crown jewel of Xbox Game Studios nowadays, is doing well — but it is extremely vulnerable if sales go south. Its valuation is almost entirely based around one series, “Call of Duty,” which is so ridiculously popular that Xbox had to promise to keep the series on PlayStation platforms in order to even buy the company in the first place.
A series that began under just one team, Infinity Ward, has now expanded to encompass a staggering six studios — nearly the entirety of Activision. As long as “Call of Duty” remains a gigantic gaming franchise, this is not a problem. But if gamers start to get the “Call of Duty” equivalent of superhero fatigue, what then?
It’s not over yet for Xbox’s studios, and it appears that plenty of big games are ahead of them. New entries in series like “Fable,” “Perfect Dark” and “Gears of War” are on the way. But if the studio can’t get those teams to stick around, let alone release great games, Game Pass and the Xbox itself may become an increasingly difficult proposition for the average consumer.
The Future(s)
As far as I can tell, this means that Xbox can follow two paths towards a viable and successful future. One is far more boring than the other.
First, the boring timeline: Xbox stays on its current trajectory, skirting the line between console publisher and eccentric game distributor. It continues to manage its massive acquisitions, Bethesda and Activision Blizzard, as just another aspect of its business. Xbox Game Pass subscriptions become increasingly more important than consoles sold, but Microsoft doesn’t fully commit to prioritizing either profit model. Disgruntled studios continue to come and go, with shutdowns, reboots and the occasional hit breaking through. It’s a profitable enough business, but there might be a hard ceiling on its business model’s growth.
There is an alternative here, and while it would undoubtedly be bizarre, I don’t think it’s completely out of the question. Xbox has the potential to beat its own acquisitions to become the biggest third-party publisher on the planet by far, while simultaneously remaining a major platform — without producing any more Xboxes.
Game Pass can absolutely become its central product. Because it’s a subscription service with hundreds of first-party games guaranteed to remain on there, it can beat PC marketplaces like Steam and console subscriptions like PlayStation Plus to become the definitive best deal in gaming.
Xbox’s library is huge after acquiring Bethesda and Activision Blizzard, and without any pesky console specs or release timelines holding it back, Xbox can offer 20 years of gaming history on one platform seamlessly. Free from hardware exclusivity, it can even license out Game Pass compatibility to hardware competitors like Apple TV or even — dare I say it? — the Nintendo Switch.
But that’s just one part of this new model. Now that Xbox owns Bethesda and Activision Blizzard as well as a slew of other studios, it can start publishing full time on PlayStation and Nintendo platforms and overtake its exclusives to become the biggest company on its rivals’ own systems. Imagine how embarrassing it would be for a “Halo” game to outsell a “Mario” game on a Nintendo console — but the only outcome more mortifying for Nintendo would be to reject the game from its store, almost certainly losing out on millions.
Xbox is already testing the waters of this option. Earlier this year, it captivated the gaming industry by announcing that four of its smaller first-party games would come to PlayStation 5 and Nintendo Switch. Two huge upcoming Bethesda games, “Indiana Jones and the Great Circle” and “DOOM: The Dark Ages,” are coming to the PS5 as well. With the “Call of Duty” deal locked in as well, there’s no reason for Microsoft to not go all in on software with its resources.
It’s not like Xbox needs to completely leave the hardware space, either. It can keep supporting the Series X and sell as many as it can before the supply runs dry. Xbox controllers remain popular as well, and loyalists would surely jump for Xbox controllers to play alongside their Game Pass subscriptions.
Xbox head Phil Spencer said back in 2022 that Xbox loses hundreds on every console it sells, and it has to hope it makes the money back with games and accessories. So, what’s the point? If it can keep making “X” millions of dollars, it might not need the “Box” part.
Sammy Bovitz is a staff writer for the Daily Trojan Magazine and an assistant editor and columnist for the Daily Trojan’s Arts & Entertainment section, penning the biweekly column “Boardrooms & Blockbusters.” Bovitz is a sophomore majoring in journalism.
