It’s becoming more and more apparent that Microsoft is at a crossroads when it comes to gaming. The company has spent billions of dollars to dominate game development and is heavily invested in gaming as a service over console hardware. More than ever, it’s the Xbox console that seems like it’s on the chopping block.
The last five years of Xbox have been defined by one expensive win and dozens of losses. Xbox got away with acquiring Activision Blizzard King, but quickly turned to layoffs to balance the books. Game Pass has never quite exploded in growth. And Microsoft’s decision to bring expensive exclusive games to other platforms seemed to invalidate its previous strategy entirely.
In a Microsoft defined by its cloud business, Windows, and a big bet on AI, an Xbox division that’s still trying to sell game consoles makes less and less sense to the people who go to work in a suit or a tasteful cashmere sweater. Xbox launched in 2001 with a big bet on bringing PC-level graphics and online multiplayer to consoles, but 23 years later, the end of Xbox as a console is a matter of when, not if, and the path that gets us there is visible if you know where to look.
The End of Physical Media
One of the defining features of the Xbox from the very beginning has been its services. Xbox Live Gold, which gave you access to Microsoft’s reliable online multiplayer and communication features on the original Xbox and the Xbox 360, was always the envy of companies like Sony or Nintendo. And even as the PlayStation and Nintendo online experiences have improved, what’s possible on the Xbox has continued to stand out.
The hope, it seems, was for Game Pass and Xbox Cloud Streaming to become similarly essential. Microsoft gives you the backbone of a good modern gaming experience (the company is great at selling servers when it comes down to it), and now it would sell you a library of games, and eventually a way to play them remotely on any screen of your choice. “The Netflix for games” is a good enough pitch that even Netflix is still trying it, and Game Pass is still a great deal (good enough that Microsoft and developers seem to lose money on it). However, it’s clear that Microsoft hasn’t been able to convince everyone. As of February, Game Pass had 34 million subscribers. That’s still many subscribers away from the 100 million Xbox wants by 2030.
The lower-than-expected Game Pass subscriptions haven’t changed Microsoft’s commitment to game streaming, however. The Xbox Series S launched without an optical disc drive, an acknowledgment that most people were comfortable downloading games digitally, and game streaming could make up the difference for underpowered hardware. When legal proceedings brought the plans for future Xbox hardware into the limelight, the most obvious difference was that Microsoft’s planned consoles didn’t have disc drives. And during a showcase last month, when the company announced a revised Xbox Series X for later this year, the major difference is that the console, again, doesn’t have a disc drive.
The Xbox console is an island — one Microsoft is increasingly trying to create reasons to not visit.
Microsoft and Xbox are clearly trying to get away from physical media and move towards digital downloads, where it can get a bigger cut, and subscription services, where it pockets all of the money. We now know that Microsoft tried and failed to launch a compact streaming-only console box that was codenamed Keystone. Microsoft has also continued to bring Game Pass and Cloud Streaming to TVs and streaming boxes, including Samsung TVs and now Amazon’s Fire Sticks.
Whereas the Surface devices serve as a sort of North Star for other Windows hardware makers and as a way to experiment with new designs that can be shared with partners, the Xbox console has none of that utility. The Xbox console is an island — one Microsoft is increasingly trying to create reasons to not visit.
Everything Is More Mobile
Compounding Microsoft’s clear interest in converting the Xbox from a box that lives under your TV to a more nebulous collection of gaming services is the trend toward mobile handheld game experiences. Mobile games might dominate the financials of the game industry, but they don’t dominate the culture. That hasn’t stopped people from being increasingly interested in playing handheld video games, though. Everything from the success of the Nintendo Switch to the very technical possibility of the Steam Deck and other handheld PCs like it is confirmation of that fact, as we’ve covered before.
Xbox and Microsoft at large have shown real interest in mobile gaming. As the story goes, purchasing Activision Blizzard King was about getting control of King’s library of mobile games. There’s an Xbox mobile game store in the works for the European Union, too, which could serve as a beachhead for Microsoft's mobile game aspirations.
On more than a few occasions, Phil Spencer, the CEO of Microsoft Gaming, has expressed interest in a “handheld Xbox,” whether that’s as some kind of custom version of Windows, an app, or real dedicated hardware. If there’s any kind of Xbox console that survives in the next decade, it’s probably going to be in handheld form. Maybe it’ll even dock to a TV for living room play.
The Xbox Just Hasn’t Worked
Microsoft has never been able to reach the highs of the Xbox 360 era. Whether through misguided features and poor communication during the bungled launch of the Xbox One or a growing understanding that the company might not be the best steward of the dozens of studios it now owns that have defined the lifespan of the Xbox Series S and Series X.
Whatever Xbox means now, it probably won’t mean that in 10 years...
When a company suddenly shuts down beloved studios for seemingly no reason, it becomes a lot harder to believe that it’s in the games business for the long haul, as opposed to managing its decline, or shifting into some other business entirely. Whatever Xbox means now, it probably won’t mean that in 10 years, and based on Microsoft’s own plans and the general trends of the industry, that starts with sending the Xbox console off for good.
