Continuation; The Grave State Of Xbox Studios

·

July 17, 2025

I’m seeing so many outlets in Substack defending Xbox’s situation, making the alternative case for argument’s sake. But we all know just how badly they’ve screwed up. I’ve been giving them the benefit of the doubt for many years, no more.

I left off talking about how Microsoft has laid off or shifted development teams of several studios with little to no notice. While shifting focus on A.I., downsizing and using those A.I. tools as replacement. As well as making safe bets on established IPs by creating spin-offs and sequels.

Now we’ll be talking about the state of Game Pass, how it is effecting other developers’ ability to sell their games, and the cannibalization of Xbox first party titles. The push for a studio like Obsidian to continuously push out titles, and being too much on the comfort zone without trying anything new. Microsoft has over two decades of game development history, and all the issues they have has somehow always boiled down to corporate culture issues, and financial choices.

The topics given:

• Critical statements about Game Pass from ex-developers.

• Current games struggling with development and might also be facing cancellation in the future

• Analysis of Xbox’s management, their history, and what could be done to alleviate

Xbox Game Pass was first announced in Feb 28 and launched on June 1, 2017, to high praise. It was lauded as a service that allowed people access to games without draining their wallet, and their first attempt at a Netflix type subscription service. It worked, while not getting high numbers, it slowly climbed to active 35 million users. But there were questions asked about its viability, because the thing Xbox was doing was releasing their first party titles day-one on the service. It affected launch sales, and instead of sales units, were replaced with active players.

Microsoft had enough money to pay off even third-party developers, making great deals with them to release their titles on day-one, too. Most of these games don’t always stay in the libraries, at some certain point, they go away. PC and Xbox Game Pass have different libraries too, with more volume on the console side. That make sense if they still want their systems to sell.

For the past 8 years, Microsoft had established close relations with Japanese publishers SEGA, and few other indie developers who have claimed a lot of success thanks to their service. But statistics has only proven this to be the case for bestsellers. Games that have success and enough players to warrant purchasing them.

Applied to both online and single-player games. The niche titles are sort of in a questionable position, it’s not that they don’t make their money from Game Pass, it all depends on the kind of deal Microsoft would make with them. Raphael Colantonio, ex-game director of Arkane Austin, has made multiple claims, calling it an unsustainable model of business. This idea that most of the games promoted will be low quality, rife with performance issues, and developers quickly pushing out unfinished products. Speaking of unfinished products, it would seem a rather facetious to make the claim now that all the first party games do sell well. People continue to discuss online just how much their games have sold or contributed to Game Pass, making money along with it. Games like Gears 5, Forza Motorsport, The Minecraft spin-offs, Doom: The Dark Ages, various first-party titles were reporting high player counts, no news outlet has pressed on to see any of these games were very lucrative with concrete data.

Technical problems include that some of the games sold in the Xbox store have a number of issues compared to the Steam release, take Death Stranding for example, failed save files where people lost their progress. Others being that some games have inferior builds where Steam gets their first, and they get theirs later on.

Microsoft does show a lot of support for various developers, both indie and being published by game companies. Specifically, from their ID@Xbox, and Developer Acceleration programs. While the company likes to boast about their profit margins from their gaming division, one could ask just what the cost factor Game Pass came into making that happen. Nonetheless, the model is still making headlines for how successful it has gotten. This even though prices have been raised, after Clair Obscur: Expedition 33, the success has gone up drastically. This month alone, the list of releases are very enticing.

Pay To Read More

Answer Survey

Somewhere in 2021, it was reported that Microsoft CEO, Satya Nadella, made a choice between downsizing the gaming division and pursuing to expend it through big acquisitions. Namely, companies like Activision Blizzard King, Nadella told Phil Spencer he also wants Game Pass membership to reach around 100 million by 2030.

Five years in, and Game Pass only managed to get to 35 million. It doesn’t seem its growth rate is keeping up to expectations. It’s starting to show that they bit on more than they could chew, and seeing that ABK manages to pull 8 billion dollar annual revenue, he has made the choice to cut costs and focus on an 80 billion dollar AI restructure. Hence, explaining the massive layoffs.

What this led to, is a number of game developers dealing with low morale. Take Halo Studios for example, they’ve lost morale, not because of the layoffs but before the July job loss, Xbox didn’t seem happy with the new Halo game, and it made them nervous. One thing to note that after Bonnie Ross of 343 Industries left, Pierre Hintze took over, and Halo: Infinite was getting better content, leading to player increase. But the damage was done, the game wasn’t retaining big numbers, and so a studio rebrand and new project went forward. They also started relying on studio contracts instead. Now there’s talk of jumping ship, the focus on A.I. has also effected their work. With Microsoft implementing the tools to work on game development as well. Before this, the studio had layoffs in 2023 as well.

Another issue is the Contraband game, Xbox’s official YouTube channel has privatized the game trailer. This sparks discussion about its development state. Phil Spencer did visit the studio, but nothing has been heard yet. Avalanche Studios had introduced the IP from a July showcase in 2021. Though, this could also be a case of song license problem, which the trailer used.

Majority of games developed by various studios under Xbox Game Studios umbrella, has little update given, and was expected to be heard of from this year’s showcase. One could wonder if Gamescom this August could change that.

A little while ago, Outer Worlds 2 sequel was anticipating to be released at the cost of 80 USD price. They’ve rescinded that since, and decided to change it back to 70 after backlash, which does show Xbox still reacts to feedback from their base. This also leads to another aspect discuss of, which is Obsidian Entertainment. They are the publisher’s biggest success story. With countless game releases post-acquisition, their studio has grown massively since. Problem is, this year didn’t start well with Avowed, with very mixed reception no thanks to cut content, and a lot of design issues.

Even more so, leaks reveal of Bethesda plans to release multiple Fallout titles, one in particular being the sequel to Fallout: New Vegas. Obsidian Entertainment was promised some form of freedom once Outer Wilds 2 and Grounded 2 ships out. Will this change anything once the rumors are cleared out? PlayStation Plus to combat against Game Pass released subscription tiers with access to various game libraries and streaming for PS3 titles. PlayStation Plus members account to over 45 million. That is 33% higher than Game Pass, including Core.

I want to preface something about Phil Spencer, and that is he did get Xbox back in track after the disastrous Xbox One launch. There was no way to salvage that against PlayStation 4 within the 8th gen run of that console. In fact, a lot of his ideas were great, and he has kept close touch with a lot of the playerbase, maintaining a greater sense of respect for a company that still hasn’t figured out how to work with developers without communication issues.

That being said, his legacy is now tarnished, and I still can’t believe after eleven years in the company, he is still floating around. It’s also hinted that president Sarah Bond will be his successor soon. As he takes his position of CEO for Microsoft’s gaming division. While that might be true, the issue still persist is the gap they now have with us and them. Matt Booty including.

Microsoft has had a large problem with their corporate culture. This goes way back during Bungie days, when the producers from Microsoft entered their developer’s circle. In fact, post Bungie split after Halo Reach, the relation between the people making games and managerial were creating a lot of rifts. Thus leading to their current state after the abysmal release of Destiny. The company wanted to expand further into Japan’s market, which they’ve failed with the OG console, and once the window was open for the Xbox 360, they’ve proved once again that they overcomplicate things, and led developers to leave their projects. After Hi-Fi Rush, I doubt anything’s worth salvaging afterward.

Whereas, Sony and Nintendo works a lot closer, and deliver truly on the quality end of things. Both of them had a large asking price for their games, however. But Xbox delivers free cloud service across all platforms, even going as far as being super prosumer by providing QoL services to go with. Window dressing for what is historically pointed out as having little to no exclusives. After the Xbox Series release, this would have fixed the issue, considering the older system was weaker than the PS4. But this more likely seems to be the edge only because of the amount of acquisitions they’ve made, far superseding Sony.

Phil should have worked out different plans to release better games, to fill up their libraries and pretty much show PlayStation after struggling to release more games due to development time and budget having increased significantly. Instead, they’re waving the white flag and are putting their known games out on the other platform. Funny thing, Forza Horizon 5 on PS5 sold even more than Death Stranding 2. All the talk about a handheld, and we only get a collab system with ASUS. Xbox is now dealing with the slow stench of death, and the responsible ones in charge to blame.