A recent report by The Information has raised concerns about the future of Microsoft’s Xbox division. The report claims that in 2021, Microsoft CEO Satya Nadella considered the possibility of closing down the gaming division. At a crucial juncture, Nadella weighed whether to exit the gaming market or pursue aggressive expansion, leading to the eventual acquisitions of Bethesda ($7.5 billion) and Activision Blizzard ($75.4 billion).
Although Microsoft has denied these claims, the report has fueled speculation about the division’s performance and its future direction. Xbox hardware sales have reportedly dropped by 29% compared to the previous year. In response, Microsoft has increasingly shifted its focus towards its Game Pass subscription service.
Despite this shift, the Xbox division fell short of its revenue growth targets for 2023, missing the 11% target tied to CEO Satya Nadella’s bonus. Interestingly, Microsoft has removed Game Pass growth from the list of criteria for Nadella’s compensation, which could indicate declining confidence in the subscription model.
Looking ahead, Microsoft has set an ambitious goal to surpass 100 million Game Pass subscribers by 2030, up from 34 million in February 2024. Achieving this would require a dramatic annual growth rate of 40%, tripling the subscriber base within five years.
Microsoft has reported a 36% increase in subscriptions since 2022, though these numbers have not been independently verified. While the company touts successes such as record Game Pass subscriptions following the release of Call of Duty: Black Ops 6, questions remain about the sustainability of this growth.
Industry opinions on the future of Game Pass are mixed. Analyst Michael Pachter is optimistic about its potential, stating, “Seventy billion dollars is a big investment. Short-term losses are acceptable if Game Pass proves to be a reliable source of recurring revenue over time.” On the other hand, Gus Zinn from the Macquarie Science and Technology Fund has voiced skepticism about the model’s widespread adoption. Some developers have raised concerns, estimating that premium game sales on Xbox consoles could drop by as much as 80% when games are made available through Game Pass.
In response to these discussions, Microsoft has reaffirmed its commitment to the Xbox brand. A company spokesperson emphasized the company’s focus on gaming and praised Nadella’s “all-in” approach to the industry.

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