As the subsequent technology of consoles will get kicked off, it feels like Xbox is retreating reasonably than making a case for dominance.
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I’ve spent the previous few weeks mulling over Microsoft’s newest actions. On July 2, 2025, Microsoft introduced that round 9000 staff could be minimize from the firm. Whereas the actual numbers aren’t recognized, it’s understood that the Xbox division could be taking the brunt of these layoffs. Phil Spencer, who’s the head of Microsoft Gaming, launched an announcement to his crew. “To place Gaming for enduring success and permit us to deal with strategic progress areas, we’ll finish or lower work in sure areas of the enterprise and observe Microsoft’s lead in eradicating layers of administration to extend agility and effectiveness.”
As half of these layoffs, each the Good Darkish and Everwild video games had been cancelled. In the meantime, Doom creator John Romero confirmed that the writer of his subsequent FPS had minimize their funding the following day, which was later confirmed by staff now in danger of layoffs to be brought on by the Microsoft debacle. This was a disastrous month for Microsoft and the Xbox, not simply because of the preliminary layoffs, however as a result of it’s going to have an effect on how they’re going to be seen by the wider trade in the coming years.
This can be a lesson that Microsoft appeared to have realized years in the past – a key half of a console’s success is the way it treats third-occasion studios. They’re the ones who’re going to make the bulk of the video games that find yourself in your console. A bigger library makes it extra seemingly folks will wish to decide up your costly console as their major gaming system. It is usually the place most of the cash is in the trade.
Here’s a little Insider Baseball information for you. The revenue margins on recreation consoles are razor-skinny. For instance, even with the elevated worth, every sale of the Switch 2 makes Nintendo less money than the Switch. The cash is definitely from recreation gross sales. Corporations like Nintendo, Microsoft, and Sony get a proportion (which relies on the firm and whether or not the title is bought in bodily or digital codecs) of each copy of each recreation that’s bought for his or her consoles, even when they didn’t have an energetic hand in growing or publishing it.
“The console gaming enterprise is historically a {hardware} subsidy mannequin,” a Microsoft spokesperson said back in 2021. “Sport corporations promote consoles at a loss to draw new prospects. Earnings are generated in recreation gross sales and on-line service subscriptions.”
If John Romero, who’s one of the most properly-recognized and celebrated recreation builders in the FPS style, is in danger of dropping his funding as a result of Microsoft is having a tough 12 months, then think about what different builders are considering. I’m not saying that they’ll keep away from making offers with Microsoft or growing for Xbox consoles in the future, however it can undoubtedly be on their thoughts.
I discussed Sega earlier, and there’s a purpose for that. Although the causes for Sega’s eventual collapse and exit from the console enterprise are completely different – they gambled on baffling console add-ons like the 32x that just confused customers and made it harder rather than easier to make games for them – the final result is essentially the similar. A scarcity of belief for the firm from third-occasion builders creates a restricted library. After the Sega Saturn bought poorly, nobody wished to leap in and make video games for his or her observe-up, the Dreamcast. Although the Dreamcast bought moderately properly, its library of video games was too restricted, which meant it by no means turned a worthwhile enterprise. That’s what in the end pressured Sega to exit the console market and deal with making video games.
True, Sega and Microsoft are completely different corporations, with Microsoft working on a very completely different scale. Nevertheless, even their sources usually are not infinite. With their insistence on investing $80 billion in GenAI in the coming years, that cash has to return from someplace. A division like Xbox, that admittedly doesn’t make a revenue off its fundamental product, has already confirmed ripe for cuts and layoffs. How lengthy they select to remain in the console enterprise in any respect, as a substitute specializing in their position as writer and developer, goes to rely on how a lot the relaxation of the gaming trade trusts them in the coming years.
If they’ll’t rebuild that belief, I wouldn’t be shocked if the subsequent technology is the final one with an Xbox console in it.
The gaming trade has come a good distance since Pong blew all our minds in the 70s. We have all the pieces you should learn about the subsequent massive factor in video games. In fact, Grand Theft Auto VI goes to be the massive recreation of 2026, however there are lots of different video games popping out between at times. Right here is our starter information for each gamer:
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