Microsoft Refutes Claims of Potential Xbox Business Shutdown in 2021

The Challenges Facing Microsoft’s Gaming Division

This week, The Information, a prominent tech insider platform, revealed that Microsoft CEO Satya Nadella was confronted with a pivotal decision regarding Xbox in 2021. He needed to choose between dismantling the gaming division or intensifying his commitment through substantial investments, exemplified by the landmark acquisition of Activision Blizzard for $68.7 billion, following the earlier purchase of Bethesda’s parent company, ZeniMax.

Mixed Outcomes from Significant Investments

Ultimately, Nadella opted for the latter path, yet recent analysis indicates that the gaming segment is lagging behind Microsoft’s broader growth aspirations. Data shows that the Xbox division failed to meet the 11% growth target required to trigger Nadella’s bonus, instead achieving only 5.8% growth. Notably, this underperformance made it the sole division that fell short of the established threshold.

Investor Concerns Over Performance

The Information also compiled insights from industry investors and analysts regarding the situation. Denny Fish, a portfolio manager at Janus Henderson Investors, whose firm holds over $800 million in Microsoft stock, expressed disappointment in the return on investment from the Activision Blizzard acquisition. Fish noted:

“It’s a business that had some degree of consistency over a three- to five-year period but was highly volatile from year to year due to dependence on major releases like Call of Duty.”

Call of Duty’s Mixed Impact on Xbox

This year, “Call of Duty: Black Ops 6″enjoyed commercial success. However, the impact of its launch on Game Pass remains uncertain. Microsoft has not released updated figures for Game Pass subscriptions since February 2024, when numbers reached 34 million. The initial goal before the Activision acquisition aimed for a staggering 100 million active subscribers by 2030.

Conflicting Perspectives on Game Pass

Michael Pachter, an industry analyst, forecasted when Activision titles would debut on Game Pass, with many now available. Despite this, subscriber counts have not surged as expected. Pachter commented:

“Seventy billion dollars is not a pittance—it’s a lot of cash. They might lose money in the short term, which is fine, as long as they can prove that in the long run Game Pass is a solid source of recurring revenue.”

In contrast, Gus Zinn from Macquarie Science and Technology Fund holds a different viewpoint, claiming:

“I just think the majority of the game market doesn’t really want a Game Pass.”

This highlights the divide in opinions surrounding Microsoft’s subscription model. While some developers find success with Game Pass, others voice skepticism. Former GamesIndustry.biz head Christopher Dring noted that developers often face a significant reduction in premium game sales when their titles are included on Game Pass, estimating losses around 80% on Xbox platforms.

Official Response and Strategic Moves

A Microsoft spokesperson has officially refuted reports suggesting that Satya Nadella considered shutting down the Xbox division a few years ago. In a statement to Insider Gaming, the spokesperson referenced Nadella’s previous assertions about Microsoft’s unwavering commitment to gaming.

Recent Developments in Employment

In a somewhat related development, Microsoft has recently executed job cuts within its gaming and several other departments, including security and devices. These layoffs are described as minor compared to the extensive reduction of over 1900 positions that occurred in January of the previous year, as reported by PC Mag.

For more details, refer to the original report by The Information.

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