In March 2000, Bill Gates stood onstage at the Game Developers Conference in San Francisco and officially announced Microsoft's long-anticipated video game console to a packed crowd. "We want Xbox to be the platform of choice for the best and most creative game developers in the world," he told attendees. That was the intention of the small, dedicated team that assembled the blueprints for that first machine.
Twenty-five years later, the Xbox landscape looks vastly different. Last week, just days after a bullish summer showcase featuring Gears of War revivals and promises of renewed focus on gaming strengths, new CEO Asha Sharma and chief content officer Matt Booty sent a memo to Xbox staff, urging them to brace for "hard truths." The memo stated, "Excluding Activision Blizzard King, over the past five years, we have spent over $20bn on ongoing investments in our content, platform and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue."
With grim inevitability, Bloomberg and Kotaku reported that Xbox plans to cut costs by shutting three studios: Ninja Theory, Double Fine, and Compulsion Games. All three are reportedly negotiating with Xbox to buy their independence and avoid closure. None of this has been confirmed by Microsoft, but several staff members at the affected studios have publicly posted that they are available for work. Sharma and Booty's memo warned that Xbox would need to "reset" to meet modern industry challenges. "We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming and devices," the memo said. "In the process, we have found ourselves overextended."
Microsoft also cites the "hardware component crisis" as a motivator for change—a crisis driven by Microsoft itself, along with every other company powering the AI boom. Notably, Microsoft posted overall profits of $217.4bn in the most recent financial year. Craig Duncan, head of Xbox Games Studios, and chief of staff Louise O'Connor have both resigned, perhaps after discovering the company's plan to correct over-extension by shutting talented studios that Microsoft once relentlessly pursued and purchased. Ninja Theory and Double Fine are multiple award winners, responsible for fascinating, boundary-pushing games like the gruelling mythological psychodrama Hellblade and the wacky cartoon adventure Psychonauts. Compulsion produced South of Midnight, a truly original southern gothic thriller and Peabody award winner. Now they are to be jettisoned in favour of more Halo and Gears of War—ageing franchises that have likely left their best years behind.
This is all the more frustrating given how recently Xbox was grandstanding these studios as creative giants. During the Xbox Showcase in early June, the third Hellblade instalment, Senua, received its world premiere followed by a glowing feature on Xbox Wire. Now Ninja Theory must gather whatever funds it can to survive and continue its project. In April, Sharma and Booty sent a different message to staff—a Jerry Maguire-style vision statement containing ten commandments for the business, including "Makers over managers" and "Clarity is kindness." How much clarity was extended to the team at Ninja Theory?
This is not the first time Xbox has been in this position. In 2024, the company shut Arkane Austin and Tango Gameworks, the latter after delivering the unexpected hit HiFi Rush. In 2025, Microsoft made 9,000 staff redundant and cancelled high-profile projects including a Perfect Dark reboot and new title Everwild from Rare. All this came after billions were spent to purchase Bethesda and Activision. Going further back, Microsoft also purchased and then closed legendary British studio Lionhead.
The newest whispers suggest Xbox plans to spend cash to speed up development on new Halo, Fallout, and Elder Scrolls titles. There are even reports that Xbox itself may be spun off into a separate company by Microsoft. This is an enormously disappointing situation for anyone who has spent two decades buying, playing, and adoring Xbox games. Many market conditions the company now faces could not have been predicted when Seamus Blackley, Kevin Bachus, and the rest assembled the original console 25 years ago—the industry has undergone massive technological changes and now faces ceaseless competition for consumer attention.
But a division founded on a love of games, which brought us Halo: Combat Evolved, Xbox Live, Forza, Fable, Sea of Thieves, and hundreds of other wonderful titles, now appears in danger of being finally, fatally overcome by its corporate owner, intent on undoing decades of work building a portfolio of diverse studios full of talented developers making interesting art. For developers and fans alike, the future must be brighter and broader than this.
What to Play
Hot on the heels of last month's brilliant Mina the Hollower comes a second piece of playable Zelda worship: The Adventures of Elliot. Created by the makers of Octopath Traveller, this Square Enix-published Link-a-like swaps Mina's swear-inducing sadism for a breezy, big-budget take on top-down Zelda. Rendered in glorious 2D-HD, it reimagines Link's Gameboy-era time-travelling adventures as a sprawling, narrative-driven modern adventure, part Chrono Trigger, part Oracle of Seasons. Our obnoxiously upbeat hero journeys through the ages to solve puzzles, uncover lost magic, and save the princess. With Breath of the Wild-esque temples hidden across the map, fast travel, and constant hints about your next destination, Team Asano sacrifices retro mystique for satisfying forward momentum. Available on Nintendo Switch 2, Xbox, PS5, and PC. Estimated playtime: 30-50 hours.
What to Read
There is much more to be written about this when we have more information, but the UK government announced an "Australia-plus" social media ban for under-16s this week. The ban will not target online gaming spaces but will make it mandatory to prevent under-16s from talking to strangers on voice chat and messages (functionality that already exists on all games consoles). The real effect will be on spaces where teen gamers gather: Discord, YouTube, and Twitch. What will Twitch look like without teenagers? For more on video games and politics, a new book from George Osborn (not that one, promise) shows how rightwing and authoritarian governments from the US to Russia to Saudi Arabia are way ahead on using games as third spaces to build political influence. It's called Power Play, and it's out this week. Vintage UK computer brand Commodore has announced a new electronics product—a flip-phone. "Welcome to the Internot," promises the Commodore Callback. This extremely Y2k-looking device blocks browsers and social media but still runs other useful apps, though going back to typing messages without a touchscreen is unappealing.
Question Block
This week's Question Block is a question for you, readers: "What are the best games of 2026 so far?" We published our favourites last week: unfortunately (or fortunately, for one other game that would have been knocked off the list), these were compiled a couple of days before Keza discovered Ribbit. Titanium Court (pictured above) ranked highly for both of us, and Pokopia, Pragmata, and Forbidden Solitaire also feature. What did we miss? Have you already played something you're sure will be a favourite by December? Write a paragraph about it, and we'll round up some reader recommendations in a couple of weeks. If you have a question for Question Block—or anything else to say about the newsletter—hit reply or email us at pushingbuttons@theguardian.com.
