Microsoft may spin off Xbox into a separate business or team up with rivals, according to a new report. The potential restructuring comes as the company hints at other significant changes within its gaming division.
Xbox's Uncertain Future
Following the Xbox Games Showcase earlier this month, it is clear that major shake-ups are underway. Xbox has shifted back to exclusive games, though in a muddled manner. A frank blog post from CEO Asha Sharma about declining revenue has reportedly led to more layoffs and potential studio closures. Game designer Chris Avellone warned that even studios with steady releases are no longer safe.
Memory Shortage Impact
Ongoing memory shortages have forced a drastic rethink of Xbox's next console, codenamed Project Helix. Xbox's future is in a state of flux, with Microsoft reportedly considering spinning off the gaming business into its own subsidiary.
Restructuring Options
According to The Information, Microsoft has not ruled out restructuring Xbox into a wholly-owned subsidiary or creating a joint venture with other partners, though no imminent plans exist. Sources told the publication: 'Microsoft doesn't have any imminent restructuring plans, but those options are on the table. Satya Nadella and Amy Hood haven't ruled out restructuring Xbox's relationship to Microsoft at some point in the future if doing so would make Xbox a more successful business.'
If Xbox becomes a subsidiary, it would gain more autonomy in budgets and direction, but Microsoft would retain control. Both LinkedIn and GitHub are currently Microsoft-owned subsidiaries.
Focus on Top-Tier Games
It is also claimed that Nadella and Hood have green-lit Sharma's plan to spend more on top-tier games in the coming fiscal year, starting in July. However, exact budget details are unclear. Xbox is expected to move faster on developing new games in its biggest franchises, with a focus on Halo, Fallout, and The Elder Scrolls. The latter two, developed by Bethesda, are a particular focus for Sharma.
Despite the success of the Fallout TV show, no major new Fallout game has been released since 2018's Fallout 76, and no single-player game since 2015. Similarly, The Elder Scrolls 6, announced over eight years ago, is still in development and seemingly years away.
Nadella's Comments on Sustainability
Recent comments from Nadella provide insight into why Microsoft may consider spinning off Xbox. Speaking at The New York Times Hard Fork event on June 10, Nadella said: 'The challenge now for us is to think about how do you innovate both in hardware as well as in the games going forward in a world in an economically viable way.'
He added: 'We've invested a lot. No one can accuse Microsoft of not having invested for the last 25 years. And now we have to turn this into a sustainable business that delivers what is fundamentally one of the best sources of entertainment. The challenge we have is we've not been monetising that entertainment. If anything, we've been subsidising it. There's more monetisation of Xbox games happening on YouTube than at Microsoft.'
Nadella offered no specific solutions, but with potential layoffs, restructurings, and pivots on Project Helix, everything is up in the air for Microsoft's gaming division.
