Microsoft’s Xbox business needs to get bigger. The company’s Xbox Series S and X sales still lag behind Sony’s PlayStation 5, and Microsoft Gaming CEO Phil Spencer has previously admitted its Xbox Game Pass subscriptions were slowing down, too. He admitted that in 2022, a dry year for Xbox games after Microsoft’s big exclusive Bethesda game Starfield was delayed.
An Xbox Game Pass slowdown might be why I’m hearing that a number of Xbox exclusives are coming to consoles with which Microsoft usually competes. Sources familiar with Microsoft’s plans tell The Verge that the company is getting ready to launch a select number of Xbox games on PS5 and Nintendo Switch. Weeks of rumors suggest that Hi-Fi Rush, Sea of Thieves, and even Bethesda titles like Starfield and Indiana Jones could appear on non-Xbox platforms.
The first two games that are set to appear on rival consoles are Hi-Fi Rush and Pentiment, according to sources. Microsoft is also currently planning to launch Sea of Thieves on non-Xbox platforms later this year, with other first-party titles also under consideration.
Launching Xbox games on PlayStation or Nintendo Switch is a seismic shift in strategy, and not one that Microsoft will have taken lightly. It will give Microsoft more reach for its first-party games and an opportunity to generate more gaming revenue, but it also comes with plenty of risks.
Microsoft’s overall gaming business just passed Windows in terms of revenue, thanks to the Activision Blizzard acquisition. That giant $68.7 billion acquisition will be weighing on Microsoft’s mind, particularly when you consider that Call of Duty is a big multiplatform game that drives key revenue across these platforms and mobile. That slowdown in Game Pass will also be a part of why Microsoft is even considering more multiplatform games.
In May 2022, Microsoft had an ambitious goal of 100 million Xbox Game Pass subscribers by 2030. At the time the service, which lets Xbox owners subscribe to a library of games, was sitting at 25 million subscribers, up from 18 million in 2021. It looked set to continue growing rapidly amid Microsoft’s device-agnostic focus on consoles, PCs, and cloud gaming.
Then Xbox Game Pass started to stall. Starfield and Redfall, which were set to be major Xbox exclusives, got delayed from a 2022 release to 2023, with Starfield missing a key holiday window.
“It feels like we are likely to go through a gap of almost 16 months between big exclusive launches on our platform,” said Microsoft Gaming CEO Phil Spencer in an internal email to Xbox leaders in May 2022, revealed in the FTC v. Microsoft case. “This is really a disaster situation for us given all we’ve invested in content across studios at our [Game Pass] content fund.”
In the months since, Microsoft hasn’t provided any update on subscriber numbers to investors. It’s been more than two years since the 25 million figure was announced alongside the company’s Activision Blizzard acquisition, and some analysts estimate Microsoft is only at around 33 million subscribers.
If accurate, that’s around 33 percent growth in two years. Microsoft targeted a 73 percent growth rate for Game Pass subscriptions for a single fiscal year that ended in June 2022, but only managed 28 percent. The company then dropped Xbox Game Pass growth as a target for Satya Nadella’s executive compensation last year, after first exceeding its ambitious Game Pass internal targets in 2020 and then failing to meet compensation targets for two years in a row.
Microsoft has instead focused more on PC Game Pass growth this past year and scaled back some of its Xbox Cloud Gaming plans. The combination of Xbox Series S, the effective $299 Game Pass console, and cloud gaming was supposed to drive a big part of the 100 million Game Pass members figure that was leaked in FTC v. Microsoft materials, but sales of Microsoft’s latest consoles won’t get the company there alone.
Microsoft has been looking at other avenues for Xbox Game Pass or gaming revenue growth, particularly on mobile — a key reason behind its Activision Blizzard acquisition. The publisher’s lineup includes mobile games like Call of Duty Mobile, Candy Crush, and Diablo Immortal. A new Xbox mobile gaming store could launch this year, with Microsoft banking on the EU’s Digital Markets Act forcing Apple and Google to change how they distribute apps on mobile devices, and ultimately open up their platforms and stores to competition.
But Apple’s surprise new plan to comply with the European Union’s latest tech regulations has left Microsoft and others frustrated. “Apple’s new policy is a step in the wrong direction,” said Bond in reaction to Apple’s proposals last month. Spencer had previously described the Xbox mobile store and the EU’s Digital Markets Act as a “huge opportunity” for Microsoft.
All this means that adding a bunch of games to the Switch and PS5 won’t necessarily help Microsoft’s embiggening ambitions for the Xbox. That’s why I suspect Microsoft might need to tease more of its future hardware vision.
Microsoft held an internal town hall for Xbox employees last week where Microsoft Gaming CEO Phil Spencer, head of Xbox game studios Matt Booty, and Xbox president Sarah Bond all addressed employees. Shannon Liao first reported details of the town hall.
While Xbox executives reassured employees that Xbox hardware would continue, they didn’t directly address the elephant in the room: those persistent rumors about Xbox exclusives coming to the Nintendo Switch and PS5.
Even rumors of the move rattled Xbox fans with fears that Microsoft may eventually scrap Xbox console hardware, render digital Xbox libraries useless, and just publish games on rival platforms. But after 20-plus years of Xbox hardware, it seems inconceivable that Microsoft would suddenly walk away from the device ecosystem that drives its Xbox platform and revenues. Instead, I suspect Microsoft will have a vision that distracts from some select Xbox games heading to rival platforms.
There are whispers of an Xbox handheld, with Windows Central’s Jez Corden claiming earlier this month that “Xbox literally greenlit several new hardware projects in the past couple of weeks.” Days later, Corden speculated about a potential Xbox handheld, and Spencer liked a post on X describing the handheld as “inevitable.” Microsoft has a habit of teasing future hardware: at E3 2016, it announced Project Scorpio, describing it as “the most powerful console ever” before it shipped 18 months later as the Xbox One X.
A disc-less Xbox Series X refresh and a new Xbox controller leaked last year and those could still arrive, but Spencer pretty quickly dismissed the leak as old plans, so maybe that hardware has been canceled.
Regardless, without some public commitment to future hardware, Microsoft could have a problem. By gradually opening up Xbox games to Nintendo Switch and PS5, this also opens up questions over how many games will be multiplatform in the future. If you can play Xbox games anywhere — including PC, the cloud, the Nintendo Switch, and the PS5 — then why would you want an Xbox? That’s the big question that Microsoft needs to answer on Thursday.
