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Microsoft Gaming
Company typeDivision
IndustryVideo games
FoundedJanuary 18, 2022; 2 years ago (2022-01-18)
FounderPhil Spencer
HeadquartersOne Microsoft Way,
Redmond, Washington
,
US
Area served
Worldwide
Key people
  • Phil Spencer (CEO)
  • Dave McCarthy (COO)
  • Tim Stuart (CFO)
ProductsSee § Products
BrandsXbox
Services
RevenueIncrease $21.5 billion (2024)[1]
Number of employees
20,100 (2024)
ParentMicrosoft
Divisions
Subsidiaries

Microsoft Gaming is an American multinational video game and digital entertainment division of Microsoft based in Redmond, Washington established in 2022. Its five development and publishing labels consist of: Xbox Game Studios, Bethesda Softworks (publisher of ZeniMax Media), Activision, Blizzard Entertainment, and King (the latter three are publishers of Activision Blizzard).[2] It produces the Xbox video game consoles and services, in addition to overseeing production and sales, and is led by CEO Phil Spencer, who has overseen Xbox since 2014.

Prior to 2022, Microsoft had several different video game-related product lines, including Xbox hardware, Xbox operations, and game development studios. Microsoft Gaming was created with the announcement of Microsoft's plans to acquire Activision Blizzard to unify all of Microsoft's gaming groups within a single division. With the completion of the Activision Blizzard acquisition in 2023, Microsoft became one of the largest gaming companies, the third-by revenue and the largest by employment.[3][4] The company has 500 million monthly active players across all gaming platforms.[5]

The division owns intellectual property for some of the most popular, best-selling, and highest-grossing media franchises of all time, including Call of Duty, Candy Crush, Warcraft, Halo, Minecraft, and The Elder Scrolls.[6]

History

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Pre–Microsoft Gaming (2001–2021)

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See also: Xbox Game Studios
Xbox's logo

Up through 2000, Microsoft had only a limited number of video game publishing efforts. With the announcement of the first Xbox in 2000 and its release in 2001, Microsoft established a division for internal development of video games for the Xbox and Windows, then known as Microsoft Game Studios (MGS). The Xbox hardware remained a separate division within Microsoft. After Steve Ballmer's departure as Microsoft's CEO, Microsoft investors attempted to exert pressure on the company to either sell or shut down its gaming business. However, these efforts did not gain significant traction. Microsoft's gaming division, including products such as the Xbox console, has remained a strategic focus for the company. Under the leadership of Satya Nadella, who assumed the role of CEO in 2014, Microsoft has continued to invest in and expand its presence in the gaming market.[7][8] Since 2009, Microsoft's games operations, including Xbox division, are located at Microsoft West Campus.[9][10]

MGS made a number of acquisitions of studios to help build out the Xbox software library over its first decade, including Bungie, Lionhead Studios, and Rare while establishing internal studios 343 Industries for Halo development and Turn 10 Studios for Forza games. In 2014 after Satya Nadella was promoted to CEO (combined with the ascension of Phil Spencer to head of Xbox), Microsoft embarked on a new acquisition strategy, starting with the acquisition of Mojang Studios, the developer of Minecraft, for $2.5 billion.[11] Between 2014 and 2019, MGS also acquired several high profile studios, including Ninja Theory, Playground Games, Obsidian Entertainment and inXile Entertainment. These acquisitions were aimed to help position MGS as the company's premier first-party development house comparable to PlayStation Studios for Sony.

Microsoft launched Xbox Game Pass in 2017, marking a pivotal year in which the company reevaluated its strategy to focus on a service-based business model rather than exclusive titles. This strategic shift allowed Microsoft to distinguish itself from other console manufacturers. By prioritizing a service-oriented business model with the Xbox Game Pass, Microsoft differentiated its approach from traditional console strategies that often relied heavily on exclusive game titles to attract users. Instead of competing solely based on exclusive content, Microsoft aimed to offer a broader value proposition to gamers through a subscription service that provided access to a vast library of games.[12][13] In 2017, Spencer was named Executive Vice President, Gaming at Microsoft.[14]

In 2019, as part of a larger branding, MGS was renamed to Xbox Game Studios (XGS) as to align with the Xbox hardware branding, and further acquired Double Fine.[15] Microsoft acquired ZeniMax Media for $8.1 billion in 2020, the parent company of id Software, MachineGames, Arkane Studios, publisher Bethesda Softworks and others, to further expanding its portfolio of game development studios. ZeniMax remained a separate entity from XGS from its acquisition though overseen by Spencer.[16]

Establishment and acquisition of Activision Blizzard (2022–2023)

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Further information: Acquisition of Activision Blizzard by Microsoft

Microsoft announced its proposed acquisition of Activision Blizzard for $68.7 billion in cash on January 18, 2022. Simultaneously, Microsoft announced that Xbox Game Studios, ZeniMax Media and Activision Blizzard will fall under Microsoft Gaming, Microsoft's newly formed gaming division. Microsoft Gaming CEO Phil Spencer stated that one of the primary reasons for acquiring Activision Blizzard is to enter the mobile gaming market.[17] Meanwhile, Activision Blizzard CEO Bobby Kotick mentioned that they accepted the offer to access more talent, capitalize on the growing demand in the gaming industry, and to compete with rising gaming companies from China and Japan.[18][19] Microsoft Gaming has entered into several 10-year agreements with gaming companies including Sony, Nintendo, Nvidia, Boosteroid, Ubitus, Nware, and EE to bring Call of Duty to their respective platforms over the next decade.[20][21][22][23][24][25][26][27][28] Additionally, Microsoft Gaming sold Activision Blizzard's cloud gaming rights to Ubisoft for 15 years due to regulatory pressure from the acquisition of Activision Blizzard.[29] After several regulatory challenges, the deal was closed on October 13, 2023. The total cost of the acquisition amounted to $75.4 billion.[30][31] This made Microsoft the third largest publisher of video games after Tencent and Sony Interactive Entertainment. On the day the acquisition was announced, Phil Spencer formed the Microsoft Gaming business, taking over as CEO, while Matt Booty headed Xbox Game Studios.[32][33][34] Spencer's role includes all Microsoft's global interactive entertainment business across all devices and services.[14][35] In 2022, ZeniMax Media, acquired Nemesys Games, a Hungarian video game development studio. Following the acquisition, Nemesys Games was officially renamed to ZeniMax Online Studios Hungary.[36]

Shortly after completion of the Activision Blizzard acquisition, Microsoft further reorganized Microsoft Gaming. In this move, the Xbox hardware line was brought into Microsoft Gaming led by Sarah Bond. Matt Booty was made president of game content and studios, which includes oversight of Xbox Game Studios and ZeniMax Media, while Activision Blizzard also remained directly under Spencer, with Bobby Kotick remaining as CEO until the start of 2024 to help with the transition.[37] In an email sent to employees, Bobby Kotick announced that he would leave the Activision Blizzard on December 29, 2023.[38][39]

Following Bobby Kotick's departure, Activision Blizzard has undergone organizational changes to realign with Microsoft Gaming.[40] Vice Chairman of Activision Blizzard, Thomas Tippl; President of Activision, Rob Kostich; President of Blizzard Entertainment, Mike Ybarra; and President of King, Tjodolf Sommestad, have begun reporting to Matt Booty, President of Game Content and Studios. The leadership teams at Activision, Blizzard Entertainment, and King remained unchanged. CCO Lulu Meservey departed Activision Blizzard on January 31, 2024. After assisting with the transition, Thomas Tippl, along with several other top Activision Blizzard executives, departed from the company in March 2024.[41]

Microsoft Gaming laid off 1,900 staff (approximately 8% of its workforce) in January 2024.[42] Additionally, Blizzard's president Mike Ybarra and Blizzard's co-founder and chief design officer Allen Adham left the company.[43] Blizzard Entertainment reportedly is the organization that is most affected by layoffs. Project Odyssey, a game that Blizzard Entertainment has reportedly been working on for six years, has been cancelled.[44] Toys for Bob and Sledgehammer Games reportedly lost over 30% of their staff due to layoffs.[45] Microsoft Gaming also reportedly laid off the entire internal customer support team of Activision Blizzard and the team dedicated to bringing Xbox games to physical retail.[46] Johanna Faries, the former general manager of the Call of Duty franchise, officially took on the role of the new president of Blizzard Entertainment on January 29, 2024, commencing her position on February 5.[47] Simultaneously, Matt Cox assumed the position of the new general manager of the Call of Duty franchise. In February, Toys for Bob's office closed, and employees will work remotely.[48]

Multiplatform strategy (2024–present)

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After rumors in early February 2024 that Microsoft was looking to bring its first-party exclusives to either PlayStation 5 or Nintendo Switch, and that Microsoft may be leaving the hardware business, Microsoft held a special installment of the Official Xbox Podcast scheduled on February 15, 2024, to address the future strategy of Microsoft Gaming and Xbox, with Phil Spencer appearing alongside head of Xbox Sarah Bond and Matt Booty, president of Game Content and Studios at Microsoft Gaming.[49][50][51][52] Spencer announced that four Xbox-exclusive games will be released on PlayStation 5 and Nintendo Switch in the future, but specifically stated that these titles would not include Starfield nor Indiana Jones and the Great Circle.[53] Phil Spencer stated that one of the reasons for this decision is to grow the Microsoft Gaming franchises, and he anticipates that in the next 5–10 years, console-exclusive games will be a smaller part of the gaming industry. In addition, the Podcast stated that the next generation of Xbox hardware would likely be discussed in late 2024, and that Microsoft would start bringing Activision Blizzard games to Game Pass, starting with Diablo IV in March 2024.[54][55] Microsoft Gaming announced that four games will be released on other platforms, namely Pentiment, Hi-Fi Rush, Grounded, and Sea of Thieves.[56] On February 29, 2024, Activision developer Toys for Bob announced their intentions to spin off from the publisher to become an independent studio but confirmed that they were open to working with both Activision and Microsoft on future projects.[57][58]

On April 9, 2024, Microsoft Gaming and NetEase Games announced an agreement to bring Blizzard Entertainment games back to China. Previously, Blizzard terminated a publishing deal with NetEase in 2022.[59] Microsoft Gaming also revealed plans to bolster their collaboration through a strategic partnership focused on expanding the availability of NetEase video games across various Microsoft Gaming platforms.[60]

Microsoft Gaming shut down three development studios on May 7, 2024: Alpha Dog Games in Canada, Arkane Austin in the US, and Tango Gameworks in Japan. Additionally, Roundhouse Studios will merge with ZeniMax Online Studios in the US.[61] According to Microsoft Gaming, this move is a part of a larger "reprioritization of titles and resources" that Microsoft's gaming division is carrying out. The intention is to boost investment in their library of games and new intellectual assets while focusing on high-impact titles. Some teams have been reassigned to other projects inside Bethesda and ZeniMax, and production on some games has stopped as a result of these companies closing.[62]

In June 2024 during the Xbox Games Showcase, Microsoft announced that the upcoming Doom: The Dark Ages (2025) from id Software would launch simultaneously on multiple platforms,[63] with Spencer detailing that the decision to develop a PS5 version stemmed from the series' prior multiplatform history and persuasion from the developers.[64] Jerret West, Xbox's chief marketing officer, left Microsoft Gaming at the end of June 2024. West led the marketing efforts for the Xbox Series X/S consoles and his team was responsible for developing marketing plans for games, hardware, and Xbox Game Pass. Following his departure, Microsoft is reorganizing some of its marketing teams. A new, expanded central gaming marketing team is set to be created under Kirsten Ward, VP of Xbox integrated marketing. Consequently, games marketing would become a part of the game content and studios division led by Matt Booty, while Xbox marketing, led by Chris Lee, would move to the Xbox organization and report to Xbox president Sarah Bond.[65]

On August 7, 2024, Krafton reached an agreement with Microsoft Gaming to acquire Tango Gameworks as well as the Hi-Fi Rush IP.[66] On August 20, 2024 during Gamescom: Opening Night Live, Microsoft announced that the upcoming Indiana Jones and the Great Circle (2024) from Bethesda and MachineGames, which was originally announced as an Xbox Series X/S console exclusive, would launch on PlayStation 5 in Spring 2025 following its Xbox and PC launch in December 2024.[67] On the decision to pursue a PS5 release for the title after initially amending the licensing terms with Lucasfilm to exclude the platform from distribution plans,[68] Spencer cited the positive reception to the prior four Xbox titles released on other platforms in the earlier half of 2024, in addition to a need to maintain a strong business and interest in their franchises as they work to grow the Xbox ecosystem.[69][70] Spencer also called to attention that the gaming industry was undergoing changes in the methods by which games were developed and distributed, that Microsoft was prepared to anticipate when considering a more aggressive multiplatform strategy.[71]

In September 2024, Spencer announced another round of layoffs affecting 650 staffers in "corporate and supporting functions" following the acquisition of Activision Blizzard.[72] In an interview with Bloomberg News in November 2024,[73] Phil Spencer expressed a desire to continue acquiring studios, specifically taking interest in Chinese developers and partnerships with mobile game publishers similar to their relationship with Tencent Games, whom they collaborated with to produce Age of Empires Mobile.[74] Spencer also confirmed that the company was prototyping a possible handheld Xbox console, though stressed that "such a device is a few years out."[75] Spencer commented on Microsoft Gaming's efforts to establish a first-party Xbox storefront for mobile devices amidst ongoing conflicts with platform holders such as Apple Inc. and Alphabet Inc., who respectively control the App Store and Google Play, saying that he envisions an environment where such companies are more open to hosting Xbox's content in co-existence with their marketplaces.[76] He also addressed the company's ongoing plans to publish their first-party games on competing platforms such as PlayStation and Nintendo consoles, stating that he did not see "red lines" in their franchise portfolio with regards to games considered for release on such systems, but that certain tentpole franchises like Halo had not reached a consensus at this early stage.[77][78] During the month, Microsoft Gaming launched a new advertising campaign titled "This is an Xbox", intent on showcasing the various compatible devices that can access Xbox games and services beyond the traditional consoles, such as Windows PCs, Samsung Smart TV sets, and streaming devices like Amazon Fire TV through cloud streaming.[79] Xbox Senior Marketing Director Craig McNary stated that the campaign's message was to illustrate "the evolution of Xbox as a platform that extends across devices," thus being evocative of a future where their games and content are accessible on a variety of hardware and software.[80]

In December 2024 during The Game Awards 2024, Microsoft Gaming unveiled The Outer Worlds 2 from Obsidian Entertainment, confirming its scheduled launch for 2025 as with their other upcoming game Avowed, and that the game would now simultaneously launch on PlayStation 5 alongside the previously announced Windows and Xbox Series X/S versions.[81]

Products

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Video game devices and services

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Main article: Xbox

Microsoft Gaming develops and produces the Xbox line of home gaming consoles along with associated peripherals. The company supports the consoles with online services, utilizing the base Xbox network. Since the late 2010s, Microsoft began combining its standard paid subscription service, originally known as Xbox Live Gold, with Xbox Game Pass, which in addition to online multiplayer and matchmaking support, provides subscribers with a rotating library of games to play through the Xbox, on Windows computers, or through cloud gaming.

Video games

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Main articles: List of Microsoft Gaming video games, List of Xbox Game Studios video games, List of Bethesda Softworks video games, List of Activision video games, List of Blizzard Entertainment games, and List of King games

Among the video game franchises owned by Microsoft Gaming include Call of Duty, Halo, Minecraft, Warcraft, Diablo, StarCraft, Overwatch, The Elder Scrolls, Fallout, Crash Bandicoot, Spyro, Banjo-Kazooie, Battletoads, Killer Instinct, Perfect Dark, Doom, Wolfenstein, Quake, Dishonored, Pillars of Eternity, Wasteland, State of Decay, Hellblade, Gears of War, The Evil Within, Fable, Forza, Tony Hawk's, Guitar Hero, Skylanders, Microsoft Flight Simulator, Age of Empires and Candy Crush.[6]

Divisional structure

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Executives

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Microsoft Gaming leadership[82][83]
Role Name Details
Chief executive officer Phil Spencer —
Chief operations officer Dave McCarthy Overseeing the delivery of fundamental technological services and player experience across both the Xbox platform and game studios
Chief financial officer Tim Stuart Responsible for leading the financial management and operational execution of the global business
President, Xbox Sarah Bond Leads the teams responsible for the Xbox platform and business
President, Game Content and Studios Matt Booty Overseeing Xbox Game Studios, ZeniMax Media and Activision Blizzard games worldwide
Head of Xbox Game Studios Craig Duncan Head executive of Xbox Game Studios
CEO, ZeniMax Media Jamie Leder Head executive of ZeniMax Media
President, Activision Rob Kostich Head executive of Activision
President, Blizzard Entertainment Johanna Faries Head executive of Blizzard Entertainment
President, King Tjodolf Sommestad Head executive of King

Business segments and strategy

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The business isn’t how many consoles you sell. The business is how many players are playing the games that they buy, how they play.

—Phil Spencer on Xbox's business

Microsoft Gaming's strategy in the video game industry is characterized by a commitment to inclusivity and accessibility.[84] The company aims to reach a wider audience and meet different gaming preferences by publishing games on mobile, PC and Xbox platforms.[85] At the center of Microsoft Gaming's strategy is the Xbox Game Pass subscription service. This service offers a variety of game libraries for a monthly fee, emphasizing a shift towards a content-first platform.[86][87] Microsoft Gaming's chief financial officer (CFO), Tim Stuart, has asserted that Microsoft ceased disclosing the number of consoles sold in 2016 because their focus shifted towards content, services, and increased customer spending.[88]

Phil Spencer has served as the CEO of Microsoft Gaming since 2022.

Phil Spencer has expressed that his vision for Xbox has consistently aimed at shifting the brand's focus from being primarily console-centric to becoming a content-first platform, with a strong emphasis on prioritizing player engagement over sheer console sales.[89] Phil Spencer expressed his viewpoint by stating that the essence of the business lies not in the quantity of consoles sold but in the number of players actively participating in and enjoying the games they acquire, as well as the manner in which they choose to engage with them.[90][91]

By February 2024, Microsoft Gaming began planning to release their games on other platforms as part of a pivot in strategy to grow their franchises and compete with online game platforms like Fortnite and Roblox. Phil Spencer has stated that Xbox will continue to make exclusives and Game Pass will still be at the center of their strategy, but their goal is to expand the games with big communities.[54][92] Phil addresses the gaming industry's stagnation, acknowledging its impact on job cuts and tough decisions within companies. He emphasizes the necessity of industry growth for sustainability, advocating for a focus on expanding the player base rather than solely maximizing revenue from existing players. By prioritizing Xbox's growth through attracting new players and supporting creators, Phil aims to ensure long-term strength and success for the platform and the industry as a whole.[93]

Game development and publishing

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Microsoft Gaming, as of October 2023, is the third largest video game publisher in the industry following Sony and Tencent. Microsoft Gaming owns three major video game publishers: Xbox Game Studios, ZeniMax Media (through Bethesda Softworks), and Activision Blizzard (which includes Activision, Blizzard Entertainment, and King).[94] In addition, Microsoft Gaming also publishes third-party games with Xbox Game Studios Publishing and helps indie video game studios to self-publish their own games with ID@Xbox.[95] Since Microsoft entered the video game industry in 2001, Sony has consistently been viewed as its main competitor.[96] But, Microsoft Gaming has stated that their main competitors are big tech companies, specifically Amazon, Google and Apple.[97][4]

Among the gaming franchises owned by Microsoft, Minecraft is the best-selling video game of all time, with 300 million units sold, while Call of Duty is the 4th best-selling video game series of all time with 425 million units across multiple installments sold and $30 billion in revenue.[98] Microsoft CEO Satya Nadella announced that Microsoft Gaming now owns 20 franchises that have each generated over $1 billion in lifetime revenues.[99] Candy Crush Saga alone generated $20 billion in lifetime revenue.[100] Following the acquisition of Activision Blizzard, Microsoft Gaming doubled the number of video game employees, studios and its revenue with the addition of Activision Blizzard to the company.[101][102] In 2023, during an interview with Famitsu, Phil Spencer announced that, leveraging Activision Blizzard's capabilities, they are now planning to release a first-party video game every three months.[103][104] Phil Spencer also talked about how creative freedom is crucial for Microsoft Gaming, emphasizing that they will not compel a video game studio to create a sequel. Microsoft Gaming will support developers in making whatever they want.[105][106][107][108]

Microsoft Gaming's video game development business holds a strong position in the video game industry, regularly developing widely played titles. In certain video game genres such as first-person shooter (FPS) and role-playing games (RPG), Microsoft Gaming has held market dominance, owning popular FPS franchises like Call of Duty, Halo, Doom, Quake, Rage, and Overwatch, as well as RPG franchises such as The Elder Scrolls, Fallout, Fable, Pillars of Eternity, Wasteland, Warcraft, and Diablo.[109][110] Starfield has become the biggest Bethesda game launch of all time.[111] Eleven of the twelve best-selling video games released in the United States in the last thirteen years were from the Call of Duty franchise. Microsoft also has a strong presence in the real-time strategy (RTS) sub-genre, platformer genre and racing game genre with popular franchises such as Age of Empires, StarCraft, Crash Bandicoot, Spyro, Banjo-Kazooie, and Forza.[112][113] Microsoft Gaming holds a significant position in the multiplayer gaming, serving as one of the leading publishers of multiplayer and live-service games along with Take-Two Interactive, Electronic Arts and Tencent. Popular multiplayer titles under Microsoft Gaming's umbrella include Minecraft, Sea of Thieves, Grounded, Call of Duty: Warzone, World of Warcraft, Hearthstone, Overwatch 2, Diablo IV, The Elder Scrolls Online, Fallout 76, Halo Infinite, State of Decay 2, and many others.[114]

Microsoft Gaming has had difficulties finding success in the third-person shooter (TPS) and single-player genre, finding it difficult to compete with industry leaders like Sony, Take-Two Interactive, Nintendo, Capcom, and Square Enix in this space. Despite intense efforts, the company faced difficulties in establishing itself and gaining the same level of recognition and market share as its competitors.[115] This competitive landscape presented challenging obstacles that prompted Microsoft Gaming to re-evaluate their strategy and potentially explore other genres or approaches to improve their market position. Microsoft Gaming attempted to gain traction in the third-person single-player genre by developing titles like Gears of War, Quantum Break, and Sunset Overdrive. However, despite these efforts, the company continues to face challenges in competing successfully in this genre, struggling to match the market dominance of competitors such as Sony and Nintendo.[116][117]

Today, big games like Fortnite and Roblox can actually be bigger than any one platform, and that really has changed the way we think about things.

—Matt Booty on online game platforms

Microsoft Gaming has stated that its acquisition of Activision Blizzard reflects a strategic effort to tap into the growing Metaverse trend in the gaming industry.[118] For Microsoft, the Metaverse concept involves creating online game platforms where users can interact, similar to popular games like Grand Theft Auto V, Fortnite, and Roblox.[119] Microsoft aims to incorporate strong social features and effective monetization strategies within games like Call of Duty, Minecraft and World of Warcraft to establish a competitive presence in the evolving landscape of virtual environments. According to Microsoft, this acquisition is not solely about expanding Microsoft's gaming portfolio but also about leveraging Activision Blizzard's established franchises to enhance the overall gaming experience.[120][121] The move aligns with industry trends where companies are exploring ways to create immersive and interconnected virtual worlds, combining social interactions with in-game purchases.[122] Microsoft has been observing the success of other Metaverse games. The company strategically positioning itself in the Metaverse trend, evident in its efforts to strengthen its gaming portfolio and explore opportunities for social interactions and monetization strategies within virtual environments.[123] Microsoft's strategic positioning through acquisition of Activision Blizzard to play a significant role in shaping the future of gaming by integrating Metaverse elements into its gaming ecosystem.[124] Microsoft Gaming plans to remain competitive in the evolving digital entertainment landscape.[125]

Phil Spencer emphasized that for the Xbox brand to remain relevant, it must establish its presence on mobile, PC, and console platforms simultaneously.[126] With the acquisition of Activision Blizzard, Microsoft Gaming has become a significant player in the mobile gaming industry.[127] It owns one of the largest mobile game developers and publishers, King, and publishes popular mobile games such as Candy Crush Saga, Fallout Shelter, Diablo Immortal, Warcraft Rumble and Call of Duty: Warzone Mobile.[128] Phil Spencer has reiterated multiple times that Microsoft Gaming desires to launch a new storefront in the mobile game industry to rival Apple and Google and break the mobile duopoly.[129] In 2023, Bloomberg reported that Microsoft Gaming is in talks with video game publishers for a partnership to launch a mobile store aimed at competing with Google Play and App Store in the mobile gaming market.[130] In 2024, Sarah Bond announced that Microsoft Gaming would be launching its own mobile game store in July of that year, starting with a web-based version before expanding further. The store will initially showcase its first-party portfolio, featuring popular titles such as Candy Crush Saga and Minecraft. Subsequently, it will welcome other publishers to join.[131]

Xbox console hardware and software

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Xbox Series X on the left side and Xbox Series S on the right side – Microsoft Gaming's latest gaming consoles

Microsoft entered the home video game console market in 2001 with release of the first-generation Xbox. It since has manufactured three successive systems, as of 2023, as part of the Xbox brand. Microsoft's latest gaming hardware, the Xbox Series X and Xbox Series S, were released in November 2020. The Series X is a high-performance console with powerful hardware for native 4K gaming, while the Series S offers a more affordable option with a focus on digital gaming at lower resolutions.[132] Xbox Series X/S consoles sold 21 million units in total by 2023.[133] Phil Spencer emphasized that Microsoft Gaming is selling consoles at a loss, losing $200 per unit sold. However, Microsoft Gaming is compensating for this loss by taking a 30% cut from sales of third-party games on its platform.[134][135]

Microsoft and Sony have been longstanding rivals in the console hardware market since 2001. The competition reached a peak during the seventh console generation, with the Xbox 360 emerging as the primary competitor to Sony's PlayStation 3 (PS3). In the subsequent generation, Sony's PlayStation 4 (PS4) outperformed Microsoft's Xbox One, selling twice as many consoles.[136] During the eighth generation of gaming consoles, the PlayStation 4 sold 117 million units, the Nintendo Switch sold 133 million units, and the Xbox One sold 58 million units. Sony's success is attributed to its exclusive game catalog and marketing techniques. Microsoft initially prioritized multimedia features over gaming capabilities; Sony has managed to exploit the perceptual gap. PlayStation 4 and Nintendo Switch have surpassed Xbox One due to their design and large portfolio of first-party games.[137][138] In 2017, Xbox began rethinking its tactics and placing more emphasis on exclusive content and gaming-focused methods to better compete in the market. The Xbox Series X/S consoles continued to face challenges in competing against the Nintendo Switch and PlayStation 5 (PS5).[139]

The console gaming market is defined as the combined total of console hardware, console game content, and console subscriptions. As of 2023, with a 45% market share in PlayStation system hardware, games, and services, Sony remains the worldwide industry leader, followed by Nintendo with a 27.7% market share and Microsoft with a 27.3% market share.[140] Sony has a 70% share of the global high-end console market, while Microsoft has a 30% market share as of 2023.[138][141]

At a bilateral trade discussion between the United States and Japan, United States senator Maria Cantwell from Washington raised concerns regarding what she perceived as a dominant market position held by PlayStation.[142] The senator specifically highlighted the perceived monopoly by PlayStation and expressed support for Xbox as a competitive alternative. During a Senate Finance Committee hearing featuring U.S. Trade Representative Katherine Tai, Senator Cantwell highlighted concerns about high-end game market in Japan, asserting that PlayStation holds a 98% monopoly in this sector in Japan. Cantwell expressed disapproval of what was characterized as Sony's anti-competitive behavior facilitated by exclusive deals and payments to game publishers. The senator further criticized Japan Fair Trade Commission for purportedly neglecting to investigate Sony's conduct, referring to it as "exclusionary." Cantwell sought insights into how Japan aimed to establish a "level playing field" in response to these perceived issues.[143]

Microsoft Gaming manages numerous software services, including Xbox Game Pass, Xbox Cloud Gaming, Xbox Network, Microsoft Store, and Battle.net. The Xbox Network experienced substantial growth, with 120 million monthly active players as of December 2022, marking a notable increase from 46 million at the beginning of 2016.[144][145] By July 30, 2024, the number of monthly active players had reached 500 million following the acquisition of Activision Blizzard.[146]

Xbox Game Pass and xCloud

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Microsoft created Xbox Game Pass in 2017. Xbox Game Pass is a subscription service that offers a vast library of games for a monthly fee. This includes a mix of first-party titles, third-party games, and titles available across PC and console platforms. The service has been praised for its value and has become a significant part of Microsoft's gaming strategy.[147] In 2022, Microsoft announces Xbox Game Pass surpassed 25 million subscribers.[148] Microsoft Gaming is investing over $1 billion in the gaming market annually to expand the Game Pass library by bringing in third-party games.[149] By February 15, 2024, the number of Xbox Game Pass subscribers reached 34 million.[54]

Microsoft Gaming launched Xbox Cloud Gaming for Xbox Game Pass Ultimate subscribers on September 15, 2020. Xbox Cloud Gaming is Microsoft's cloud gaming service designed to allow users to play high-quality video games via streaming on a variety of devices. The service uses cloud technology to enable gaming on devices such as smartphones, tablets and PCs without the need for high-end hardware.

Film and TV series production

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Microsoft Gaming oversees the management and licensing of its gaming franchises to external production studios. The division has expressed that these partnerships are aimed at bringing the beloved gaming universes to a wider audience through the medium of television.

Licensed completed works or those in production include the following: the Halo television series, produced by Showtime Networks and released in 2022;[150] the Fallout television series, produced by Amazon MGM Studios and released in 2024;[151] the Minecraft feature film, produced by Warner Bros. with a release in 2025;[152] the Minecraft animated television series, to be produced by WildBrain;[153] the Gears of War live-action feature film as well as its adult animated spin-off series, to be produced by Netflix;[154] the Grounded animated television series, to be produced by Bardel Entertainment;[155] and others. The division also manages the motion picture production company Activision Blizzard Studios.

Public relations

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Xbox at Gamescom

Gaming events and transparency

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In terms of international engagement, Microsoft Gaming has actively participated in key gaming expos worldwide. The company has been a notable presence at events such as E3 and Summer Game Fest in the United States, Gamescom in Germany, Paris Games Week in France, the Tokyo Game Show in Japan, and CCXP in Brazil.[156][157][158] The company organizes major gaming conventions such as BlizzCon and QuakeCon, and also have other shows, including Developers Direct, Xbox Partner Preview, Xbox Games Showcase, Inside Xbox and Xbox X0.[159]

Phil Spencer emphasized that participating in large gaming expos and maintaining transparency is essential to connect with their business partners, fans, consumers and various gaming communities, showcase their latest innovations, and engage with fans on a global scale.[160] Following the troubled launch of Redfall, Phil Spencer, in an interview with Kinda Funny Games, has apologized to the fans and pledged to provide a more robust roadmap for releasing high-quality games.[161][162]

Criticism and controversies

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Monopolistic tendencies

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Microsoft Gaming has faced criticism from video game journalists and industry observers regarding its strategic acquisitions. The company's move to acquire major gaming publishers, including the notable purchase of ZeniMax Media and Activision Blizzard, has sparked debates about potential monopolistic tendencies.[163][164] Critics argue that such acquisitions may concentrate too much power within Microsoft, raising concerns about healthy competition within the gaming industry. Various Video game journalists have criticized Microsoft Gaming of attempting to create a monopoly by acquiring two significant gaming publishers.[165][166] The concern centers around the potential impact on market competition, with skeptics worrying that the consolidation of major titles under one umbrella might limit choices for gamers and stifle innovation.[167]

Mismanagement of gaming studios and layoffs

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There has been controversy surrounding Microsoft's mismanagement of their gaming studios. Following the failed launch of Halo Infinite and Redfall, critics have started to criticize Microsoft for this issue.[168][169] There have been reports about Everwild and Perfect Dark also being in development hell.[170][171] Most of the criticism was directed at Matt Booty, President of Game Content and Studios, for his past management of Xbox Game Studios division.[172]

Microsoft Gaming has faced criticism on multiple occasions for video game layoffs. In 2022, 343 Industries lost over 60 employees due to layoffs, leading to public criticism from several former 343 Industries employees regarding Microsoft's leadership and management policies.[173] In 2024, Microsoft Gaming underwent another round of layoffs, with Microsoft laying off 1,900 employees. Additionally, during this time, Microsoft canceled Blizzard Entertainment's new game Project Odyssey, which also garnered criticism from fans and journalists.[174] FTC expressed concern that Microsoft's layoffs seemed inconsistent with past claims of preserving operational autonomy post-Activision Blizzard acquisition.[175] Microsoft, in a statement, claimed that Activision Blizzard had already been planning to eliminate a significant number of jobs while still operating independently, and that these layoffs are unrelated to the merger.[176]

After several studio closures, multiple Microsoft employees and video game journalists criticized Microsoft for its decision. Dinga Bakaba, the studio head of Arkane Lyon, publicly criticized Microsoft Gaming executives for their decision to close several studios. He emphasized the importance of taking care of artists and entertainers in the video game industry, highlighting that their role is to create value for corporations.[177] Booty was also criticized for comments he made during a town hall meeting with employees following the closures, in which he stated that Microsoft needed “smaller games that give us prestige and awards,” which many saw as hypocritical as one of the studios that Microsoft closed, Tango Gameworks, was behind the critically acclaimed and award-winning game Hi-Fi Rush.[178]

Toxic work environment

[edit]

In 2022, an investigation conducted by Kotaku revealed concerns about the studio environment at Undead Labs, suggesting the presence of sexism within the company. The studio's new leader, Philip Holt, who succeeded Strain, and the then-Head of HR, Anne Schlosser, were both implicated in fostering this problematic culture. Following a Microsoft HR investigation, Schlosser was subsequently removed from her role. Despite her departure, the persisting toxic work environment led to a significant turnover of experienced staff. The amalgamation of these issues, coupled with a lack of a clear design direction, resulted in substantial delays in the development of State of Decay 3.[179] Employees also pointed fingers at Microsoft for not promptly addressing reports of abuse, claiming that the company fell short of its diversity, equity, and inclusion objectives.[180] There have also been concerns about whether Microsoft will address the toxic work environment at Activision Blizzard following the acquisition.[181] Microsoft pledged to address the toxic workplace environment at Activision Blizzard after the acquisition.[182] On December 16, 2023, Activision Blizzard agreed to pay approximately $54 million to settle discrimination claims brought by the California Civil Rights Department on behalf of women employed by the company. Activision Blizzard also agreed to take steps to ensure “fair pay and promotion practices” at the company.[183]

On December 5, 2023, 300 quality assurance (QA) workers at ZeniMax Media announced that they were organizing a union.[184] In June 2023, Microsoft and the Communication Workers of America (CWA) announced a labor neutrality agreement.[185] This agreement enabled Activision Blizzard employees to freely establish a union, and Microsoft committed to recognizing and accepting that union.[186] 600 Activision QA employees became members of the Communication Workers of America on March 8, 2024, making it the largest game developer union in North America.[187]

Multiplatform development

[edit]

The decision to distribute various first-party Xbox titles on non-Xbox consoles, particularly its direct competitor the PlayStation 5, has been a subject of continued scrutiny since rumors first emerged of the initiative taking place internally at Microsoft in early 2024. Certain commentators have remarked upon the potential for games reaching platforms with more matured install bases and more players such as the PlayStation 5 or Nintendo Switch, to benefit Microsoft financially with regards to simultaneously providing sufficient returns for funding future game development, as well as avoiding cost-cutting measures such as job layoffs, the likes of which the company had engaged with throughout 2024 with its gaming division.[188] Speculating on the strategy, Digital Foundry editor Richard Leadbetter wrote on Eurogamer that with the acquisition of previous third-party publishers such as Bethesda Softworks and Activision Blizzard, Microsoft Gaming was already setting themselves up as "one of the largest multi-platform publishers on the market" with their established presence on PlayStation and Nintendo consoles in addition to Microsoft's ownership of Minecraft, and that attempts to limit Xbox's addressable audience to their traditional consoles and PC was becoming increasingly unsustainable by making such developers forfeit the release of said games on other consoles.[189] Oli Welsh from Polygon reciprocated the speculation, also adding that in the ninth generation of video game consoles, the Xbox Series X/S already occupied a "distant third place" in hardware sales when compared to either of its competing platforms, and wasn't able to recapture the market share and financial viability Microsoft had previously enjoyed during the Xbox 360 generation, meaning distributing their portfolio to the "tens of millions of customers" on PlayStation and Nintendo consoles was an approach to software that could prove itself more successful due to the franchises under their umbrella they could exploit. Furthermore, he cited the acquisition of Activision Blizzard as an event that possibly reoriented Xbox's necessity for increased profits and the need to expand audiences beyond Xbox consoles and PC, particularly with retaining the strongly amassed playerbases for franchises such as Call of Duty, Diablo and Overwatch among others, as opposed to limiting their reach by extending console exclusivity towards them.[190] Reporting on the strategic pivot for The Verge in February 2024, Microsoft content editor Tom Warren surmised that Xbox's plan to branch out beyond their standard three-tier console and PC and cloud gaming model to other platforms was an indicator of a lack of engagement with their content and services, particularly with regards to slowing Game Pass subscriptions and the need for the company to pursue other revenue streams such as mobile. He cited unmet growth estimates for the Xbox division during the 2022 and 2023 fiscal years, and a shift to marketing PC Game Pass as opposed to the console service, but still noted that extending their content to consoles such as PlayStation 5 and Nintendo Switch were not going to help their "embiggening ambitions" for making Xbox widely adopted from a hardware and software standpoint.[191]

In contrast, criticism has been directed at Microsoft Gaming for such a strategy deincentivizing the value proposition of an Xbox console both as a competing hardware platform, as well as an intrinsic device in their ecosystem to facilitate software and services. Windows Central editor Jez Corden derided the move as an extension of Microsoft's wider history of devaluing other in-house hardware projects such as the Surface line and Windows Phone, namely in that potentially moving premier first-party franchises outside Xbox platforms threatened to eliminate any reason for investing in Xbox hardware, while simultaneously empowering their competitors, and stagnating their acquisition of users for both their console, and associated services such as Xbox Game Pass and Xbox Cloud Gaming.[192] He also anticipated that Xbox transitioning towards a third-party publishing model would leave PlayStation without any substantial competition in the premium console space, allowing them to exercise their control over the gaming market by taking larger profits from third-party games on their consoles and promoting platform consolidation for consumers and developers.[193] Writing for Medium, Zack Daniels similarly expressed disillusionment towards Xbox's plans, commenting that such action taking place would also undermine their prior affirmed stances on game exclusivity that were reiterated throughout the Xbox One and Xbox Series X/S console cycles, particularly with regards to securing games such as Starfield and Senua's Saga: Hellblade II as marquee console exclusives for driving hardware and service engagement.[194] Former Blizzard Entertainment CEO Mike Ybarra responded to a fan inquiry on Twitter / X regarding the differing approaches to platform exclusivity between Sony Interactive Entertainment and Microsoft Gaming in light of their strategic pivot and Phil Spencer's comments about industry shifts in game distribution, suggesting that console exclusive games were to remain the key factor in a successful games platform, and that platform holders like Microsoft were pushing a "narrative that fits for them."[195]

The announcement of the MachineGames title Indiana Jones and the Great Circle (2024) launching on PlayStation 5 after a period of timed exclusivity on Xbox Series X/S and PC was met with particularly divisive reactions due to its original confirmation as an Xbox console exclusive,[196] as Microsoft Gaming had amended the contract terms with IP holder Lucasfilm to initially exclude a PlayStation 5 release after their acquisition of MachineGames alongside other Bethesda studios in 2021.[197] Ben Kerry from Pure Xbox wrote that announcing a PlayStation 5 version of an Xbox first-party game that had been marketed as exclusive up to that point removed any interest in potential new customers investing in Xbox's hardware platform or ecosystem, and remarked that there wasn't much initiative within Microsoft to promote Indiana Jones as an Xbox-associated game first and foremost outside its attachment to Game Pass.[198] GamesIndustry contributing editor Rob Fahey weighed in on the decision, noting the non-traditional way in which the exclusivity margins were detailed by confirming an additional platform before the launch of the game on its target hardware, and concluding that Microsoft informing the public of the game's limited window of exclusivity before the game's release significantly dampens the prospect of the title faring financially well on its primary systems, while hypothesizing that Microsoft did not care about such effects occurring to Xbox console sales during The Great Circle's launch, as it illustrated a more affirmed transition period towards third-party publishing from the onset.[199] Following up on Windows Central, Jez Corden critiqued the move by describing it as "a masterclass in bad product marketing", framing Microsoft's way of providing potentially impactful news to Xbox customers as dismantling the goodwill the company had fought to recuperate following the launch reception of Xbox One in 2013, and lamenting that it gave off the impression the Xbox console was "on the lowest rung of Microsoft's priority list."[200]

Corporate structure

[edit]
Main article: List of Microsoft Gaming studios

Microsoft Gaming has a major global presence and studios located across the world. Globally, Microsoft owns 40 studios and employs over 20,100 people.[201] While the majority of Microsoft's gaming activities are based in the United States, the company has strategically expanded its reach internationally. This global approach allows Microsoft to collaborate with diverse talent and develop a wide range of gaming experiences for a global audience. In addition to the United States, Microsoft has established and acquired studios in various countries such as United Kingdom, Canada, Sweden, France, Spain, Mexico, Germany, Poland, China, Japan, Ireland, Malta, and Australia, contributing to the company's status as a key player in the worldwide gaming industry.[202] In the United Kingdom alone, Microsoft Gaming owns four video game development studios and employs over 1,000 people. Playground Games, Rare, Ninja Theory, and King are among the studios owned by Microsoft in the UK.[203] In Canada, Microsoft Gaming owns five video game studios, including The Coalition and Beenox, making it one of the largest video game employers in the country, alongside Electronic Arts and Ubisoft.[204]

Microsoft Gaming
Xbox Game Studios ZeniMax Media Activision Blizzard
Activision
Blizzard Entertainment
King
Major League Gaming
Activision Blizzard Studios

See also

[edit]

References

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