Is 2025 The Year To Expect The Worst Case Scenario With Xbox Hardware And Microsoft In Gaming?

Xbox Had A Great 2024, And It Amounted To Jack. So, What's Next?

Yes, this game is indeed rad and absolutely demos well every time it is show. But does it matter for Xbox?

Let's give credit where credit is due. Xbox released the most quality games of the "big three" in 2024. Indiana Jones and the Great Circle was the ultimate highlight for me, but other games that came out from their assortment of internal studios and third-party partners made it a good year for Xbox. I know not everyone was a big fan of Senua's Saga: Hellblade 2, but when you pair that with Microsoft Flight Simulator 2024, S.T.A.L.K.E.R. 2: Heart of Chornobyl, Call of Duty: Black Ops 6, and everything they brought to the forefront on Game Pass, their portfolio in 2024 was miles above that of Sony and Nintendo. With Nintendo, you have to admit the company was in the process of reallocating all of its resources towards the Switch 2. Sony seemingly pegged much of their 2024 on Astro Bot, and while that title is fantastic, they also oversaw the Concord debacle. On top of that, the PS5 Pro was a mess with half-baked promises of running premier AAA games better, with the reality being far from that. So, 2024 was a layup for Microsoft, yet their console numbers continued to plummet, with rumors swirling that they were considering pulling out of uncompetitive markets.

Though decades have passed since the Xbox One, Microsoft's gaming division continues to have a credibility gap. Game Pass subscriptions continue to grow, but not at a rate worth the entire identity of their console hardware, at least, not in the minds of most consumers. And while Xbox had some gaming victories, there were multiple cracks in their facade. 2024 was the year when multiplatform games skipping the Xbox Series S/X became a recurring storyline, with Capcom Fighting Collection 2 being announced with no signs of a Series S/X release posted and Black Myth: Wukong only getting one months after the fact. Even though this upcoming Xbox Direct is bound to drum up confidence that Microsoft is, in fact, still able to work with third-party developers and partners, we have already seen example after example of fairly major game releases completely skipping Xbox-based ports. Even if Xbox suddenly gets Final Fantasy VII Remake or Final Fantasy XVI or maybe even the next Persona, does that excuse the growing body of developers that are not signing on to Game Pass or physical game releases on the Series S/X systems? For every Persona 6, the Xbox misses one or two key Konami or Capcom-made remasters or three Nihon Falcom titles. All of this grousing is dancing around the issue of the needle not moving for Xbox hardware at all in 2024. Like, not even the slightest bit. With 2025 being a year practically defined by the Switch 2 by default, how can we hope for anything positive from Microsoft?

This blog goes up slightly before Microsoft airs its January "Developer Direct" event, during which the company will lay out its portfolio of games and services for 2025. While there's some general hype surrounding the event and the usual enthusiast scuttlebutt suggesting there will be surprises, I'm here struggling to bat an eyelash. Will seeing Phil take the stage and promote big and small games be cool? Sure, but we have been here before where an Xbox Developer Direct gets everyone excited, and by the time we reach the second half of the year, we are back at this essayist grind set, talking about there not being a future for Xbox hardware. Every time we watch one of these, there's always at least one game for every slice of gamer, but the same long-term issues plague any excitement you develop for Microsoft's gaming fortunes. The games that appear either end up on other platforms or descend into development purgatory, with Microsoft struggling to convey even the most basic level of transparency by a company in its position. How many times have we been around this block? How often have we seen promising demos at an Xbox event that seemed cool or exciting, only for those projects to go radio silent for months or years? Knowing how much of a mess the company as a whole is today, why buy into any platitudes that any division at Microsoft, let alone a long-ailing console division, can remain committed to any proactive vision for the future?

So, What's Even The "Future" With Xbox?

This man still has yet to take a pay cut.

650. That's the number of jobs cut at Microsoft's Xbox gaming division during the final leg of 2024. Those cuts came after the company laid off approximately 1,900 Activision and Xbox Game Studio employees at the start of 2024 and its decision to shut down studios like Arkane Austin, Alpha Dog Studios, and Tango Gameworks. The week this blog was published, Microsoft announced another round of layoffs, which it later clarified were "small." Targeted were the company's security, devices, sales, and gaming divisions. Though most of us did not think there was more blood to extract from the Xbox division, company CEO Satya Nadella disagreed. For Microsoft's security and devices divisions, these latest layoffs come off the heels of a previous round of layoffs targeting employees who failed internal performance reviews, which were done to address Microsoft's security division repeatedly failing to adequately address the fact its cloud computing and server program kept allowing hackers to access private documents related to the U.S. military and Department of Defense. So, it's a shitshow across the board with Microsoft. It looks like a shitshow, smells like a shitshow, and sounds like a shitshow.

As if confidence in the future of the Xbox couldn't be lower, The Information reported that Game Pass has been failing to meet internal growth targets for as long as two years. Admittedly, it sounds like Microsoft's internal targets were utterly unsustainable, with an expected growth rate as high as 11% from January 2023 to June 2023. Still, the report also shared something that we all knew already. Despite shelling out a whopping $75 billion to buy Activision-Blizzard, the purchase has not only failed to move the needle on Xbox hardware, but the presence of Activision-Blizzard titles hasn't actionably resulted in growing new Game Pass subscriptions. A portfolio manager close to Microsoft was even quoted as saying, "[Activision] has been disappointing," and "It's also a business that had some degree of consistency over, like, a three- to five-year period but was highly volatile from year to year [for us], because you're so dependent on the big releases like Call of Duty." Speaking of Call of Duty, Game File, upon reviewing court files, discovered that Activision-Blizzard has spent approximately $1.8 billion to make the last three Call of Duty titles. However, those games went on to sell a combined 114 million copies worldwide. On the other hand, Call of Duty on Game Pass has been a complete wash. Circana analyst Matt Piscatella found that Black Ops 6 being added to Game Pass resulted in a subscription spending boost but at the cost of Call of Duty's game sales on Xbox, which have entirely shifted to PlayStation. Luckily, this shift hasn't cannibalized sales of Call of Duty entirely, and Game Pass users are indeed spending money on microtransactions, and early signs suggest they are staying on past the first month. Nonetheless, there has been no Xbox Series hardware sales boost to coincide with Game Pass's overall growth. Piscatella called the current data "mixed" and repeatedly urged caution and patience regarding any positive or negative gains for Xbox and Microsoft.

Nonetheless, you put Call of Duty on Game Pass. Now that you've broken that seal, what's the play for 2025? Microsoft and Xbox had an overall better portfolio of games in 2024, but it netted them virtually nothing regarding hardware sales. Brand leader Phil Spencer, later in 2024, clarified that a successor to the Series X was in the works and that Xbox was making a dockable or portable Xbox device on par with the Steam Deck. And to be generous to Spencer and anyone leading the charge on Xbox hardware, if the Series S "fixes" the general clunkiness of running a modified version of Windows on a portable or the fact hooking up a Steam Deck to a TV and having it output anything above 720p is impossible out of the box, I'm down. Just this day, the few games I could get my Steam Deck to output at 1080p on my 4K TV, I still had to dial down the settings to medium to have it run things at a sub twenty to thirty FPS, and that's even when I was using RretroArch. Also, a portable or dockable Xbox Series S that runs Game Pass out of the box without any finagling sounds great. The thing can still be an "Xbox" that operates within the "Xbox ecosystem" and do fine for itself. While there was early hype that the Steam Deck or any of its imitators would mark this revival of console gaming on the go, they all have weird hiccups that speak to the fact they are more portable PCs than proper intermediary devices for those seeking console-like experiences. I am not alone in saying I want one of these things to act like an actual video game console where it does everything it says on the box without me playing around with settings for fifteen minutes. Even at its worst, both Xbox Series consoles do what they promise; the Series X gives you console games at 4K and 60 FPS on your TV, and the Series S gives you 1440P games at 60 FPS.

And is Microsoft really banking on Valve, Lenovo, MSI, and others not innovating faster than the normal console cycle?

Now, don't get me wrong. I don't think the path forward is obvious or clear for Microsoft, and it seems like all parts of the Xbox division view physical media and, to that extent, the Series X SKU as a growing minority of their possible consumers. The "This Is An Xbox" PR blitz was a groan-inducing stance for them to take when it obviously seems like they need to engage in a more careful balancing act, and that's doubly so as more people report and echo that every single in-house Xbox game, including Halo, is eventually set to appear on Sony or Nintendo platforms in the future. However, and this might come across as wishful thinking, there is a way for them to thread the needle, even though the company has had two console generations where they got creamed. Now, if only someone could tell Satya Nadella to either shut up or get off his AI-based high horse because it seems like Xbox has to wrangle with a company leader who has no idea or personal investment in helping Xbox strike a healthy equilibrium. That same report by The Information had several sources verify that as far back as 2021, Nadella debated winding down Xbox, but after being sold on opening up the checkbook to buy ZeniMax and, eventually, Activision Blizzard, he finally changed course. The entire brand was one mood swing away from being dead. And his biggest frustration alongside Game Pass not meeting arbitrarily high growth targets? He hates that Activision Blizzard still rents Google Cloud and Amazon Web Services for their servers rather than Microsoft's Azure servers. It wasn't spurning internal development or finding ways for Treyarch or Infinity Ward to reduce ballooning budgets, and was it about reckoning with Activision Blizzard's past issues with maintaining a toxic workplace; nope, instead, he doesn't like how the biggest investment in his company's history doesn't use his own servers. That's Xbox's fearless leader for you.

And then there's the real white elephant regarding Xbox hardware. If the Series S is going to be a dockable or portable device, how will Microsoft ensure it doesn't hamper its appeal to third-party developers the way the current Series S has? It's no secret that third-party multiplatform releases haven't happened day and date of PC or PlayStation 5 releases due to developers struggling to meet system spec requirements for the Series S. And more developers are getting vocal about their frustration with downgrading their games to meet Series S specs. So, if that SKU is a portable, how does that problem get better? Not even Steam has everything in its catalog compatible with its own Steam Deck, and that's their goddamn hardware! Are we getting even more tiers of Game Pass where one promises to silo all games that are compatible on a portable/dockable Series S? Am I going to have to do the same amount of research to find out which games can run on a Steam Deck but this time, for the Xbox portable? Maybe I'm missing something here, but I don't see the current "Tale of Two SKUs" problem with the current Xbox Series X and S getting better, with one being a completely different beast.

The Luster Of Game Pass Is Done And Dead, And It's Already A Mess Of A Service.

This might seem easy to you, but now try explaining these tiers to someone who just wants to play Call of Duty as their only game for three months.

Before we jump into the looming issues facing Game Pass, let's return to some of the bombshells of The Information's report about the direction of the Xbox brand. While Nadella and others at Microsoft have been apt to point out that the platform and program have not met growth targets, it is still growing, and in terms of the Activision Blizzard purchase, it's not been a total loss despite the high price tag. Throughout 2024, Activision titles were directly attributed to the more than fifty to sixty percent revenue growth Xbox saw in its "content and services" division. Microsoft has crunched the numbers and found that of the revenue growth they have seen since the start of 2024, 85% of that can be directly tied to Activision. Likewise, Nadella and others at the top have been very vocal that they currently have the prevailing mindset that buying Activision Blizzard was a net good, especially when you add the rarely reported King and mobile part of the deal. What Nadella has done is shift the priorities for Xbox more towards engagement than a jump in raw numbers. So, it's not all hands on deck or white flag waving just yet. There does seem to be a coherent direction through all of the confusing PR blitzes and mixed messages; it's not one that the competition will echo, nor is it something we have ever seen a console manufacturer embrace in the past. You might not like it, but there is a plan in place.

However, the issue facing Game Pass and Xbox is no easy one. While Game Pass continues to be an excellent resource for those in the hobby who have been using it for years, it's still not an immediately approachable program or platform for the general audience. The dedicated app, especially on desktop, is a hot mess, and Xbox continues to have massive issues with messaging when it comes to its tiers. Black Ops 6 on Game Pass Day One seemed like an audacious Hail Mary, but then Microsoft pulled its punches and made its rollout on Game Pass a confusing nightmare for anyone not closely following the hobby. Honestly, boot up Game Pass or the Xbox app on a dummy account; neither is immediately approachable for newcomers and yet, they are the things defining the identity of Xbox. More fundamentally, while Microsoft would love it if the general public were all motivated to want more things on Game Pass, that future has yet to transpire. Game Pass doesn't make financial sense unless you play a lot of games, and as a result, its value proposition only appeals to a relatively small percentage of the gaming public. Most people are still sticking with one to three games per month. Finally, trends elsewhere show that most people are exhausted with managing accounts to use streaming services. This is why Hulu has consistently seen drops in subscriptions, and the warning signs date as far back as 2023, when streaming subscriber growth halved. With people pairing down their streaming plates, where are these new untapped would-be Game Pass subscribers that Xbox is hoping to capture?

And Game Pass needs to get better. First, we all know not every AAA game is ever coming out on it day one. As a result, if Game Pass and streaming are the future in the mind of Xbox leadership, isn't that a concession Microsoft is selling you hardware that guarantees you're in the lurch for months and sometimes years for certain third-party games? Yes, you can still buy games wholesale, but that's not how Microsoft is marketing its hardware anymore. The platform had an incredibly strong 2024, wherein it put on a decent number of titles, but some disappointing removals echoed every good addition. After being on Game Pass for three years now, it's becoming incredibly tiresome to check my feed of messages and, every few weeks, scan over another glut of games that are leaving with the same robotic messaging about what's happening with my saved data for those games. Correspondingly, it is clear that the great gold rush of indie games on Game Pass is over. While the platform has been slowly embraced by more prominent developers, for years, it always felt like being able to play short indie narrative games on Game Pass was a given. If comments from indie developers like the maker of Darkest Dungeon are to judged, it sounds like the money and financial incentives for small-time developers to give Game Pass a shot are gone. And if I'm not getting a consistent supply of recent quality indie games on Game Pass on top of not getting every AAA or AA release, then why am I still maintaining a subscription beyond one or two months? 2025 already has been a trickle of a year for Game Pass's new releases, and even with new titles, it feels like it is becoming the place to play things from two to three years ago rather than remaining current with the times.

The most useless excuse for a digital storefront in gaming history short of Origin or peak Uplay.

And when I say Game Pass has to "get better," someone at Microsoft has to have a long look at the Xbox app and Game Pass PC because JESUS CHRIST! Game Pass's weird relationship with the Microsoft Store and Xbox App continues to be one of the weirdest forced losses with Microsoft's streaming vision. With developers repeatedly showing signs that they do not like putting larger titles and projects on Game Pass day one unless Microsoft pays them to, having all games visible on Game Pass as a default and then there's an indicator telling you that a particular title isn't on Game Pass, but if you click a link you can buy it outright and own it permanently seems like a decent and straightforward enough compromise. Games that get removed from Game Pass, such as ghosting your feed or database without any trace, continue to be frustrating. So, let me still see those games with a disclaimer that they are former Game Pass titles with a purchase link where the "Stream Game" button once was. When it comes to Game Pass PC, the complete lack of clarity or easy-to-access search filters to locate games that are only on it and not the "regular" tier of Game Pass is downright stupid. On top of that, the issue of Game Pass PC titles being at least two to three patch updates behind full console releases or Game Pass Ultimate versions is unacceptable. If you want engagement rather than hardware sales, it's high time to admit the chips are almost entirely in PC gaming, and that community should likely be prioritized over the PlayStation community.

I don't know if any of you use an Android phone, and upon using Chrome on mobile, you get suggested Google AMP news articles when you open a new tab. If you do know what I am talking about, then you know that upon detecting that you play video games, AMP inundates you with clickbait, and one of my least favorites are the highly individualized articles from the usual sources that amount to "Is 'Game X' Coming to Game Pass Day One?" Despite the article needing no more than a single-word response, they're always five to six paragraphs long, with the answers always hidden halfway into a lore dump about the developer and their relationship with Game Pass. I hate these articles and everything they say about the state of modern games journalism, but I continue to search and use them. Why? Because these articles are usually better about advertising what big and moderate-sized games are going to be on Game Pass than any Microsoft newsletter or Tweet. So, cool, Microsoft is going to have a January streaming event wherein they lay out reasons for people jumping on board with Game Pass and Xbox hardware. There have been reasonable reports that, finally, Xbox will achieve console parity with Sony in getting Final Fantasy XVI and other works by either Capcom or Sega on their consoles. That's all high and dandy, but the fact remains that the reasons for those deficits existing in the first place still stand. Unless Microsoft opens up the checkbook, no actual "type" of video game consistently releases on Game Pass day one, and even if it does, finding it once it's off the home page is a complete pain in the ass. That makes it incredibly hard for new and existing customers to determine what they are signing up for every month, thus significantly reducing Game Pass's luster as a service.

Why Have Hope Xbox Finds A Balancing Act With A Series X/S Successor When We All Know Microsoft Is Going To Throttle AI Bots Down Your Throat On It?

Say hello to the new Xbox customer service chatbot that totally doesn't remind you of Clippy.

To return to the theory that Microsoft's hardware future feels all but locked on its upcoming portable or dockable device, I do want to admit that there are other ways where Microsoft is the best suited to address recurring issues in that area. I think they're the only ones that would make a portable device with a familiar form factor and design that is immediately pleasing to my hands, and Xbox Cloud Gaming, though not without fault, is a better functioning platform than anything Sony, Lenovo, or MSI have at this point. I think they, and not Sony, are the only ones willing to put a 16:10 screen on one of these, thus ridding us of the black sidebars that continue to plague the Lenovo Legion and Steam Deck devices. Putting more than 16 GB of RAM in this thing with a battery that can last but doesn't sacrifice portability would be a nice cherry on top. They still need to figure out what they want to do with their OS, but this is one area where Xbox's current version of the Metro UI toolkit makes sense.

Jez Corden, in their Xbox 2025 predictions op-ed on Windows Central, has called the future for Xbox as one requiring a careful balancing act. There's just one problem. Nadella's vision for a more financially stable Microsoft has burned years and decades of hardware specialists that would have made such an endeavor easy to imagine. This statement isn't even entirely directed at the Xbox and gaming division of the company. The Surface division, once a pioneer in the laptop industry, is a shadow of itself after its original figurehead, Panos Panay, left. Just this month, they were joined by even more Surface senior leadership jumping ship for Amazon. That administration took enormous risks in the tablet and laptop industry and practically invented the 2-in-1 devices category. A portable Xbox device will need to take those sorts of risks, and all of the people who made that possible in the past with Microsoft-based hardware are gone. In their place, you have a Surface team with a mandate to orient hardware around AI systems (i.e., Copilot), and no one is in place to resist that mandate. Nadella continuing to bank on AI, achieving one-third of its pie-in-the-sky promises isn't changing, and it remains one of the most pressing elephants in the room facing Microsoft as a company. However, let's not sit here and pretend that Xbox hardware and software will not remain immune to company-wide initiatives to utilize AI systems to guide and exploit consumer habits.

As it is, Microsoft is already bleeding AI systems into Xbox. Microsoft has already filed a patent on "crafting and altering game narratives," and there's already an AI-powered chatbot that helps you search for answers to game and console support questions. All of this is the tip of the iceberg, and the picture gets even bleaker when you look at what the company is doing elsewhere. Microsoft started 2025 by bundling its AI-powered Office features into the Microsoft 365 Personal and Family tier. In response to these new features being added, Microsoft raised the price of those subscriptions. Previously, 365 users had to pay $20 per month to get Copilot features, and anyone who didn't want them was safe by default. Now, they're just there, AND you have to pay an extra $3 per month unless you go through the hoops of opting out of them! While I can describe this process as being significantly less painful than getting OneDrive to screw off, it's still your usual Microsoft-based rigamarole of needing to find tabs and clickable boxes in an obscure batch of settings that Microsoft doesn't want you to see. And things are just as "peachy" with corporate subscribers of 365 as Microsoft is making Copilot Chat, the customer service program they direct you towards unflinchingly, consumption-based in terms of how much they charge you!

This will never end, at least it's never ending with Microsoft.

Microsoft has sunk billions into OpenAI, and that's part of the reason why Xbox now has an AI Gaming division. CEO Nadella has been incredibly transparent about allocating resources and engineers to future projects. His most recent restructuring of the company's engineering team pivoted massive resources and waves of warm bodies into agentic AI and a new division titled "CoreAI - Platform and Tools." As Ars Technica points out rather aptly in the article I linked earlier, the fact Microsoft is hyping up Copilot's GitHub plans instead of .NET or Visual Studio speaks volumes about what Microsoft as a company intends to do in 2025. Furthermore, as that article points out, Nadella is still frighteningly bullish about AI's ability to turn a profit and attain its promises. He's restructuring a considerable portion of their engineering organization to focus on an AI agent concept with a 3-year target that might not be attainable or amount to anything because that's how AI has been for decades. If you ask me, Nadella will do what he did with Office with Xbox. They've spent a TON of money on OpenAI and Copilot but constantly try to hide how much money either are making by putting them together with actually successful stuff, and that's going to get annoying as all shit on Xbox hardware, even if it is well executed.

And to make matters worse, Microsoft's AI house of cards might already be crumbling. After forcing millions of Office users into Copilot, they rebranded apps to include the Copilot name in it as well. It's not just Microsoft 365 these days. No, now it's "Microsoft 365 Copilot," even though Copilot itself isn't officially a commercial product. The CEO of Salesforce continues to take potshots at Microsoft's struggles to launch Copilot and even stated to the press, with receipts, that all it was was a repurposed version of OpenAI's software. And after Microsoft faced massive scrutiny over its failure to keep classified materials on Azure safe from foreign agents, guess what they're doing to make everything safer and more secure! Why they're going to use OpenAI's GPT-4o to fill security gaps despite the Department of Defense telling them they have massive concerns about the number of warm bodies Microsoft has actively monitoring security threats! That's the Microsoft you're trusting to strike a "balancing act" with console hardware and software. That's the company you trust to make anything you enjoyed during the January Developer Direct "work."

I want to be optimistic, trust me. But this last point has me at a loss. There's a chance Xbox has a viable window to pull off a hardware pivot that pressures rivals to innovate and not view their positions as unofficial monopolies. Game Pass remains a considerable value to consumers despite its flaws and problems. Unfortunately, I'm confident that even if the next batch of hardware for Xbox is decent, it will be tied to a struggling version of Game Pass, a brand with no identity, and a CEO who thinks we all want to hop on the AI hype train. Even if a balancing act was possible, would it even be on the table by those who control Xbox's destiny? And if the AI bubble pops while all of this hardware is being developed or released, you know that heads will start to roll at the house of green again.