Xbox Has No Idea What They’re Doing, and I’m Not Sure They Ever Did

My friends both online and IRL have joked for years that I am somehow the world’s biggest Xbox fan, despite not owning an Xbox since 2003 and not enjoying any Xbox Game Studios games. The truth is that despite never being an Xbox guy, I have long been a huge fan of Bethesda’s games, and I often joke back that when Xbox acquired Bethesda Softworks in 2021 they also acquired me.

Arkane Studios’ Dishonored, Dishonored 2, and Prey are all in my top 10 games of all time; I love the Wolfenstein, Doom, and Elder Scrolls series; Hi-Fi Rush and Starfield were my favorite games of 2023; even the games that are not among my favorites, like The Evil Within 2 and Ghostwire Tokyo, I still had a blast with; and you can read any of my many pieces on the Fallout series to understand I am that franchise’s biggest fanatic. I love the games Bethesda makes, and I was hopeful they had found a great home when Xbox acquired them three years ago, safe from the threat of closure under the Microsoft umbrella.

I was wrong.

Following the mass layoffs that saw nearly 2,000 employees at Xbox suddenly unemployed just a few months ago, this morning Xbox announced that there would be further layoffs – and this time, topped off with several studio closures. First upon the chopping block is Roundhouse Games (Prey 2006, Rune II), who is being dismantled and rolled into Zenimax Online Studios to continue development on The Elder Scrolls Online. Thankfully, the 60 developers here still have a job. Second, Alpha Dog Studios (Mighty Doom) has been shuttered. These 25 developers have been laid off. Third, Arkane Austin (Prey, Redfall) has been closed, with a chunk of 40 developers being moved to Bethesda Game Studios Austin to work on the Starfield DLC Shattered Space and a few left without a job. And finally, and most grievously, Xbox’s only Japanese studio, Tango Gameworks (Hi-Fi Rush, The Evil Within 2, Ghostwire Tokyo) has been closed with all 65 employees out of a job. I have no words. Actually, I have a bunch of words, and here they are.

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Starfield launched with critical acclaim, millions of pre-orders, and 13 million players in one week just 6 months ago, albeit with mixed fan reception. And yet four Bethesda studios closed today. Why?

Microsoft has spent the last three decades with a strong, directed philosophy. If you can’t beat ’em, buy em. And if you can beat ’em, buy ’em anyway. While the monolithic tech company has slowly snapped up competitors in every field over the years, even as far back as the late 90s it attempted to buy Nintendo rather than try and create its own game console. It was only after Nintendo’s polite refusal of an acquisition that Microsoft created the Xbox, bought Bungie to create Halo for it, and introduced a new competitor to the console market.

Xbox continued on this way, and after their triumphant success with the Xbox 360, a certain Don Mattrick took over and notoriously ran the brand into the ground with the disastrous launch of the Xbox One. A few years into the generation Don was on his way out, and Phil Spencer, Mr. Gaming himself, stepped in. And thus began the era of Game Pass.

It is hard to describe in just a few paragraphs the multitude of ramifications Xbox Game Pass has had on the gaming industry, and I’m not going to try and dissect it here. For better or for worse, Game Pass has changed the way not only that customers consume games, but the way they approach buying them, and even the way developers approach making them. For years now, I’ve heard people say “oh, it’s a Game Pass game” as a derogatory statement, deciding such a thing would only be worth playing if it were part of a subscription service. I’ve said it myself a few times – The Medium and Xbox’s own The Outer Worlds come to mind. But here’s the thing; this only works if the developers are making as much as or more money than if they sold the game wholesale. Based on many developer interviews, that is very seldomly the case.

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Would a new Halo game even increase Game Pass subs at this point? And if they did, would it matter?

In a perfect world, your new indie game launches on Game Pass. A few million folks try it out on launch weekend. It’s great. Word gets out, and folks on Steam and PlayStation and Switch buy it off the store. You get the money from Microsoft because those folks are trained not to buy games now, and good word of mouth and reviews nets you even more sales on other platforms. But that is not the world we live in.

Every time a new indie or third-party game comes out, folks will look at it and say “Oh I’ll wait for it to come on Game Pass.” And I don’t just mean the gaming enthusiasts, like anyone who might be reading this article. I mean casual players too. They have been trained to think that everything will come to Game Pass, and if it isn’t there I’ll just play something that is. How many people will care to own this year’s Call of Duty when they could play it through Game Pass? I think this is a big part of what killed the fantastic Guardians of the Galaxy game, which flopped in sales but found huge success as the most played third-party game on Game Pass. Game Pass has been great for consumers – especially those without much disposable income. It has also been a harbinger of destruction for indie studios.

As much as I lament what Game Pass has done to spending habits of consumers, I can’t even complain that much. I’ve been using PC Game Pass for years to try out new games for a few hours, satisfy my curiosity, and move on. Usually I’ll look into two or three indie games each month that I think might be promising. Sometimes, if I love a game I try out, I’ll buy it on Steam, as I did with Yooka-Laylee and The Impossible Lair. However, I have played exactly one Day One First Party game through it, that game regrettably being Redfall. It’ll be a cold day in hell before I play a Bethesda game not on Steam where I can mod and mess with it to my leisure, and I’ve not enjoyed an Xbox Game Studios game besides Pentiment in… ever. Stay with me.

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Bethesda’s Fallout TV show released 3 weeks ago to universal acclaim from critics and fans. But where is that success trickling down?

So here I am, with my copy of Starfield and Hi-Fi Rush on Steam, purchasing these games on Day One when I could be doing it for “free” on PC Game Pass that I’ve already paid for. Perhaps you see the issue – Game Pass has put me in a position where it is against my own best interests to purchase a game. Now, I have to come up with reasons and justifications to support a developer I like. Now, the burden is on me, the consumer, to go against my own interests to justify why Microsoft shouldn’t shut down Tango Gameworks.

The point of Game Pass was to support smaller projects that aren’t going to sell as well with larger projects that are going to encourage folks to continue re-subbing.  Xbox VP of Marketing Aaron Greenberg stated last year that “Hi-Fi Rush was a break out hit for us and our players in all key measurements and expectations. We couldn’t be happier with what the team at Tango Gameworks delivered with this surprise release.

And yet here I am, one year later, writing this article as 65 wildly talented developers spend the evening figuring out how they’re going to feed their families, and why they are being punished for their commercial and critical success. Game Pass has justified it’s slow degrading of the value of games by promising that it makes room for little guys to survive. We all know now, finally, that this was a lie. Is it a great value for consumers still? Probably. Has Phil Spencer’s multi-billion dollar project destroyed the gaming industry? I am comfortable calling it a contributing factor to its slow decay.

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About 35m Xbox Series consoles have been sold 4 years in, a bit slower than the sell rate of the Xbox One.

Pentiment, XGS’s best game in, dare I say, ever, does not exist without Game Pass. Hi-Fi Rush, one of Bethesda’s best and most successful games in many years, does not exist without Game Pass. So the first part of the promise is fulfilled – here’s a budget to make a game we know won’t sell well but will be amazingly received by fans and critics. Perhaps I was stupid for assuming that meant they would get to continue making games. If Tango Gameworks, who made a Game of the Year competitor that outdid sales and Game Pass download expectations, who is funded and owned by the richest company in the world, cannot stay open – what hope in hell is there for everyone else? Capitalism has caught up with us.

The illusion of wealth or success trickling down has been proven to be falsified for decades now. The rich at the top make more money, and they keep it. They do not reinvest it in people, or resources to keep those people happy. As the late and great Nintendo CEO Satoru Iwata said, “If we reduce the number of employees for better short-term financial results, employee morale will decrease. I sincerely doubt employees who fear that they may be laid off will be able to develop software titles that could impress people around the world.” Iwata famously cut his own salary to a fraction after the failure of the Wii U to make sure no one at Nintendo was laid off. Spencer makes $10m a year before stock options. His boss, Satya Nadella, CEO of Microsoft, makes $48m a year in salary alone. Microsoft posted a record profit of $22 billion in the last quarter. In 2024 alone they have laid off 2200 developers and closed four game studios. If anyone continues to tell you that executives will reinvest in their staff, they are lying.

Phil Spencer is not your friend and he never was. If you’ve got half a brain, you already know that. His “Uncle Phil” persona has been fun sometimes in the past, as many defend him because he is a “real gamer.” He is a real gamer. He loves playing games. He’s also a bad person because all billionaires are bad people. He has been riding, however, on this concept that with Game Pass, he had solved the woes of the game industry. Here’s a way for everyone to get what they want at a fair price and let developers thrive by making art for millions of gamers and being compensated fairly. I also thought he knew what he was doing until a few months ago. He does not. I don’t think he ever did.

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Bill Gates (right) reveals the original Xbox at the 2001 Consumer Electronics Show in Las Vegas, with the help of Dwayne “The Rock” Johnson (left). Take me back.

Where does this leave us? My favorite studios have been swallowed by the Microsoft monolith and tossed away like garbage. Phil Spencer purchased Arkane Austin while they were working on Redfall. He was informed they did not want to make a live service game and had been forced to do so by the Zenimax Media Board of Directors.  He forced Arkane to continue work on it even after he knew it was a bad game, made them release the game in a totally broken state, and then shut down the studio. It’s not all his fault – Arkane Austin director Harvey Smith certainly shares the blame for mismanaging the studio and running a toxic work environment. But again it begs the question – just what the hell is Xbox doing?

Phil Spencer insists that good games don’t sell consoles. Fine. I disagree, but that’s his prerogative. Now, we know the dark truth under that statement. He doesn’t care if his studios make good games. He doesn’t even care if his studio makes successful games. Game Pass has failed him, and for that, it’s the studios and the ground-level developers that pay with their careers in a market that has never been in more dire straits. Game Pass has failed Microsoft, and so the cuts will keep coming. Game Pass has failed the customer, and so the diminished value of the art form is stained onto Xbox’s legacy.

Making good games isn’t enough to sell good games. Prey, Dishonored 2, Wolfenstein II, Deathloop, and The Evil Within 2 were all commercial failures while being beloved by fans and critics. In fact, Todd Howard alluded to the fact that Bethesda was approaching bankruptcy and was rescued by Microsoft. The hopefulness in the studios that this was the turning point, that once again they could make great art under the protection of the biggest company in the world with infinite money, was a lie. And here is the sad truth that I wish I could ignore, omit, or lie about: the gaming industry is in such a bad place that Bethesda would likely have shut down entirely by now if not for the Xbox buyout. This is the best case scenario. And it will continue happening to studios until the system is abandoned altogether.

Xbox Microsoft Bethesda Zenimax
Remember all this talk about Bethesda “joining the family” ?

What does the future hold for Bethesda under Xbox’s control? I am guessing abandoning everything that isn’t DOOM, Fallout, or The Elder Scrolls is coming in the near future. What happens to Xbox now that they are watching their dumb, absurdly expensive empire crumble after gobbling up Activision Blizzard? The Xbox Series X/S continues to sell worse than the Xbox One. Game Pass subs have stagnated at a whopping 35 million. Games are getting exponentially more expensive to make and taking 7-8 years to complete. While I have hope it will recover one day, at the moment I worry that Xbox will explode not with a bang, but with a whimper – with thousands more layoffs every year until a skeleton crew remains. And I worry that the industry itself will follow.

This industry does not care about its employees. The folks at Arkane Austin were working on Redfall this morning until they found out from an IGN tweet they didn’t have a job anymore. Tango Gameworks was not warned. Roundhouse was not warned. The artists are being exploited and tossed out like trash. Yes, Redfall is awful. Irredeemably bad. But no one deserves this. Arkane Lyon director Dinga Bakaba had some choice words today that are more eloquent than anything I could muster: “Don’t throw us into gold fever gambits, don’t use us as strawmen for miscalculations/blind spots, don’t make our work environments Darwinist jungles. You say we make you proud when we make a good game. Make us proud when times are tough. We know you can, we seen it before.

What can we do about this? Nothing, practically speaking. We know voting with your wallet doesn’t work. It won’t even stop your favorite studios from closing. In the meantime, I’ll keep hoping that Phil Spencer and his ilk disappear from this industry, that someone less obsessed with their own wealth and importance takes the reigns, and that maybe one day someone might actually be able to say they want to work as a game developer without being called an idiot. In the meantime, keep playing the games you love, buying what you can to support who you can, and never ever forgetting these companies are not your friend.

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Caleb W
Caleb W
13 days ago

Enjoyed the article. Perhaps I misread what you were trying to say, but I don’t think that Phil Spencer is anywhere near a billionaire in terms of net worth. Might be worth an edit.

Cheers!