Is Xbox Shutting Down? Here's What We Know About What's Happening at Microsoft

Last weekend, well-substantiated leaks indicated that the Console War—the two-decade battle of attrition between Sony's PlayStation and Microsoft's Xbox—may finally be over. It seems, from all indications, that Microsoft is ending platform exclusivity for its major titles. 

At one point, this practice was a main selling point for the Xbox console—anyone who wanted to play Halo had to buy an Xbox. But if Microsoft makes games like Halo available on PlayStation as well—and it seems this might be the case—it decreases any incentive to buy an Xbox at all. And it begs the question: What is the Xbox console's financial viability, moving forward? And is Microsoft amid a pivot—away from hardware and into software? 

The backlash from Xbox customers has been harsh and swift. In response, CEO of Microsoft Gaming Phil Spencer announced on X that there will be a "business update event" next week to address the console's future. For people who have been observing Microsoft's moves over the past two years, the viable path forward seems pretty clear. But to people who work at Xbox, the future remains uncertain with rumors and speculation floating around that the company might be shutting down. 

Here is everything we know so far and what it means for consumers in the months and years ahead.

There is speculation from fans who think that Xbox is shutting down this year. There are rumors that the business update event happening next week is going to be run by Microsoft rather than the Xbox team, which might imply that there are going to be some impactful, top-down decisions coming next week. Prominent gaming influencers see the writing on the wall and are divesting themselves from creating Xbox-centric content.

But in a practical sense, it is very unlikely that Xbox will shut down entirely; the brand name still commands attention, after all. It is more likely that we'll see a shift in purpose—that perhaps Xbox will become a third-party developer, or it will focus more on selling Game Pass than selling consoles.

Over the past month or so, there's been a slow trickle of rumors that various Xbox titles, once thought to be exclusive to Xbox, might be moving to multi-platform instead. This includes currently available titles, like rhythm action games Hi-Fi Rush and Sea of Thieves, and upcoming games, like the new Indiana Jones title under development by Bethesda. But things came to a head when it leaked that Bethesda's Starfield, released last year, was also in line for the same multi-platform treatment.

The latter two titles were especially galling to Xbox users because Microsoft owns ZeniMax Media, which is Bethesda's parent company. A layperson would think, just by the amount of money that Microsoft purchased the studio for in 2020 ($7.5 billion), that they would make Xbox-exclusive games. Now that no longer appears to be the case.

A software exclusivity strategy only works if there is a large install base of hardware users to purchase the game. But in 2023, Sony sold 22.5 million PlayStation 5s, whereas the Xbox Series X/S sold 7.6 million units. Over its console's lifetime, Sony has sold 48.93 million PS5s; by contrast, Microsoft has sold 25.37 million Xbox Series X/S consoles in roughly the same amount of time.

Companies implement exclusivities to drive the sale of consoles, but numbers-wise, Microsoft has reached a saturation point. And so, even if they have an amazing exclusive game, there's a finite audience that can purchase or play it. And what was once intended as a long-term strategy—to build a loyal customer base that feeds into the Xbox ecosystem—can become a choke point to maximizing profits.

It might. Why buy an Xbox console with no exclusives, especially when Sony shows no sign of ending theirs? Brand loyalty aside, customers would most likely rather purchase the console that will allow them to play everything.

For years, dating back to the last console generation, Xbox has attempted to pitch itself as a media hub in addition to being a gaming console—that having an Xbox in the customers’ living room means that they can unify their music, TV shows, movies, and games into a single ecosystem.

Had this messaging worked out the way that Microsoft intended, this latest news wouldn't hit nearly as hard. But clearly, the public still sees Xbox as a tool for gaming, first and foremost. And under those terms, it's hard to see how this is anything but a capitulation on Microsoft's part. Giving up exclusivity could be an acknowledgment that not only are the hardware sales not where they should be, but that Microsoft does not see a viable path forward where they ever will be.

Microsoft's bright spot in all of this is its Game Pass, which is a subscription game service. It continues to grow, with a base of 33.3 million subscribers in 2023. The appeal of Game Pass is that for a small monthly fee, users not only get a massive library of old games, but also get access to the latest games that, under the old system, would cost them $70 per title to own.

It's consumer-friendly. But it might not be viable long-term. Developers are split on the service—many feel that putting everything in a single massive library of content minimizes their hard work and decreases unit sales—Microsoft has admitted as much. And some games, like Baldur's Gate 3 (which Complex named Game of the Year in 2023), are not on the service because the developers decided against devaluing their work. 

That means that if an Xbox user wants to play Baldur's Gate 3, they will probably end up paying for a Game Pass subscription (to save money on everything else), plus an additional $70 for Baldur's Gate 3. And the problem could get worse. A recent rumor is that the new Call of Duty will also not be on Game Pass. And since the Call of Duty developer, Activision Blizzard, has also been owned by Microsoft since 2022, it's another sign that this decision is coming from the top, and Microsoft has decided that the current model is no longer viable.

Then there's the recent layoffs. In January 2024, Microsoft announced that 1,900 employees were being let go—primarily from Activision and Blizzard. This constituted approximately 8% of the total gaming division.

Microsoft’s game content and studios president, Matt Booty, released a statement—which, in the context of the most recent rumors, might be cause for concern among Xbox fans.

"This is a difficult process, but it is one that will best enable Blizzard and Xbox to deliver ambitious games for our players on more platforms and in more places than ever before,” Booty said. “We are moving forward with a more focused strategy across Microsoft Gaming that sets us up for sustainable growth and aligns our talent and resources to our top priorities."

We won’t know for sure until the Microsoft event next week. But if Xbox exclusivity is no more, and Game Pass is not sustainable long-term, it could mean that Microsoft is getting out of the console game entirely, or that they'll rebrand themselves as a third-party developer, or both. That's what Sega did after the Dreamcast failed in 2001. If Microsoft has determined they are too behind on hardware sales to catch Sony in the next console generation, they might not have a choice.

None of this is good for consumers. PlayStation fans might be crowing over this, but they shouldn’t be—ultimately, competition is healthy. When Sony and Microsoft compete for consumers’ dollars and attention, that means they get better choices. If it's only Sony in competition with itself, it'll be easier for Sony to get complacent, increase prices, or engage in predatory practices. Fans will have to see what Microsoft says next week—and then wait to see how Sony reacts. 

And as for Nintendo? They've managed to stay out of the console war entirely, by creating their niche that emphasizes gameplay and family accessibility over cutting-edge visuals and sound. Nintendo realized, around 2004, that a graphics arms race would end up with only one winner, so they went in a different direction and avoided the confrontation. Twenty years later, we see how prescient that decision was.