Xbox Figured Out Its Biggest Mistake Too Late in the Game

Xbox seems to be aware of one of their biggest problems, but the cost to fix it already feels too great.

Photo: Bethesda Game Studios

Recently, Xbox decided to shut down developers Alpha Dog Games, Roundhouse Games, Arkane Austin, and Tango Gameworks. Bloomberg’s Jason Schreier is also reporting that Xbox is expected to make further studio cuts and consolidations within the coming weeks and months. 

This news sent shockwaves through an industry that has become sadly accustomed to reports of layoffs and studio closures. The closures of Arkane Austin and Tango Gameworks feel particularly baffling. While Arkane Austin’s latest project (Redfall) was a notable disappointment, the studio previously contributed to the development of several highly acclaimed games. Tango Gameworks, meanwhile, most recently released Hi-Fi Rush: one of the best-reviewed games of 2023 and one of the titles that Microsoft decided to port to PlayStation 5 as part of their expanded publishing program. 

As many began to ask increasingly angry variations of the question “Why?” Head of Xbox Game Studios Matt Booty offerred something you could callously call an answer. 

“Today I’m sharing changes we are making to our Bethesda and ZeniMax teams,” said Booty in a leaked email acquired by IGN. “These changes are grounded in prioritizing high-impact titles and further investing in Bethesda’s portfolio of blockbuster games and beloved worlds which you have nurtured over many decades…We are making these tough decisions to create capacity to increase investment in other parts of our portfolio and focus on our priority games”

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Interestingly, those comments about high-impact titles and further investments in Bethesda were made shortly after Microsoft insider Jez Corden reported that Xbox may be interested in expediting the development of Fallout 5 to capitalize on the success of Amazon’s Fallout series. Even if it feels like too much of a stretch to connect those dots, Booty’s statement seems to make it clear that Xbox wants to devote more resources to its highest-profile projects and biggest current studios.

It is, in many ways, an absurd attempt at justifying this decision. It’s particularly infuriating that Booty would suggest finite investments are a factor given that Microsoft is a $3 trillion company that just posted a record revenue of nearly $212 billion. No, not all of that is coming from (or flowing to) the Xbox division, and yes, managing resources on that level is an inherently complex topic. But when one of the biggest companies in the history of humanity dares to mention prioritizing investments in their decision to close down celebrated studios, it’s kind of hard not to submit to the will of that pessimistic voice that says “No amount of good work will save you.”

If you allow yourself to push aside the human costs of this decision for only a moment, though, you may find that there is a harsh truth in Booty’s message. Xbox has been struggling on a global stage since the end of the Xbox 360 era, and for quite some time, it’s been apparent that a lack of major new releases is part of the problem. There are many individuals, outside factors, and internal decisions that have contributed to that problem, but it is a major problem nonetheless. 

Xbox has been searching for major blockbuster exclusives since the critical and market decline of the Halo and Gears of War franchises. While that relative lack of system-selling titles has hardly been Xbox’s only market problem over the last couple of generations, it has certainly been one of their most consistent issues.

Yes, Xbox and its many partner studios continue to make great games. When you look at the best Xbox One and Xbox Series X/S exclusives, though, you may struggle to identify the generational must-have titles that rival the kinds of exclusives Nintendo and PlayStation have put out during that time. As we’ve said elsewhere, it’s no longer just an argument about the comparative quality of those games. Xbox has a decade+ long exclusives quantity problem as well. 

I hate talking about the value of blockbuster franchises almost as much as I hate even temporarily suggesting there is some kind of point to these layoffs. The modern entertainment industry is obsessed with franchises in ways that have become boring at best and horrifying at worst. I’d rather talk to you about the many significantly more interesting initiatives Xbox has launched over the last decade or so. Game Pass, expanded backward compatibility, expanded cross-play, a carbon awareness program, best-in-class cloud gaming options, revolutionary accessibility features, the release of several excellent smaller titles, and the generally excellent design of the Xbox Series X/S hardware. Xbox has been at the forefront of several incredible programs and initiatives that should be industry standards yet largely remain limited to that platform. 

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That’s the problem, though. All the great things that Xbox has been doing in recent years sometimes feel like they live in the shadow of the company’s consistent lack of notable new releases. Sadly, they kind of do. 

I don’t love the idea that the video game industry (or any corner of the entertainment industry) is dependent on new releases in major franchises to the point that the lack of said releases can negate so much other good work. What’s even more frustrating is that companies seem so willing to give up on new properties just because they don’t immediately compete with the sales of those legacy franchises. People often say “Call of Duty” when they refer to the kind of modern juggernaut gaming franchise that is seemingly locked into best-seller status regardless of quality, but the first Call of Duty game sold less than 5 million copies, and its early sequels only did slightly better. In today’s industry, there are no guarantees that Call of Duty would have even gotten the chance to grow into that juggernaut. 

But bemoaning our dependency on and fascination with legacy franchises is different from respecting their power. While I don’t necessarily believe that Xbox would be outselling Nintendo and PlayStation right now if their franchise output had been more consistent over the last 10 years or so, it’s hard to ignore the fact that their global market decline runs nearly parallel to the decline in their production of such titles. So much good work and so many worthwhile causes have been squandered by bad decisions or perhaps just the wrongheaded belief that people will follow you outside the box en masse without needing to be lured by something familiar first.

And now, Xbox is putting more and more studios in the position of having to watch their incredible work be effectively negated by bad management decisions and market miscalculations. Matt Booty is right. Xbox could really use a game like Fallout 5 right now to get people into an Xbox ecosystem that otherwise has so much to offer. The trouble is that it’s becoming difficult to tell how many of those good things will be left by the time those games finally come out.