After reports from earlier this week about Microsoft CEO Satya Nadella being faced with a choice to shut down the company’s Xbox division back in 2021, a Microsoft spokesperson has denied the same.
According to WCCFTech, a spokesperson from Microsoft stated that Nadella could not have shut the Xbox division down, referring to it as a rumour. Among the analysts talking about this are Janus Henderson Investors portfolio manager Denny Fish, analyst Michael Pachter, and Macquarie Science and Technology fund investment manager Gus Zinn.
A common theme throughout the comments is that, while the Xbox division might have required some big investments, such as the acquisition of Activision Blizzard for example, the business has still been one of the most consistent performers for Microsoft. “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 because you’re so dependent on the big releases like Call of Duty,” said Fish.
Whether or not the Xbox division gets shut down in the future comes down to the Activision Blizzard acquisition helping with growth in the longer term, especially for recurring payment-based services like Xbox Game Pass. “Seventy billion dollars is not a pittance – it’s a lot of cash,” said Pachter. “They might lose money in the short term, which is fine, as long as they can prove that in the long run, Game Pass is a solid source of recurring revenue.”
On the other hand, Zinn believes that demand for services like Game Pass might be on a downward trend. “I just think the majority of the game market doesn’t really want a Game Pass,” he said.
Whether or not the company shuts down its Xbox division, however, Nadella has, in the past, maintained a focus on the fact that Microsoft has traditionally been a software company. Back in October, Nadella reiterated that the company would continue to bring some of its bigger releases to other platforms, namely PlayStation and Switch.
In 2023, Nadella had doubled down on wanting to focus on software, stating that he would “love to get rid of” console exclusives. Rather than selling games for a single set of hardware, Nadella wants the company’s releases to get a larger audience by being available on every platform out there. Currently, Microsoft has been realizing this vision by not only releasing its major titles on PC but bringing some of them to PS5 and Nintendo Switch as well.
It is worth noting that, according to reports from earlier this month, developers expect to lose quite a few sales when they bring their titles to Game Pass. Depending on how big the game is, developers apparently expect to lose around 80 percent of the sales they would have made on Xbox. Multi-platform titles, however, have the unique property of boosting sales on other platforms if they get on Game Pass, likely with more players wanting to check them out.
