What is Going on With Xbox Game Studios?

Despite advancements like Game Pass and major acquisitions, Xbox's first-party development still has its share of problems.

Posted By | On 08th, Apr. 2022

What is Going on With Xbox Game Studios?

Console gaming has never been easy for Microsoft. It was laughed at for trying to buy Nintendo; laughed at for the OG Xbox’s bulky size and massive controller; battled hardware issues of its own making thanks to the Xbox 360’s Red Ring of Death; fought from underneath to reverse so many of the Xbox One’s initially terrible policies; and so on and so forth. When Phil Spencer took over as the head of Microsoft Game Studios in 2014, however, there was a conscious drive to make Xbox gaming better. To show that Microsoft actually cared and was willing to invest in its product, both for its present and future consumers.

This can be reflected in various positive ventures like backwards compatibility (which is free as long as someone owns the game); Xbox Play Anywhere which allows for playing the same game on Xbox One and Series X/S as PC; and of course, Xbox Game Pass, currently at over 25 million subscribers and growing. Even initiatives like better gaming integration with Windows 11, the Xbox Adaptive controller, and cloud gaming which lets you stream Xbox Series X/S titles to an Xbox One, deserve to be praised. It’s incredible to think that this is the same company that had Don Mattrick at the gaming helm, telling people to play on an Xbox 360 if they couldn’t always be online with an Xbox One back in 2013.

gears 5

However, before and after its revamp, the Xbox brand has had a major issue with first-party offerings. This was most apparent when a major selling point for the Xbox 360 was timed exclusive access to Call of Duty DLC, of all things. That the company’s biggest offerings would alternate between Halo, Gears of War and Forza for several years is rather telling.

With a desire to prepare for the coming generation, Microsoft announced a wave of acquisitions starting in 2018. Though it had acquired Mojang and the Gears of War IP from Epic Games in 2014, this acquisition spree was unlike anything before with Ninja Theory, Playground Games, Undead Labs and Compulsion Games joining Microsoft (while a new studio, The Initiative, was founded at the same time).

In 2019, Microsoft Game Studio would become Xbox Game Studios and the acquisitions somewhat slowed – only Double Fine of Psychonauts 2 fame joined the family. It was 2020 where the first major bomb dropped – the acquisition of Zenimax, which includes Bethesda Game Studios, Arkane Studios, id Software, MachineGames, Tango Gameworks and ZeniMax Online Studios for $8.1 billion. Suddenly, Xbox’s first-party lineup had been bolstered to an incredible degree. That’s even with previously announced titles like Ghostwire: Tokyo and Deathloop being timed exclusives for PS5.

state of decay 3

A whole swathe of exclusives would then be announced like Redfall from Arkane Studios, Contraband from Avalanche (which is being published by Xbox Game Studios), Undead Labs’ State of Decay 3, Perfect Dark from The Initiative, Senua’s Saga: Hellblade 2 from Ninja Theory, Playground Games’ Fable, and of course, Bethesda’s Starfield as a console exclusive for Xbox Series X/S. Absolutely none of these were announced with any gameplay with Hellblade 2 receiving its official gameplay reveal some two years after its announcement. But new games, that too console exclusives! Yay!

Xbox Game Pass was also benefiting big time thanks to a whole range of Bethesda-published titles like The Evil Within, Wolfenstein, Dishonored and so on now being permanent fixtures of the service. More and more studios were jumping on to the service and it wasn’t odd to see third-party offerings like Outriders or Back4Blood releasing day one on Game Pass. In 2022, another big publisher – the embattled Activision-Blizzard – would be acquired. Spencer ascended to the role of CEO of Microsoft Gaming with Xbox Game Studios under it and being led by Matt Booty.

Pending Activision-Blizzard’s acquisition, there are 22 game studios under Microsoft. So overall, it would seem that the company has its first-party offerings in order. It seems to have finally gotten its act together and developed a cohesive plan to support the Xbox Series X/S for the future, giving Sony’s first-party titles a run for their money. Right?

Unfortunately, that hasn’t quite been the case. Even when Spencer initially took over Microsoft Game Studios, it struggled in a number of ways. ReCore was underwhelming; Remedy’s Quantum Break wasn’t the huge transmedia phenomenon that it was hyped to (and is hardly even remembered); and PlatinumGames’ Scalebound would meander for some time before being canceled. It also didn’t help that the highly anticipated Halo 5: Guardians faced severe backlash for its story-telling and lack of multiplayer features at launch, or that Halo: The Master Chief Collection was utterly broken for years. Bleeding Edge from Ninja Theory came and went. But hey, at least Gears of War had a decent new start with The Coalition releasing Gears of War 4.

Gears of War 4

Time has unfortunately not made things better. There are four key titles that represent problems with Microsoft’s handling and oversight of its game studios – 343 Industries’ Halo: Infinite, The Initiative’s Perfect Dark, Undead Labs’ State of Decay 3 and Rare’s Everwild.

Everwild is probably the most mysterious because, quite frankly, no one knows what it is. Announced in 2019 by Rare, it was later revealed to be in pre-production with less than 50 people involved. LinkedIn profiles for its developers would reveal a development period of about five years and it was reportedly rebooted in 2021 following the departure of its creative director the year before. VGC would report that the team “struggled to define a clear direction for the title” though it “optimistically” targeted a 2024 release.

Executive producer Louise O’Connor assured the site that the “The team behind Everwild continue to shape a truly magical experience and remain focused and excited about creating a new game centered around a truly unique, new world.” But as of January 2022, VentureBeat’s Jeff Grubb reported that development was a “real mess”.

Despite Microsoft claiming that some reports of reboots were overstated, Grubb said that Rare “don’t know exactly what the state of it…they are still figuring that out, and it’s a mess. This is not me just using colorful descriptions — the people working on that game don’t really know what’s going on with that game. That’s how much of a mess it is right now.” The last major bit of news on the title came from a LinkedIn profile which indicated that it would have “a large scale multiplayer world” and “extended artificial intelligence systems” but that’s pretty much it.


Perfect Dark is a much more curious beast. It was officially announced in December 2020 as a reboot though Joanna Dark would be returning. Alarm bells immediately went off in February 2021 when design director Drew Murray left the project. The departures continued – game director Dan Neuburger left just last month and a subsequent report by VGC revealed that 34 people had left the studio over the past 12 months, which was roughly half of the core development team.

Development progress was described as “painfully slow” and Microsoft was reportedly quite lenient on The Initiative. One source stated that, “Making games is hard enough, let alone when you feel like you can’t get through to people making the decisions that affect everyone” though whether this referenced the publisher or the studio’s management is unclear.

A few days later, after speaking to “trusted sources”, Windows Central’s Jez Corden reported that The Initiative’s departures stemmed from a “big disagreement” on the studio’s structure. It was initially set up to have a flat structure with the idea of remaining small and developing “high quality indie games.” However, two schools of thought would eventually emerge with the second opting to bring in Crystal Dynamics.

Finally, as Corden reports, “It just got to a point where it wasn’t working for the team in general or perhaps Microsoft itself. They were just like, ‘We need to put a plan in place here.’ From what I understand, the people that are still with The Initiative and Microsoft itself…they prefer this plan and they’re happy with this plan. What they’ve got now is that they’re working towards a common goal for the first time and that the game is actually moving forward.” This resulted in all of the departures that have happened thus far. VGC later reported that the project was essentially “led” by Crystal Dynamics but there’s still no clear indication of when it will be released.

State of Decay 3 – and Undead Labs as a whole – is perhaps the most damning indictment of Microsoft’s hands-off approach. Following its acquisition in 2018, staff were worried about a change in culture. However, following the departure of studio head Jeff Strain and the hiring of Philip Holt to lead the company, it was the studio’s own management that caused a turn for the worse as per a report by Kotaku. Pre-production began in late 2018 with teams facing re-organizations and reports of mistreatment (with Undead Labs’ HR head outright dismissing concerns of the same).

The 2020 announcement occurred when the studio wasn’t even sure what the game would be – and whether it would even have zombie deer – and despite the team size being doubled, the sequel is still in pre-production. Following enough reports of poor working conditions, Microsoft finally got involved last Summer which resulted in Undead Labs’ HR head “quietly” leaving (though Holt continues to be in charge). Several developers had already departed the studio by this point and while some believe it’s turning around, others aren’t as optimistic.

Then there’s Halo, Microsoft’s bread and butter, its flagship franchise, its key mascot. Yet it’s been handled to a strange degree by 343 Industries since the days of Halo 4. Announced at E3 2018, Halo Infinite promised a return to form for the franchise and more specifically, a renewed focus on Master Chief as the protagonist after Halo 5.

halo infinite

It featured a new engine with Slipspace and would see numerous other studios like SkyBox Labs, Certain Affinity, Sperasoft and so on helping with development. Originally, the campaign was meant to have a large open world akin to The Legend of Zelda: Breath of the Wild as per Bloomberg’s Jason Schreier. Technical issues, mismanagement and personnel turnover – especially with Microsoft’s reliance on contractors, who could only work for 18 months (and which made up almost half of 343’s team at one point) – caused about two-thirds of the game to be cut.

Following the response to its disastrous gameplay demo in July 2020, former Halo lead writer Joseph Staten was brought on as Campaign Lead and tasked with getting things back on track. Halo Infinite was delayed to 2021 and Staten became Head of Creative. He reportedly persuaded Microsoft to allow for as much time as possible to improve and fix the game.

As 2021 rolled on, features like Forge and campaign co-op would have to be delayed. 343’s plans for armor customization, particularly with Cores, also weren’t getting the hottest reception but there was a ways to go yet. By November, the multiplayer component would be released early for Xbox Series X/S, Xbox One and PC players, completely free. The response was positive en route to the campaign’s launch in December but it was quickly apparent that there were some problems.

These included only 10 maps at launch (three for Big Team Battle), the lack of dedicated playlists for Team Slayer and Free for All, a Challenge-focused system that was stingy with XP and almost no means of unlocking cosmetics outside of the store or Battle Pass. This is in addition to issues like desync and lag, which continue to plague the multiplayer to this day. 343 worked fairly quickly to address many of these issues, adding more specific playlists, improving the XP from Challenges (along with trimming some of the more annoying ones) and even reducing store prices.

However, the lack of content, further delays to Forge and campaign co-op, and other critical issues would continue to sour fans. Recently, community director Brian Jarrard outright said, “We understand the community is simply out of patience and frankly, I think understandably tired of words.” However, he also revealed that “a lot of production planning, costing, planning, hiring, etc.. is all happening which doesn’t really lend to detailed regular updates”, seemingly pointing towards the developer’s reliance on contractors coming back to bite it. As such, Season 2: Lone Wolves is coming up and will add two new modes, two new maps and at some point (not at launch, obviously), campaign co-op.

Based on the development status of these titles, you’d think that Xbox Game Studios is in complete disrepair. But its offerings haven’t been a complete failure. Forza Horizon 5 shot to 10 million players in just two weeks and even if the daily active player count is significantly lower, it continues to receive regular content updates. Despite Halo Infinite’s problems, its campaign and overall gameplay are good, and it crossed 20 million players as of January 26th 2022. Rare is seemingly lost with Everwild but its MMO Sea of Thieves continues to do well.

But the current predicament of these titles goes beyond the amount of money invested or the buzzwords used to market them – it’s about Microsoft’s plan to effectively manage its studios. Encouraging independence isn’t an excuse for such a blatantly hands-off approach which allows titles to fester for years in development hell, with some fostering mistreatment to occur. On the surface, it’s just baffling how a company that’s been ranked as one of the top 10 most reputable companies eight times in 11 years (as per RepTrak) could have such problems with its gaming division.

If anything, these issues highlight the hurdles and challenges that can occur with acquisitions. Not everything becomes all bright and shiny by throwing money at it, and no studio is immediately improved under new management. With Activision-Blizzard further bolstering the number of studios, it’s about to get even tougher.

Nevertheless, there is pressure for Microsoft to become more actively involved, especially following the various controversies that have affected Activision-Blizzard already (and which could impact the acquisition deal). Forget competing with Sony, which mostly has its act together regarding its first-party offerings – given the scale of projects in the works and the momentum of Game Pass, it’s now or never for Microsoft to formulate a proper first-party development plan and release schedule.

Note: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, GamingBolt as an organization.

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