CEO of Microsoft Gaming Phil Spencer stated that Microsoft could potentially be leaving the gaming industry soon and Xbox could be killed off, in quotes extracted from an FTC investigation.
The investigation by the FTC into Microsoft’s acquisition of Activision dredged up plenty of information about the internal workings of Microsoft’s gaming division and a leak revealed it to the world. One of the most significant pieces of information details the plans for Microsoft’s gaming division for the future. Some of those plans include a crypto-enabled console utilizing AI, and Bethesda’s release schedule which includes a yet-to-be-revealed remaster of Oblivion.
However, the most concerning information relates to Microsoft’s potential exit from the gaming industry. Spencer outlined internal expectations for Game Pass and how Xbox hardware fits into those goals.
Is Microsoft quitting the gaming business and killing Xbox?
Microsoft is not quitting the gaming business or killing off the Xbox line of consoles, but Microsoft Gaming CEO Phil Spencer stated that it could happen.
FTC Lawyer James Weingarten asked Phil Spencer about their internal projections for the success of Game Pass in the next few years. Microsoft aims to reach over 100 million subscribers to Game Pass by 2027. As of January 2022, the latest confirmed number of subscribers to the Game Pass service is 25 million.
Microsoft plans to exit the gaming industry and potentially shutter the Xbox brand by 2027 if Game Pass does not meet its projections for success, according to Spencer. That timing lands a year before internal projections for the release date of the successor to the Xbox Series X/S consoles.
In October 2022, Spencer noted that Game Pass was already profitable and accounted for 15% of Xbox’s content and services revenue. The question is whether the service’s growth will be able to match those projections. Spencer stated that if these projections are not met, then Microsoft will be exiting the gaming business.
Spencer’s testimony came from the investigation into the FTC which was seeking to block the merger between Microsoft and Activision Blizzard. His statements could have been colored by this. Microsoft regularly emphasized the importance of the acquisition during the FTC investigation and in federal court hearings. By framing the acquisition of Activision Blizzard, Inc. as critical for company plans moving forward, Microsoft makes its position stronger.
Analysts have discussed how important the release of Starfield is to Microsoft, and the game’s success thus far stands in contrast to the critical flops of other Xbox exclusives such as Halo Infinite and Redfall that have killed some of the hype surrounding the platform. In a tech giant like Microsoft, no venture is safe if it fails to move the needle.
Is the Microsoft acquisition of Activision Blizzard done?
The acquisition of Activision Blizzard by Microsoft is not yet completed, though the FTC withdrew its attempt to block the merger.
The FTC attempted to block Microsoft’s acquisition of Activision Blizzard due to anti-trust concerns that the move could lead to the company monopolizing the gaming space through high-profile acquisitions.
The acquisition of Activision Blizzard added established IPs including Call of Duty, World of Warcraft, Candy Crush, and Diablo. The $69 billion deal is Microsoft’s largest acquisition in the gaming sphere yet. The company had previously acquired Minecraft developer Mojang and ZeniMax Media, a holding company that encompasses major gaming IPs including The Elder Scrolls, Doom, Quake, and Wolfenstein.
The FTC alleged that Microsoft could use its ownership of those IPs to suppress competitors. As part of the investigation, internal emails discussing possible Microsoft acquisitions of Nintendo and Steam owner Valve were also discussed.
The suit against Microsoft was withdrawn by the FTC in July. The acquisition has not yet been completed and faces legal challenges from outside the United States including the United Kingdom’s Competitions and Markets Authority. The FTC can re-submit its lawsuit.