Xbox Hits Reset Button on Business & Netflix Has a ‘Season 2’ Problem

Microsoft's Xbox division is in crisis. In an unusually blunt internal memo, Xbox chief Asha Sharma told employees that "our business today is not healthy" and revealed that the division lost 64 cents for every dollar invested into its game studios. The admission came alongside news that Microsoft is cutting up to 20% of its gaming workforce and selling or spinning off four to five game studios it had acquired over the past decade. The gaming giant spent $69 billion on Activision Blizzard in 2023 and another $8.1 billion on the studio behind Fallout and Skyrim, aiming to build an exclusive game library that would drive Xbox console sales and Game Pass subscriptions. Instead, the strategy backfired. The internal memo was brutally honest: "Excluding Activision Blizzard King, over the past five years we've spent over $20 billion on ongoing investments in our content platform and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue." Game Pass subscriptions have plateaued at roughly 30 million, far short of the 100 million target by 2030. Meanwhile, Microsoft is spending roughly $190 billion this year on AI infrastructure, redirecting resources away from slower-growing businesses like gaming. The turnaround plan, now in the hands of S