Microsoft's $80 Billion Bet on Xbox Game Pass Falls Short

A new report sheds more light on the situation at Xbox that led to Microsoft cutting jobs, divesting from studios, and making other cutbacks to 'reset' the business.

Bloomberg reported that Microsoft spent nearly $80 billion in the past 10 years on deals to help revitalize Xbox and realize its dream for Xbox Game Pass, but those plans did not pan out the way Microsoft envisioned. Xbox CEO Asha Sharma said this week that the big bets made under previous leadership--including Game Pass, acquiring studios, and putting its games on rival platforms--'did not grow at the pace we expected.' Sharma said these efforts drove 'meaningful value,' but that wasn't enough with the growth piece. To that end, Microsoft said in a filing from the Microsoft-Activision acquisition proceedings that it was aiming to have 77 million Game Pass subscribers by the end of fiscal year 2026. That was on June 30. What was the number of subscribers? 30 million, a source told Bloomberg, following reporting by The Wall Street Journal of the same number. That's 4 million fewer subscribers than Microsoft itself reported in 2024.

According to Bloomberg's sources, Xbox employees 'had been growing concerned' that Game Pass subscriber numbers had peaked. Xbox chief strategy officer Matthew Ball revealed in June this year that 'millions' of people canceled their Game Pass subscriptions after the 50% price hike was announced in October 2025. Sharma brought the price down to $23/month, but that was still higher than it was a year ago ($20/month), and it's not actually the discount you think it is. So what happened with Game Pass? One theory is that the Netflix model of paying one price to access a huge library of content didn't work in the context of gaming due to documented player behavior. Data from Circana shows that the majority of US gamers buy a maximum of two games per year. The suggestion here is that consumption patterns are very different between Netflix and Game Pass.

Mat Piscatella weighed in on the Game Pass situation, writing that Game Pass 'failed' because Fortnite and other so-called 'black hole games' took up so much time, money, and attention. Beyond that, Piscatella observed that Game Pass was not appealing enough to the mass market audience. Also in the Bloomberg piece, it was reported that former Xbox president Sarah Bond was the leader of Xbox's Game Pass strategy. The report said Microsoft was spending $1 billion annually for third-party game deals to help convince people to sign up for Game Pass. Other efforts to expand Game Pass, like offering it to the massive PC player userbase and streaming markets, failed to catch on as well.

Regarding the $80 billion in spending in the past decade, this came from Microsoft's blockbuster acquisitions of Activision Blizzard ($75.4 billion) and ZeniMax ($7.5 billion), as well as the purchases of developers like Ninja Theory, Obsidian, and Double Fine. Sources speaking to Bloomberg said some Xbox staffers feared that putting popular, expensive-to-make games into Game Pass at launch 'could devalue them and cannibalize individual, higher-priced copies.' While there were some success stories of developers seeing a lift in full-game sales after coming to Game Pass, that wasn't always true.