Xbox CEO Asha Sharma has admitted that the company's big bet on Game Pass hasn't worked. In a memo sent to employees on Monday, the same day Xbox announced it was cutting 3,200 jobs, Sharma said the Xbox business is "not healthy" and that the subscription service "did not grow at the pace we expected," according to GameSpot.
The numbers behind that admission are rough. Kotaku reports, citing The Wall Street Journal, that Game Pass currently sits at around 30 million subscribers, down from the 34 million Microsoft announced back in 2024.
Microsoft hasn't confirmed the current number itself. Internal projections revealed during the 2023 FTC trial over the Activision Blizzard deal had the company targeting 77 million subscribers by 2026, which leaves the service more than 45 million short of its own goal, and shrinking.
Sharma was just as direct about how it happened. "In order to grow, we made a bunch of bets... and as we did that, we inherently didn't focus on the core business," she said in an interview with Fortune. "The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin."
Sharma took over from Phil Spencer in February, so the bets she's describing were placed under the previous regime.
The memo spelled out how the problem compounded. "Our core business weakened, and we added more teams, more investment, and more time," Sharma wrote, before landing on the line that has defined the week: "We must reset Xbox."
She named Game Pass, releasing more titles on competing platforms, and a broader portfolio of content as the big bets, and said those efforts created real value but never grew fast enough to carry the business.
The Fallout So Far
That reset is already in motion. The 3,200 job cuts amount to roughly 20 percent of Xbox's gaming staff, with 1,600 of those being effective now and another 1,600 coming over the next year, according to Fortune.
Four studios are on their way out as well: Compulsion Games and Double Fine are going independent with their IP, while Ninja Theory and Undead Labs are headed to new owners with financing in place for the next Senua game and State of Decay 3, as Game Developer notes. Xbox says no announced games are being canceled as part of the cuts. We broke down everything that has been confirmed so far right here.
Game Pass wasn't a small bet, either. The service launched back in June of 2017 as a $9.99 all-you-can-play library, and its growth became the justification for a historic buying spree: $7.5 billion for ZeniMax and Bethesda in 2021, then $68.7 billion for Activision Blizzard in 2023, which is still the biggest acquisition in gaming history. GameSpot puts the combined spend behind the Game Pass strategy at more than $80 billion.
Subscribers have been paying for the miss in the meantime. In October of 2025, Microsoft raised the price of Game Pass Ultimate by 50 percent to $30 a month right before Call of Duty: Black Ops 7 launched, a move that Xbox chief strategy officer Matthew Ball admitted cost the service "millions of subscribers." One of Sharma's first moves as CEO was walking that price back down to $23.
The Road Ahead For Game Pass
The admission reframes everything Xbox does next. Game Pass has been the heart of the Xbox pitch for years, and the two pillars holding it up are the subscription price and the promise that every first-party game lands in the service on day one. That day-one promise was built to chase the 77 million subscribers who never showed up.
Microsoft hasn't announced any changes to it, and Sharma's only public fix so far has been the price cut. When the CEO says the bet didn't work, the question of whether day-one releases survive the reset in their current form is a fair one to ask.
If Microsoft decides to protect game sales by pulling back on day-one releases, is a $23 subscription still worth keeping? Let us know in the comments below!
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