Asha Sharma faces a Herculean task: the new Xbox CEO must position Microsoft’s gaming division for the future and navigate a current crisis. Where the biggest challenges lie.
Microsoft preempted an impending reveal story from US media by announcing the personnel changes on Friday of last week.
The message: Longtime Xbox boss Phil Spencer is leaving the company – and with him, designated successor Sarah Bond. Notably, Microsoft CEO Satya Nadella offered extensive praise for Spencer, while Bond received no mention. Sources within Microsoft indicate that Bond was faulted for several strategic missteps that contributed to the gaming division’s difficult position.
Now, it falls to new Gaming CEO Asha Sharma to turn things around – along with Studio Head Matt Booty, who is taking on more responsibility as Chief Content Officer.
Sharma is, as yet, an unknown quantity in the games business, meaning the learning curve will be steep. She spent the past months in secret, preparing for her new role in lengthy sessions with Spencer. The coming weeks will be far more public, with visits to internal studios and external partners planned.
Time is of the essence, and Sharma is acutely aware of that. Spencer has left behind a massive construction site – with acquired XXL properties, many projects begun (but partially completed), and the expectation from the capital markets that the record investments in Activision Blizzard, Bethesda & Co. Will pay off.
At the same time, it remains unclear what Xbox stands for – and what it should stand for in the future. It’s no coincidence that, alongside “great games,” Sharma has announced “the return of Xbox.” Because that’s precisely where a gap exists, one that demands her full attention to justify further investment in the marginal gaming business.
The most pressing quests for Microsoft Gaming, outlined:
1. Restore Calm
“My first task is simply: understand what works and protect it” – that was one of Asha Sharma’s first pronouncements.
For good reason: Studio closures, project stoppages, and multiple rounds of layoffs have created massive uncertainty – both internally and externally. Hardly a single location or department has been spared.
It’s possible that Spencer has already taken the most painful and unpopular measures – but it’s also not out of the question that further restructuring will follow to eliminate duplicate and overlapping structures.
Further acquisitions are unlikely in the near term – there’s no shortage of content. Instead, the focus will be on consolidating existing studios and the vast portfolio. Sharma wants to strengthen locations, invest in brands, encourage bold ideas, and take risks.
Essential to this journey: transparent, credible communication with employees and customers. Promises must be kept and not run the risk of being retracted or modified at the next opportunity (see the announced and then-stopped $80 ticket for The Outer Worlds 2).
2. Reset the Xbox Brand
“This is an Xbox” – that’s about the last thing loyal Xbox fans want to hear, many of whom have been on board for decades and enthusiastically defend $600 consoles, $80 controllers, and $27-per-month subscriptions.
Because with the promise that everything and anything can be an Xbox (smartphone, TV, cloud, VR glasses…), the brand has been recognizably gutted. According to US media, this misdirection was one of the reasons Sarah Bond was passed over in the Spencer succession.
It remains unclear what Xbox represents – and what it should represent. The brand reset must convey why it’s (again) worth being an Xbox fan.
3. Clear Exclusives Strategy
To play Ghost of Yōtei or Marvel’s Wolverine or The Last of Us Part 2, you need a PlayStation 5. To play Mario Kart World or Donkey Kong Bananza, you need a Nintendo Switch 2. Microsoft, relies on multiplatform support and routinely supplies competitors’ platforms.
But the ambiguity of “This is an Xbox,” which extends to the hardware, also applies to the software. Giving up all those revenues is something Microsoft can’t afford. The company is now commercially the most successful game supplier in the PlayStation Store.
If Microsoft wants to be more than just a developer and publisher (which Matt Booty explicitly emphasizes), it needs games that are either (initially) exclusive to Microsoft systems – or that look particularly good on Microsoft devices. Otherwise, there’s no reason for customers to urgently choose an Xbox.
Both approaches cost money and/or market share – Sharma must choose one of the two bad options.
4. Stop the Decline of Xbox Hardware
Is there even a proper successor to the Xbox Series X/S? Or will Microsoft definitively abandon building dedicated gaming PCs and simply license them, slapping an Xbox logo on them?
The fact that Microsoft has largely given up on the current Xbox generation can be seen quarter after quarter in the financial results: hardware sales are steadily declining – with no prospect of improvement.
The 2020-released console is simply no longer competitive. Unlike Sony Interactive, Microsoft has not opted for a tech upgrade à la PlayStation 5 Pro – conversely, the stripped-down Xbox Series S holds back game developers.
In retail, the model has hardly played a role since a significant price increase. Sharma has indicated a desire to change this. “The return of Xbox” is one of Sharma’s three core messages, and she now needs to develop an idea of how to play a noticeable role in the hardware business again – with a console that is not only backward compatible but also forward-compatible. And that comes with a reasonable price-performance ratio.
Things have become more difficult: while game consoles have always initially been a loss-making business, recouping costs through software and services, the unpredictable Trump tariffs, combined with the AI hunger that Microsoft itself actively contributes to, have added to the equation. Both developments have led to supply shortages and sharply increased prices, for example for memory chips and hard drives.
At least: with AMD, Microsoft has a strong partner at its side. Announcements are expected soon.
5. Reform Game Pass
Call of Duty was the last bullet: after already popular titles from Blizzard and Bethesda found their way into the game libraries, the integration of the blockbuster shooter series was supposed to be the breakthrough for the subscription service. Instead, substantial price increases scared off even loyal customers.
All Microsoft measures are now aimed at increasing the number of subscribers. Current data is not available – estimates range between 30 and 40 million and are well below the targeted altitude.
Microsoft now has few options left to regain momentum. The Game Pass is now riddled with footnotes and fine print. The original “value” promise has been gradually watered down – only in the Ultimate plan for an astronomical €323.88 per year are new games included directly upon release.
The fact that Sharma did not mention the Game Pass in her opening message suggests that Microsoft wants to take its time integrating the service into an overall strategy.
6. The Million-Dollar Question: How Will Microsoft Gaming Handle AI?
Artificial intelligence remains the hot topic in roughly all creative industries: the question of where and to what extent AI is allowed to be used is dividing workforces, award committees, and customers.
Given her career as Head of CoreAI at Microsoft, Sharma immediately rejected “soulless AI slop” upon taking office. At the same time, she is also aware of the competitive advantage of AI, especially in light of ever-increasing development costs. At least the competition will not take sensitivities into account.
Moderating the very different interests between art and commerce will therefore be one of Sharma’s main tasks. Interestingly, she hinted that Microsoft is working on platforms where developers and players can build and share their own creations – which sounds like Minecraft 2, to address both an aging core audience and the phenomenon of Roblox.
Even if You’ll see no specifications from corporate headquarters around CEO Nadella regarding the use of AI, according to Chief Content Officer Matt Booty, the fact that Microsoft is appointing an AI expert to head the gaming division is inevitably a clear signal – both internally and externally.
