"Bad news for Xbox": Analysts react to the leadership shakeup at Microsoft's games division

Microsoft’s games division has gone through its biggest shakeup in leadership since the departure of former Xbox boss Don Mattrick following the infamous Xbox One reveal during E3 2013.

Executive VP of gaming Phil Spencer has retired after 12 years in charge and 38 years with the company. Xbox president Sarah Bond has also departed.

Taking the job is Microsoft CoreAI product president Asha Sharma, while Matt Booty has been promoted to EVP and chief content officer for Microsoft Gaming.

The move comes after years of layoffs at Xbox, including studio closures and project cancellations. Microsoft has invested tens of billions of dollars in expanding its games division, as well as building up its Xbox Game Pass subscription service.

Challenges and opportunities

Industry analysts have weighed in on what they think the executive shakeup means for the future of Xbox.

Thinktank research and strategy founder Robin Boyar said the outlook for the games division is “not so good”. She outlined reasons to be concerned about the company’s prospects, including losing the console battle with PlayStation, audiences gravitating to mobile and PC and that the subscription model “doesn’t work” and devalues Microsoft’s prestige IP.

Boyar also highlighted how Microsoft’s big IP acquisitions have fan bases that are now over 40 for the most part, while growth in games is coming from new audiences, as seen on platforms like Roblox.

On AI, Boyar commented: “There's no point in discussing how AI can make faster and better games, because the last thing the gaming ecosystem needs is more games.”

Suggesting what Microsoft could do moving forward, she suggested culling IP, focusing resources on core IP, stop making hardware, refine GamePass and “hope that cloud gaming becomes a thing”.

“I do not think they will sell Xbox off... it's not in their DNA,” she said. “Besides, who would buy them?”

Time of transition

Aldora CEO Joost van Dreunen said a change in leadership rarely signals a continuation of an existing strategy. “At this level, it usually signals a phase transition.”

Van Dreunen commented that throughout Xbox’s history, it has been tasked with accommodating novel technologies as part of Microsoft’s efforts to dominate product categories, but fell short of these ambitions.

“The console is no longer the economic center of gravity for Microsoft's gaming business,” he said. !Over the past year, they've raised hardware prices twice, outsourced chip design to AMD, and licensed the Xbox brand to third-party manufacturers. Hardware is shifting from strategic moat to distribution node. Putting an AI executive in charge formalises that shift - from devices to infrastructure.

“Under Spencer, Xbox tried to win in gaming. Under Sharma, gaming may be tasked with strengthening Microsoft.”

He added: “The more cynical read is that Xbox has lost the plot.

“Spencer understood the gaming ecosystem from the inside. Sharma understands platforms and scale from the outside. Gaming might become subordinate to Microsoft's horizontal AI ambitions rather than treated as a category with its own logic and culture.

“The incoming exec team I've spoken to seem eager and disciplined. It might prove to be the shakeup the firm needs. It may also mark the repositioning of Xbox from growth engine to efficiency engine - one focused on operational leverage, margin discipline, and AI-enhanced optimisation.

“Microsoft will have to earn its credibility with players and developers all over again. The $69 billion question is whether they can.”

"Bad news for Xbox" 

Games consultant Tadhg Kelly said while Sony and Nintendo have identified their target audience and have kept their primary offering and messaging largely the same, Microsoft has not.

“Where Xbox has been going wrong for many years is believing there's an untapped or unaddressed gaming segment that can be turned on with innovation on services,” he wrote.

“That, like software, there's a way to redefine the horse. But there isn't. It's been tried and tried and tried and tried, not just by Microsoft. At every turn the gamers respond that they just really really really like their faster horses and have zero interest in motor cars.”

Gossamer Consulting Group principal Eric Kress called the executive change “troubling” and said the reshuffle “has Satya’s fingerprints all over it”.

“I think Xbox has been losing precisely because Spencer was already being pushed to prioritise cloud and subscription over gaming. Sharma's appointment signals more of the same, doubling down on a strategy that doesn't work for the console business.

“The move that would have made sense: keep Booty running studios, and install an actual gaming executive as CEO. Someone with relationships, credibility, and a real vision for what Xbox could be. Focus on exclusives, build the brand the way they should have from the beginning.

“Instead, they've created massive uncertainty. Studios will be scrambling to justify their existence. Culture takes a hit. And if history is any guide, we're looking at significant layoffs and studio closures within 12 to 18 months as Sharma tries to find her footing.

“This is bad news for Xbox. And it likely accelerates the inevitable: a spinout or sale to the Saudis.”

"Deserves respect"

Writing about Spencer’s tenure at Microsoft, former EA COO and executive VP Peter Moore said while it’s easy to critique decisions and debate strategy with the benefit of hindsight, it’s harder to sustain leadership over decades “in an industry that reinvents itself every few years”.

“Phil did that,” he stated, adding: “Leadership in this industry means making imperfect decisions with incomplete information, under extraordinary pressure. It means standing in front when things go wrong, and sharing credit when they go right. That is not easy work.

“Whatever opinions swirl today (and I see the boo birds are out in flocks) history tends to be kinder and more balanced. Sustained contribution matters. Building institutions matters. Showing up year after year matters. A long career in gaming, particularly at the scale of Microsoft, deserves respect.”