Why Xbox can’t afford to give up on consoles despite going multiformat

Even as Xbox console sales struggle, Microsoft remains committed to making more hardware – and it’s all because of Game Pass.

2024 marked a significant turning point for Microsoft’s gaming strategy. After years of pushing its own game exclusives, to coax people into choosing Xbox over PlayStation, higher-ups admitted to themselves that they just weren’t making enough headway.

Xbox boss Phil Spencer himself corroborated rumours that a curated selection of Xbox exclusives would be ported to Nintendo Switch and, most shockingly of all, PlayStation 5. Since then, it’s become increasingly likely that most, if not all, future Microsoft games will be multiformat.

Almost every upcoming Microsoft published game is already slated for PlayStation 5 and/or Nintendo Switch (the latest Xbox Developer Direct only highlighting one Xbox exclusive) and frequent rumours – and Spencer himself – suggest more ports of older Xbox games, including legacy franchises like Halo, will follow suit.

This has, unsurprisingly, led to some Xbox fans describing the change of plan as a ‘betrayal’ as well as worrying that Microsoft will eventually quit making consoles altogether.

Despite what even Microsoft’s own actions would suggest though, not only is it not dropping out of the hardware race, but it can’t afford to.

Is Microsoft giving up on making Xbox consoles?

No, Microsoft has no plans to stop making Xbox consoles. To a casual observer, it’s easy to assume otherwise, when Microsoft is promoting how you no longer need an Xbox console to play its games, but it’s not the case.

PC, mobile phones, handheld devices, Samsung smart TVs, Amazon Fire TV Sticks; Microsoft has come up with multiple ways to get its Xbox Game Pass service into the hands of those who don’t want to buy one of their consoles.

Its newest marketing campaign explicitly highlights how all these alternate devices can technically be considered an Xbox, with examples like phones and Samsung TVs making use of cloud streaming to pull it off.

It makes sense for Microsoft to de-prioritise pushing hardware when the Xbox Series X and Xbox Series S have unambiguously lost to the PlayStation 5 in terms of sales. Especially as they’re performing worse than the Xbox One.

As highlighted in this Game Developer report, the Xbox One is estimated to have sold around 38 million units in its fifth year on the market. The last recorded lifetime sales for the Xbox Series X and Xbox Series S are at a combined 28.3 million, with an estimate that they’ll only reach 33 million by the end of their fifth year in 2025.

Additionally, in the US specifically, lifetime sales for the Xbox Series X and Xbox Series S are trailing behind the Xbox One by 18%, according to Circana analyst Matt Piscatella.

If you shared all this information with someone who’s not attuned to the games industry and told them Microsoft would stop making consoles, they’d probably believe you. Yet this is far from the case.

Microsoft has promised it’s working on a next gen Xbox console that is ‘focused on delivering the biggest technological leap ever in a generation’ and it’s building prototypes for a Xbox handheld which may or may not be the same thing.

It may seem strange for Microsoft to continue investing in gaming hardware when current sales are so bad it’s had to start releasing games on rival consoles, but there’s a very good reason for this and it’s because of Xbox Game Pass.

Why is Microsoft still making Xbox consoles?

While Microsoft is unlikely to ever share detailed data for Xbox Game Pass subscriptions (which in turn tells you almost all you need to know), the aforementioned Game Developer report indicates that most Game Pass subscribers are also Xbox console owners.

Game Pass remains a key part of Microsoft’s gaming strategy and despite the service regularly missing its growth targets, the company loves to tout how many people use it.

Last February, Microsoft revealed it had 34 million Game Pass subscribers (via The Verge), which is a lot but the company wants almost triple that number – 100 million – by 2030, which is sounding more and more impossible by the day.

Microsoft has never indicated how many of those subscribers are accessing Game Pass without an Xbox, but it’s not unreasonable to assume they are in the minority. After all, not everyone is going to own the specific TV or streaming stick needed to access Game Pass and, even if they do, cloud streaming isn’t a viable option for everyone.

Aside from needing a strong and reliable Internet connection, Xbox’s cloud gaming service is gated behind Xbox Game Pass Ultimate, the most expensive tier at £14.99 a month. Plus, if you weren’t interested in getting an Xbox console to begin with, would you really be swayed into subscribing to Game Pass instead?

One could argue that an easy way to attract more Game Pass subscribers is to bring the service to other consoles, namely the PlayStation 5, the Switch, and the upcoming Switch 2. But that would only further incentivise people into flocking to those consoles instead (plus, neither Sony nor Nintendo are likely to allow it).

Remember the Flaming Moe’s episode of The Simpsons? Moe’s bar was incredibly popular because of the drink idea he stole from Homer, but the moment others learned the secret recipe and could offer it elsewhere, all Moe’s patrons left. It didn’t matter that he did it first; that wasn’t enough to keep customers coming back anymore.

It’d be the same situation for Microsoft if Game Pass came to Switch or PlayStation. The company’s already in a position where not enough people are buying Xbox consoles, so the last thing Microsoft wants is to make the one advantage Xbox has left available elsewhere.

This is why Microsoft needs to keep making new Xbox consoles, at least for the time being. Not to mention, Sony’s going to make a more powerful PlayStation 6 eventually and, even if it can’t compete sales-wise, it wouldn’t look good if Microsoft didn’t have a shiny, new console ready to go for the dedicated Xbox customers.

If anything, the next console generation could allow Microsoft to regain some ground. As former PlayStation president Shawn Layden said this past December, console hardware has plateaued when it comes to raw power and any future improvements will be negligible at best.

So, the next Xbox has an opportunity to try something radically different to give itself some unique selling point (beyond continued access to Game Pass) and further differentiate itself from the PlayStation 6.

Assuming it’s not the same thing, the Xbox handheld Spencer has talked about could certainly reach a new audience; one that’s more enamoured with devices like the Steam Deck and PlayStation Portal.

There’s no telling where things will go for Microsoft from here. The Xbox Series X/S has sold less than the Xbox One and it’s reasonable assume to the next will sell less again, unless it actually does do something different – other than being a decade late to the portable hybrid party.

Market research already points to the next generation only having room for two consoles, one of which will almost certainly be the Switch 2, so there’s a non-zero chance the Xbox will be pushed out entirely.

But perhaps that doesn’t matter to Microsoft, in the sense that they only have to tread water until streaming games is more viable for more people. Or perhaps until their other advantage over Sony, in terms of AI tech, can also be leveraged.

Avid Sony supporters would certainly cheer at the prospect of Xbox going entirely third party, but less competition for Sony also means less reasons for it to try – and it’s not exactly been going all out lately as it is.

As things stand now, though, it’s far too early for Microsoft to embrace being merely a third party publisher. Not when a significant portion of its paying audience is still using its consoles and there’s still a chance Game Pass could become their unique selling point.

It may be losing its exclusives, but there’s still a place for the Xbox… for now at least (Microsoft)