The Xbox Situation Keeps Getting Worse
The decline of Xbox is a sad spectacle.
YouTube comment sections and r/Xbox are filled with a nostalgic yearning for the 360 and those legendary Xbox Live lobbies, but there's no going back to what many label the "golden era" of gaming. And the modern state of Xbox only makes it harder to accept.
Xbox has been on a downward trajectory for a while now. The Series X|S failed to deliver and practically handed the console market over to Sony, while Microsoft Gaming CEO Phil Spencer's shock retirement has just sent yet another earthquake through Microsoft's gaming division. What we know so far is that Phil Spencer is officially out, Xbox President Sarah Bond is resigning, and Asha Sharma, the current serving president of Microsoft's CoreAI, will become Microsoft Gaming's new CEO.
Already, statements are being put out about Xbox getting back to making "great games" amid the internal shake up going on. However, at this stage, it may be too little, too late. The Xbox situation is much worse than many people even realize, so let's unpack everything.
Microsoft Shakeup Won't Save Declining Sales
It's never a good sign when a company does a major shakeup following years of underperformance on the market. That's exactly what's going on with Xbox at the moment, though, with Phil Spencer officially hanging up his hat after a 25-year career at Xbox. Internal promotions have been capped off with Asha Sharma taking the reins as Microsoft Gaming CEO, with the hope among Xbox loyalists that she might be able to save a sinking ship.
The numbers aren't great: last year, the Xbox suffered its worst year for sales ever in the UK, down 39%. An AMD insider also recently shed light on the fact that the Series X|S has failed to even surpass 30 million lifetime sales, despite being on the market for nearly half a decade, while IGN reports that Xbox hardware sales have tanked for two years straight.
There are countless factors behind this, including the fact that most new releases still come out on old gen, Xbox exclusives just aren't as good as they used to be, and price increases have gamers spending more carefully.
Sometimes, when a fresh year starts, gamers will traditionally head out and grab some new gaming hardware. But again, January 2026 Xbox Series X|S saw a staggering 27% decline, setting the tone for what looks set to be another bad year for Xbox. A new year hasn't been enough to inspire anyone to go out and buy a new Xbox and you really can't blame them at this point.
The Focus Is Back to "Great Games"
The people over at Xbox do, at least, deserve a little credit for being aware that Xbox is not in a good state.
Time and time again, game companies fail to grasp why they're failing in the market, but the newly promoted Microsoft Gaming CEO Asha Sharma claims that "as monetization and AI evolve and influence this future, we will not chase short-term efficiency or flood our ecosystem with soulless AI slop" and that they must get back to making "great games" for core Xbox customers.
These are promising words, yet the problem remains that Xbox has taken so much brand reputation damage over the past few years, as well as significant market share loss, that reversing it at this point could be next to impossible.
Another overriding problem in the promise to get back to making great games is that many of the Xbox exclusives that fans came to know and love, such as the hugely popular Halo franchise, aren't what they used to be.
No matter how good it is, a new Halo game likely wouldn't move the needle in 2026, so switching back to the classic games formulae might not be as easy as the higher-ups at Xbox believe.
Let's not forget that gaming consumers have evolved a lot post-Covid, too, with gaming trends like the shift to mobile gaming making life much harder for today's consoles.
Many gamers, especially those from Gen Z, aren't all that happy about having to splash out over $70 every time a new AAA game comes out, which is why so many of them have switched over to mobile or only play F2P games.
This is, in part, because the likes of Xbox haven't been releasing games that consumers deem to be worthy of the price tag, and it's certainly fair to say that AAA game standards have fallen significantly over the past decade.
Xbox Market Share Has Dropped to 29.4%
An unignorable fact is that the Series X|S's market share has now dropped to 29.4%, while the Sony PlayStation 5 comfortably sits at 42.7%. What stings for Xbox is that the PlayStation 5 itself has sold 84.2M units, more than any Xbox console ever released. This, by the way, is a PlayStation 5 that many consider to be a flop due to its lack of big exclusive releases and a large chunk of Sony's fanbase still refusing to upgrade from the PS4.
Too Much Money Has Been Spent Buying Out Studios Instead of Making Games
So, where did it go wrong for Xbox? Well, it's largely in part because of how much money they spent buying out studios instead of actually making good games, something that Xbox itself admits was a mistake as they simply can't afford to run all these studios at once. An underwhelming release of the Series X|S, followed by a lack of genuinely impactful games, has also harmed what was once a legendary console franchise, and the fact that the internal focus shifted way too far in the direction of Xbox's Netflix-style subscription services only compounded the issue.
By constantly increasing hardware and gamepass prices, while also making games less exclusive or often outright just cancelling them, Xbox has shot itself in the foot too many times to count. Now, it seems like they've probably done it for the last time, too, as once loyalists start switching over to the PS5 or Nintendo Switch, it's going to be almost impossible to get them back.
What Next for Microsoft's Once Great Xbox?
The gaming world's attention will now turn to what's next for Xbox.
Following the major shake-up, which has now seen the legendary Phil Spencer finally step down, the next couple of years will be absolutely pivotal for Microsoft if they want to turn things around for the Xbox and somehow claw console sales and market share back.
The next-generation Xbox will be make or break, that's for sure. Phil Spencer was allegedly planning the release of that for 2026 as well, only for poor sales of the Series X|S to put him and the board off doing that. Asha Sharma and a reshuffled Xbox department will now have to think carefully about what the next move will be for the new generation and whether a 2027 release date would be the best option.
The damage could, indeed, be irreversible no matter what Xbox does at this point in time, but one thing they have to avoid is leaning too far into AI. Asha Sharma is right that the only way forward for Xbox is to truly get back to making timeless games that got them to the top in the first place — and they'll have to start doing so sooner rather than later.