The XBOX Reset Week: 5 Video Game Things I Learned | 2026 July 4 - July 10
Any video game news that game down the pipe this week was completely drowned out by the never-ending onslaught of reports regarding what’s been dubbed the XBOX Reset. Because of that, I’ve decided that this week’s post is going to be all about the different things I learned from this Reset (with a little extra thing that caught my eye as the 1-Up). Because of that, get ready for a wild ride forever downward into the Fly of Despair. XBOX had a rough week with layoffs, losing several studios that they had come to acquire over the better part of the last decade, canceling projects, and pivoting their strategy.
The Failed XBOX Model
A lot of XBOX’s decline reaches back to just under a decade ago in 2017 when the company launched Game Pass, its video game subscription service that allows gamers to access a vast library of video games via their XBOX consoles (and now through Windows PC) in exchange for a subscription fee. This marked a major turning point in the strategy of the previous head of XBOX, Phil Spencer. Seeing this subscription model as the future, the company pivoted heavily toward building up the Game Pass catalog to make it more enticing to gamers. Naturally, XBOX would have an easier and more effective time doing this if it owned the development studios creating the games for the service. In 2018, XBOX went on a shopping spree, and it has continued to buy up other video game companies since then, up until Phil Spencer’s departure in 2026.
As part of the XBOX news flying around over this past week, we got a better glimpse at exactly what Spencer and XBOX were aiming for all this time. Here, we get a good, broad understanding of how Xbox reached the point they’re at today. The Wall Street Journal reported this week on just how badly XBOX missed the mark. According to an infographic revealed in the trial between FTC and Microsoft back in 2023, XBOX expected to reach roughly 77 million Game Pass subscribers by this point in time with goals of hitting 100 million by 2030. However, the subscriber base today is only estimated to be 30 million, a far cry from these estimations.
So we essentially have the narrative of how we got here. XBOX made a sharp pivot to the Game Pass subscription model in the mid-2010s. Along the way, it failed to ignite public interest in its already failing Xbox One console, leading to it falling well short of Xbox 360 sales and, therefore, likely the company’s projections. XBOX began scooping up as many video game developers as it could get its hands on, sharply raising the company’s expenses in addition to the large upfront costs. In the cases of the ZeniMax and Activision Blizzard acquisitions, these upfront costs were in the billions and tens of billions of dollars respectively. Then, finally, these huge swings simply didn’t pay off. Game Pass was nowhere near where it needed to be. At the end of 2025, XBOX then announced heavy increases in subscription prices for Game Pass, estimated to have cost XBOX millions of subscribers.
Now, with Phil Spencer having left the company, current CEO of XBOX Asha Sharma is left to pick up the pieces, leading to months of preparation for an XBOX Reset. This Reset so far has already been to the tune of changes in direction, strategy, and organizational hierarchy, structure, and makeup. The latest from Sharma was a post on XBOX Wire in the form of a memo to the whole company. In it, Sharma outlines some of these major changes, largely in the form of personnel changes.
XBOX Loses Five Studios
During XBOX’s shopping spree under Phil Spencer, the company acquired:
Ninja Theory (Hellblade)
Undead Labs (State of Decay)
Compulsion Games (We Happy Few)
Playground Games (Forza Horizon)
inXile Entertainment (Wasteland)
Obsidian Entertainment (Fallout: New Vegas, Pillars of Eternity)
Double Fine Productions (Psychonauts)
ZeniMax Media, and its subsidiaries:
Bethesda Softworks (The Elder Scrolls, Fallout)
Arkane Studios Lyon (Dishonored)
id Software (Doom)
MachineGames (Quake, Wolfenstein)
ZeniMax Online Studios (The Elder Scrolls Online)
Alpha Dog Games (Mighty Doom)
Arkane Studios Austin (Prey)
Tango Gameworks (The Evil Within)
Activision Blizzard, and its subsidiaries:
Activision (Call of Duty)
Blizzard (World of Warcraft, Overwatch)
King (Candy Crush)
Nemesys Games (an outsourcing studio in Hungary that became ZeniMax Online Studios - Hungary)
The sums of money these companies were acquired for are not all known. However, we do know the figures for Ninja Theory, Activision Blizzard, and ZeniMax, all of which combine for over $83.6 billion.
With this latest XBOX Reset, Microsoft is divesting from five studios. The leadership at Compulsion Games and Double Fine Productions are negotiating to buy back their respective studios, so they will be re-privatized “with their IP, catalog, and runway for their next games,” according to a statement by Asha Sharma. Meanwhile, Undead Labs and Ninja Theory—both of which just revealed their latest games, State of Decay 3 and Senua respectively—have other investors buying them from XBOX. According to Sharma, both studios will have the funding to continue building their current projects. Finally, Arkane has begun the process “required consultation with its Works Council to review potential strategic options.”
With XBOX already having closed down Arkan Studios Austin, Tango Gameworks (which was saved by PlayerUnknown’s Battlegrounds owner Krafton), and Alpha Dog Games in previous years, that leaves the studios that make the most money and have the most valuable video game IPs. However, even those companies weren’t spared this week…
XBOX’s 1,600 Layoffs (and More to Come)
Asha Sharma also announced sweeping layoffs to the tune of 3,200 people before the end of the 2027 fiscal year (July 1, 2026 - June 30, 2027), 1,600 of which occurred on July 6, 2026. Reports actually indicate that the studio divestments are included in the 3,200 figure, meaning 1,600 jobs were cut this week with another 1,200 or 1,300, roughly, to be cut in the next year. Of the immediate job cuts, reports have indicated XBOX Game Studios and ZeniMax are getting hit very hard. Within that, id Software has supposedly lost about half of its employees. Activision Blizzard and Obsidian are also being hit. So far, the public numbers that I’ve seen account for about a third of the total job cuts.
Many people have gone online to complain about the job cuts made at id Software given the studio’s track record. Many point out that while teams like Bethesda Game Studios have released many lack-luster titles over the past decade, like Fallout 76, The Elder Scrolls: Blades, and Starfield, id continues to refine and innovate on the Doom franchise to thunderous applause from players. In fact, a day after the mass layoffs, id released the first expansion to their acclaimed release from last year, Doom: The Dark Ages. The expansion has received much praise from players, sitting tentatively at a 9.7/10 user score on Metacritic and 86% positive reviews on Steam.
While many gamers take an interest in the employees getting laid off at the studios for their favorite games, the reality is that these layoffs spread far beyond the game makers. For example, in addition to the 3,200 actual job cuts from the organization, XBOX will cut vendor spending by 50%, meaning a severe loss in business potentially resulting in the loss of work for said vendors. Sharma’s comments in her letter to the company indicate that many jobs were also affected on the platform side of things…
Reporting Hierarchy Restructure at XBOX
As is often the case when layoffs come around, middle XBOX’s middle management has been gutted pretty severely. Asha Sharma points out that the teams in charge of XBOX platforms “are 40% larger than they were at the start of this generation, even as our player base and playtime have declined. That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players.“
Sharma seeks to slash the complexity of these management structures to make a more sustainable business that can flourish through streamlined communication and decision-making. Prior to these layoffs, XBOX had pipelines through which work would pass through “as many as 14 layers of management.” To remedy this, XBOX will shift to a flatter organization with “no more than 5 [layers of management], and where possible, 3.”
As part of ridding the organization of these pesky middle management layers, Sharma has taken it upon herself to become the direct report for for Mojang (Minecraft) and King (Candy Crush) with the reasoning that “These two studios have increasingly become platforms and are our largest by monthly active players. They bring critical geographic, demographic, and differentiation to XBOX.“ Sharma has also established Helen Chiang, former business head of the Minecraft franchise, as XBOX’s first ever “Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services.”
XBOX Projects Canceled
Finally, with all of the game makers reshuffled, the games themselves will not find their ways out of this XBOX Reset unscathed. As stated before, Senua and State of Decay 3 are expected to soldier on under the ownership of new investors. It’s currently unclear what will happen to Arkane Studios’s Blade game once Arkane’s fate is determined in the coming months. Sharma also promised that “None of our first party publicly announced games or projects are being cancelled as part of these reductions.”
However, the key word here is “publicly.” XBOX studios are always making games that the public doesn’t know about yet or will never find out about.
Microsoft employees have already tipped off reporters about several unannounced and now canceled titles within Obsidian as the studio shifts to developing a new Fallout game, the studio’s first one since their highly acclaimed Fallout: New Vegas released in 2010. One of these canceled projects is a sequel to Avowed, Obsidian’s mildly enjoyed RPG from 2025 set in the Pillars of Eternity universe. Jason Schrier claims that the game is much further along than people would think, and that the team was prepared to announce it publicly within the next year or so. Schrier’s understanding is that the hope is for the game to be revived. The plan is to continue development on the game until the new Fallout game ramps up and requires extra manpower.
It’s also worth noting that shortly before these layoffs, Ninja Theory also canceled Project: Mara, a game meant to challenge traditional storytelling that was announced in 2020.
These canceled projects, and potentially others that we don’t know about yet, are part of an attempt for XBOX to refocus on the company’s key franchises: The Elder Scrolls, Doom, Wolfenstein, Quake, and Fallout. Meanwhile, Activision Blizzard still has their large game brands like Call of Duty, World of Warcraft, and Overwatch. I imagine those priorities within the subsidiary will remain unchanged.
1-Up: College Football 27 Microtransactions
To cap off this post, I want to pick on another video game company: Electronic Arts. EA continues to make me madder than a hatter. This week, College Football 27 launched as the third installment of the revived annual franchise of college football games. It was met with outrage from the community with many citing frustration with EA’s latest stunt to squeeze their players for every last dollar.
YouTuber Bordeaux was at the head of the backlash, spelling out very clearly to his community and EA his disappointment. He posted a video to his channel outlining EA’s sneaky and undisclosed tactics. In College Football 27, EA decided to rip out functionality from the previous entry that allows players to adjust the speed at which they progress through single-player modes such as Dynasty and Road to Glory. In its place, EA added microtransactions, allowing players to pay EA to speed up progression. Bordeaux (correctly, in my opinion) points out the greed and shortsightedness of this sort of design decision. Adding microtransactions to increase progression is one thing, but replacing existing functionality that people already enjoy with a microtransaction is essentially locking key functionality behind a paywall.
Bordeaux goes on to explain how necessary these settings are for many players who want to experience the full game functionality. He references comments from C4, another YouTuber who makes College Football content, that say winning every single game, including the national championship, for 10 in-game years on College Football with normal XP settings only gets a coach to level 48 while the maximum level is 100. There are also large portions of the community that enjoy these settings because they allow for quicker exploration of skill trees, bringing more of the game to the forefront so that players can experience it.
What’s worse is that modders for College Football 27 have already discovered that these functionalities that EA has “removed” are actually still within the game but are simply locked. It’s very likely this was the case because this was a late decision made by business people as opposed to the development team. Reports suggest that the core development team knew about this change for months, and they were “livid.” The team even predicted the massive backlash that EA has received in response. These same reports indicate that this is part of a sweeping effort by EA to increase monetization options across its single-player games.
Something I think Bordeaux hits home on is EA’s desire to force players into playing very specific ways instead of embracing sticky game design and allowing players to find their way to what makes their games most fun for them. In particular, Bordeaux discusses how EA lowers XP gains from simulated games. This one speaks to me loudly because I occasionally pick up a Madden title as a huge fan of football and the NFL. My preferred way to play Franchise mode as a coach is to largely simulate my games. This allows me to focus less on the individual plays and games, spending more of my effort on schemes and personnel. According to EA, this is the wrong way to play, but I would argue that there is no wrong way to play a game, especially one you paid $70 for. EA then caps off the experience by funneling those “correct” ways to play into microtransactions.
In the span of a few days, EA responded to the outrage twice.
The first time around, it fell on the deaf ears of players who didn’t want to hear the BS. EA tried to remedy the situation by adding XP adjustment settings back into the game alongside the microtransactions. The catch was that the new settings were less effective than settings from past games. While some in the community still saw this as a win given the expectation that EA wouldn’t actually do anything at all about it, many rightfully still were not satisfied.
In the second response, EA caved, reinstating the old XP system and removing the associated microtransactions. While this was certainly a good move by EA that shows they’re engaging with the community, the sentiment feels a bit hollow. I believe this is largely due to EA’s storied history of trying to insert microtransactions everywhere possible: there was the old CEO, John Riccitiello, who wanted to charge players to reload their guns, the company continues to pester players to try to convince them to spend money on Ultimate Team in their EA Sports titles, they had the whole Star Wars Battlefront II loot box fiasco, they sat in front of UK parliament in 2019 and called loot boxes “surprise mechanics,” this whole College Football 27 issue, and so, so much more. At this point, it feels like the shark in Raft; it tries to eat your raft, and no matter how many times you poke it away, you know you can’t stop a shark from being a shark.
I’ll close by saying that the one thing that irritates me the most about this whole story is the actual words in the final response. A large paragraph of the message to the community talks about the implementation of the feature, in which it says, “[The feature] was added independent of deeper mode progression with the aim to give players more choice, but what you’ve said is that they’re not adding the value we intended.“ This is just a lie. You may quote me on that. There is no universe in which any sane game maker could perceive removing functionality as a way to give players more choice. The true aim was to give players more ways to spend money for the features they used to get for free. It then ends with the biggest slap of the face when it’s signed “Your Dev Team” as if we don’t have confirmation from the dev team that they didn’t want these microtransactions in the first place. This was not written by the dev team, and this is not the responsibility of the true dev team no matter how EA tries to spin it. Don’t push your poor business decisions off onto hardworking developers who disagreed with you when said decisions come back at you in the form of a pie in the face. EA can’t even own up to their mistakes correctly.