Microsoft May Exit Gaming Business If Game Pass Subscribers off Console Don’t Increase Enough by 2027
Microsoft Gaming CEO Phil Spencer made some remarkable statements on a potential exit from the gaming business. The quotes are extracted from an investigational hearing conducted as part of the Federal Trade Commission’s investigation into Microsoft’s acquisition of Activision Blizzard.
The document has been released today, revealing plenty of interesting information (including a detailed Bethesda games release schedule from 2020). Here, though, we’ll focus on Spencer’s remarks on the future of Microsoft’s gaming business.
FTC lawyer James Weingarten put the following internal Xbox Game Pass slide in front of Spencer, asking him whether he agreed with the projections that show the subscription service surpassing 100 million users between FY29 and FY30, largely due to an increase in the PC and cloud market.
Spencer said in no uncertain terms that Microsoft could exit the gaming business if this projection became reality. Microsoft needs the light green and blue segments (PC and cloud) to get much larger and much faster by fiscal year 2027, or it could opt out of the business altogether.
I do not believe that that is what the future Xbox business would look like. This is a presentation from our devices organization to the gaming leadership team, so this is the view from the team that is chartered with building our hardware on what the future business would look like.
I can fairly safely say that if we do not make more progress than this off of console, we would exit the gaming business. If this were the outcome, we would — I don’t believe we’d still be in the business.
A majority of our customers are found off of our own hardware, I would hope by earlier than 2030. So, when you asked me if I agreed with this chart that the light green and blue depending on what colors you see there would have to be much larger much earlier. I would say by FY26, ’27 that we should be in that position, or we’d have to make a different decision with the business.
Now, there is reason to believe Spencer may have exaggerated a bit. Microsoft stressed throughout the whole FTC investigation and later in federal court that the acquisition of Activision Blizzard was critical to its plan to grow in mobile and cloud markets. Otherwise, it might as well exit the gaming business.
As such, Xbox fans need not despair yet, especially since today’s other big leak shows Microsoft readying an Xbox Series mid-generation refresh and a next-generation Xbox console coming in 2028. Microsoft has invested heavily in the gaming market between the acquisition of ZeniMax and the attempted deal to buy Activision Blizzard, and it is unlikely it would just quit before having a chance to see those investments come to fruition, especially if it can overcome the last hurdles with regulators when it comes to acquiring Activision Blizzard. Still, Spencer’s words remark how important it is for Microsoft to grow beyond consoles through Game Pass.