Former Sony and Xbox Executives Say Microsoft Must Choose What Xbox Will Become

Microsoft’s latest restructuring has renewed a fundamental debate surrounding the future of Xbox. Is it primarily a console platform that needs exclusive games to compete with PlayStation and Nintendo, or has Microsoft transformed it into one of the world’s largest publishers, requiring its biggest franchises to reach every available device?

The question has become more urgent following the elimination of approximately 3,200 Xbox positions throughout fiscal year 2027. Around 1,600 roles were removed immediately, while Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs are leaving Microsoft under different ownership structures.

Former PlayStation executive Shawn Layden believes Microsoft must decide between 2 increasingly incompatible strategies. Speaking with Eurogamer, Layden argued that Xbox can either compete directly as a platform or operate as the largest publisher in gaming, but attempting to pursue both objectives creates unavoidable conflicts.

“Those 2 roads do not converge. To be a successful platform, you need exclusive content.
— Shawn Layden”

Layden pointed toward Mario and Zelda at Nintendo, alongside Astro Bot, God of War, and Horizon at PlayStation, as examples of properties that create a clear reason to purchase specific hardware. A platform holder needs recognizable exclusive content that increases the value of its ecosystem and attracts players, publishers, and developers.

A global publisher operates under different commercial priorities. After acquiring Bethesda, Activision Blizzard, King, and numerous development studios, Microsoft controls Call of Duty, Minecraft, Fallout, The Elder Scrolls, Warcraft, Diablo, DOOM, Halo, and several other major franchises. Maximizing the value of that catalog encourages releases across Xbox, PlayStation, Nintendo, PC, cloud services, and mobile platforms.

Layden explained that PlayStation’s internal studios were not expected to take revenue away from publishing partners such as Electronic Arts or Activision. Their purpose was to expand the PlayStation audience and make the overall platform more valuable. Microsoft faces a more complicated situation because Activision Blizzard is now both an internal publisher and one of the industry’s largest content suppliers.

Former Microsoft executive Jon Kimmich expressed a similar warning through a GamesBeat analysis. Kimmich worked at Microsoft for 16 years and contributed to the original Xbox portfolio, including the acquisition of studios and properties that helped establish Microsoft’s first console.

“Xbox must decide what it is. A platform? A publisher? A subscription service? A hardware business? An entertainment ecosystem?
— Jon Kimmich

Kimmich argues that Xbox cannot simultaneously operate as a PlayStation style console platform, a Netflix inspired subscription service, a competitor to Steam, a cloud gaming provider, a mobile ecosystem, and a global entertainment publisher without establishing which business sits at the center of the strategy.

That does not mean Microsoft must abandon hardware, publishing, Game Pass, PC, or cloud gaming. The argument is that Xbox needs a clear hierarchy. One central business must define the direction, while every additional service supports that objective rather than competing against it.

Xbox CEO Asha Sharma has already acknowledged several parts of this problem. In the official Xbox Reset statement, Microsoft revealed that Xbox expected an accountability margin of approximately 3%, had invested more than $20 billion over 5 years excluding Activision Blizzard King, and had experienced an annual revenue decline of nearly $500 million during that period. Sharma also said Game Pass had declined for more than 8 months before beginning to grow again. Microsoft did not confirm that the service lost several million subscribers.

The company admitted that it expanded its studio system to support subscription, streaming, hardware, and publishing strategies before becoming operationally overextended. Xbox also confirmed that console remains central to its plans and promised regular exclusive releases, even as many Microsoft games continue appearing on competing platforms. Sharma has reportedly moved away from the previous “This Is an Xbox” campaign while rebuilding the leadership structure around clearer hardware, content, services, and platform priorities.

Layden and Kimmich identify the central contradiction that has weakened Xbox messaging for years. Exclusive games increase the value of Xbox hardware, but limiting major releases to Xbox reduces the commercial potential of Microsoft’s enormous publishing catalog.

Microsoft can continue operating across hardware, publishing, subscriptions, PC, and cloud gaming, but each division cannot remain an equal strategic priority. The company needs to decide whether Xbox hardware is the foundation of the ecosystem or simply another access point for Microsoft owned content.

The 3,200 layoffs may improve margins and reduce organizational complexity, but workforce reductions do not provide players, developers, or publishing partners with a clear reason for Xbox to exist. That answer must come from a consistent product strategy supported by games, hardware, services, and investment.

A successful Xbox platform would require meaningful exclusives, stronger hardware differentiation, and renewed third party support. A successful global publisher would need to release its games wherever players are willing to purchase them. Microsoft may be capable of maintaining both businesses, but one must clearly serve the other.

Should Microsoft rebuild Xbox around consoles and exclusive games, or fully embrace its position as a global publisher across every platform?