The REAL Reason XBOX Is Failing

Back in 2005, teenagers were begging their parents to get them the new Xbox 360. With games like Halo exploding in popularity, it looked like Xbox was unstoppable, poised to dominate PlayStation and Nintendo for years to come. But just two decades later, almost no one has an Xbox set up in their living room anymore.

By 2024, Xbox recorded its lowest U.S. console sales ever, moving just 2.7 million units. Hardware revenue plummeted 42% compared to the previous year. So what happened? How did one of the best consoles - with one of the most popular gaming franchises in existence - end up failing? We’ll explore that in today’s episode of the Infographics Show - The Real Reason Xbox Is Failing.

It’s September 2023, and you get home with your newest console purchase in over five years - the new Xbox Series S! You hadn’t heard much about it but you saw it in the store and….well, it’s the latest Xbox! You have to try it out and see how it holds up to the PlayStation 5. As you plug it in, you pause for a moment, trying to remember why you left Xbox in the first place. Whatever, why live in the past? You go online to check out which games to buy. And then you see it… A new Halo! That’s the game that made you fall in love with this system all those years ago in the first place. A wave of nostalgia washes over you as you eagerly buy the game, hoping to relive the magic. You boot up Halo: Infinite and start playing, but something feels… off. The gameplay is dull, the environments are uninspired, and the quality of the online service sucks. Disappointed, you decide to check out another tentpole Xbox series. Like…umm… Wait… where are all the big games for Xbox? What about that huge RPG everyone’s talking about? You could have sworn the developer announced it was coming to Xbox… You check and it’s available…on PlayStation? What?! Why isn’t it on Xbox? In fact…why isn’t anything popular available on Xbox?

And that’s the first big reason why Xbox is failing - game developers just don’t want to release their titles for the console anymore. Why? Well, the Xbox Series S is part of the problem. It provides inconsistent support for third-party developers. Many game developers have experienced technical problems getting their games to work on the system. Xbox released the Series S and the more powerful Series X together in November of 2020, an interesting decision instead of just releasing one new console to center hype around. The compatibility between the two systems has actually created a whole host of other problems for the company that we’ll get to soon as well. But regarding the technicals of gameplay, the S seems to be the one causing issues. As Larian Studios said when asked why Baldur’s Gate 3 had been released for PlayStation but was not yet available on Xbox: “We’ve been developing the Xbox version of Baldur’s Gate 3 for some time now. We encountered a few technical issues in the development of the Xbox version that prevented us from feeling 100% confident in announcing it… we were unable to get split-screen co-op to the same standards on both Xbox Series X and S, which is a requirement for us to be able to release it”. Baldur’s Gate 3 eventually made its way to Xbox Series S and X in December 2023, but the damage had already been done. By that point, many gamers who were choosing between an Xbox Series S or X and a PlayStation 5 - simply went with the PlayStation 5 instead. And it’s hardly the first time Xbox has been guilty of massively delayed releases in the past few years, disappointing and frustrating former fans. As one user said on a Reddit thread lamenting the future of the company, “Where’s Fable? Where’s State of Decay 3? Why was Halo Infinite such a disappointment again?” As a side note, Halo Infinite comes up a lot in Xbox discussion threads… in the least flattering way. The problem is, when highly anticipated games get delayed on Xbox but are released on time for other consoles, it pushes more gamers to choose a different platform. When a game like Baldur’s Gate 3 eventually arrives on Xbox - more than three months after its PlayStation release - most of the initial hype has faded, and many players have already moved on. That means only existing Xbox owners will buy the game - but no one will be motivated to buy an Xbox just to play it. When this pattern keeps repeating, gamers will naturally choose the console that gets major releases first - or even exclusively. In this case, that means more and more players are picking the PlayStation 5 over Xbox.

Which brings us to the other way in which Xbox is messing up… You're scrolling through the list of games, increasingly regretting the $300 you just spent on an Xbox Series S. Not only does the console not have a lot of the games you wanted, the games it does have all seem to be available on PlayStation as well. Xbox is talking about how it’s going to release Indiana Jones and the Great Circle in December of 2024, but then you learn the game will also be released to PlayStation in Spring of 2025. DOOM: The Dark Ages is scheduled to be released on PlayStation and Xbox on the same day - May 15, 2025. What is Xbox doing? Well, it seems even Xbox doesn’t really know. The company has almost no exclusive titles anymore, further driving down their console sales. The Xbox 360, one of the company’s most popular consoles by far, sold 14.9 million units worldwide in its bestselling year - way back in 2011. In comparison, the Xbox Series S and X have sold 8.65 million units in their bestselling year of 2022. That’s 8.65 million units combined. Considering the fact that the gaming market has exploded in the 11 years in between, there’s no excuse for the company to be doing that badly. Except for the fact that not many people like them anymore. In 2011, the video game market made $74 billion in revenue internationally; in 2022, it made $183 billion. It’s a mystery why Xbox isn’t securing more exclusive rights to major games. Especially since Microsoft has owned ZeniMax Media - the parent company of Bethesda, makers of Fallout, Elder Scrolls, and Doom - since 2021. Considering they spent 8.1 billion dollars on ZeniMax, you might think Microsoft would get them to make games exclusive for the Xbox. But Xbox can’t get exclusive rights to other major franchises that would drive gamers back to their console either. PlayStation, for example, has huge games like God of War, The Last of Us, and Spider-Man 2 that it keeps exclusive to their consoles - besides PCs. Anyone who wants to play some of the best games of the last ten years has to get a PlayStation. Unfortunately, Microsoft doesn’t seem serious about devoting time or resources to build out studios that would create a first-party lineup - a series of titles owned by the company, built by the company’s own in-house studio. And the problem is, the more Xbox loses customers, the less inclined other game developers are to develop their games for the console. So maybe we should examine why Xbox is pursuing such a bad strategy to begin with…

You finish scrolling through the games, frustrated and wondering what happened to the company you used to love as a kid. Who even runs Xbox anymore? You know Microsoft owns the company, but can’t quite remember who’s in charge of Xbox specifically. A quick google search reveals that since 2014, it’s been Phil Spencer. And it seems like people online aren’t happy with him. Microsoft SEO Satya Nadella named Spencer to a newly designed role known as “Head of Xbox”, which would oversee all the Xbox properties, including Xbox Live, Xbox Music, and Xbox Video. But perhaps Spencer bit off more than he could chew. His one bright spot is the creation of GamePass Ultimate. This allows customers to pay a monthly subscription fee to access hundreds of games on their console, their PC, or the cloud. Besides that, Xbox under Spencer seems to be going from bad….to worse. In 2023, amid layoffs at Microsoft he cut 800 jobs from Xbox. Then in 2024, he cut 650 more. Each time he fired people, he would send out an email explaining that the cuts were meant to create a “sustainable cost structure that will support the whole of our growing business.” Needless to say, that didn’t go over well to people who were wondering how next month’s mortgage would be paid. But as unpopular as Spencer may be among his employees, it’s nothing compared to how Xbox users increasingly feel about him… and Microsoft in general. To Xbox’s customer base it's clear that Microsoft isn’t focusing on Xbox. Even when they are, they don’t seem to care about what Xbox gamers want. As stated on gaming site LevelUp, “everything indicates that Xbox, as a console, has been relegated from the main narrative of Microsoft’s top executives.” In a rare moment, when a Microsoft shareholder openly questioned what was happening with Xbox, CEO Satya Nadella responded “that the focus is on PC gaming and that cloud technology should carry the video game business to everyone”. Chief Financial Officer of Microsoft Amy Hood only talked about Game Pass, subscriptions, and microtransactions. All of this reflects a gradual shift in Xbox’s strategy under Microsoft - particularly under Phil Spencer’s leadership - away from traditional console gaming. They seem obsessed with transitioning towards building “multimedia ecosystems” rather than just a good console.

Which brings us back to you, sitting in your living room, wondering if you shouldn’t just go back to the last Xbox console you had. You remember souring on it, but it can’t be as bad as all this. So you go down to the basement and rummage through boxes to find your old, beloved…Xbox One. After dusting it off, you take it up stairs and plug it in. It boots up and…you immediately remember all the reasons you hated it. In fact, it’s what made you promise to never buy an Xbox again. What were you thinking bringing the Series S into your home? The biggest misstep Xbox has made in the last fifteen years may just be the consoles they released. Because users hated them. After the massive success of the Xbox 360 in the late 2000s, Microsoft got much more involved with the day to day running of the company. And, as often happens when business executives with no real connection to the product or its customers take over, the results turned out… great! Just kidding. The results actually turned into the Kinect and the Xbox One. The Xbox Kinect came out on November 4, 2010, and erased some of the goodwill the company had built up with its customer base. The Kinect was meant to compete with the popular - at the time - Nintendo Wii. The problem is that the two companies had very different images and customer bases. Nintendo had already forged a path as a more “family-friendly” gaming console, appealing to an entirely different market, Meanwhile, Xbox was best known at the time for immersive, more “grown-up” franchises like Halo. Wading into the “cutesy”, family-friendly world of Wii was perceived by some as a strange move. But the real blow to Xbox’s reputation came with the Xbox One, which upon release, took whatever goodwill the brand had remaining and set it on fire. The Xbox One might be one of the most universally hated consoles released in the last twenty years. Not only did it require users to always be online - something that created a problem for people without super stable Internet connections - but it didn’t allow for sharing games, or buying or selling used games. This really struck a nerve with gamers who had built up a whole market around used games. It also focused a lot on making the Xbox One a “multimedia” console, touting TV and other capabilities. Many Xbox customers got annoyed with all these extra features. It almost seemed like Microsoft was focusing more on other media capabilities no one had asked for rather than the games themselves. The company also forced users to buy the Xbox One bundled with the Kinect sensor, adding $100 on to the final price tag. Microsoft eventually phased out the Kinect due to a backlash from gamers and a lack of demand, discontinuing it in 2018. Unfortunately for Xbox, it released the Xbox One just one week after Sony released the PlayStation 4. For $499… much higher than the $399 price tag of the PlayStation 4, which was also considered to be a higher-performing console. The PS4 had more exclusives and seemed geared towards gamers rather than trying to provide some kind of “ecosystem” like the One. As TweakTown’s Derek Strickland said, “Microsoft Gaming is doing everything it can to position Xbox as an ecosystem, but the public still associates it with consoles.” Sony capitalized on gamers’ frustrations by taking a direct shot at the Xbox’s complicated, limited disc-sharing system - a hilarious PS4 ad featuring one person handing a disc to another, mocking Xbox’s overcomplicated approach. For most gamers, the choice was a no brainer. And for Xbox, it was the beginning of the end. They lost a whole generation of gamers to Sony. Once those gamers got established on a PlayStation and built a gaming library around that console, it was unlikely they would ever be coming back to Xbox unless Sony really screwed up. Which unfortunately for Xbox…. they haven’t. And Xbox hasn’t made it any easier on themselves since then. But more on that soon.

You throw away your phone after reading all the Microsoft and Phil Spencer criticisms, wondering if maybe the problem is the specific console you bought. Perhaps the Xbox Series X would have been a better choice? It costs $200 more, but it has 1 terabyte of memory as opposed to the Series S’ 512 gigabytes. There’s three times the processing power, and 4k resolution as opposed to the Series S’ 1440 P. You can actually also play physical game discs on the Series X, as opposed to the disc-free gaming of the Series S. Maybe the Series X is the solution? You look it up and then you realize that Xbox releasing two consoles like this side by side has also become a problem. And it’s all because of something called the parity clause. Which brings us back to Phil Spencer and his questionable decisions. He fervently backs a controversial policy for Xbox’ new releases called the parity clause. This states that if developers want to release games for the Series X, they have to make sure their games run the same way, and with the same features, on the cheaper Series S. This was a big reason for the disastrous Baldur’s Gate 3 delay, as the company was having a lot of problems getting their games to work on the less powerful Series S. Some games like Black Myth: Wukong have skipped releasing to Xbox entirely because of it. Developers hate it, customers hate it, but Phil Spencer, for some reason, still proudly stands by it. Major developers like Capcom stopped releasing their titles to Xbox, including their classic fighting collection games, for years because of technical issues. Basically, Capcom’s MT Framework engine couldn’t port into Xbox’s system. While recently, these relationships seem to be improving - Capcom reached a deal with Xbox in late 2024 to finally release their fighting collection to the console - it seems to be a case of too little, too late right now. Particularly because of the worst issue affecting Xbox: the fact that Microsoft cannot read the room when it comes to gaming at all.

As you sit in your living room, you decide to check out if Microsoft has any gacha games. You love the ones you’ve played so far, especially Genshin Impact. Named after a kind of toy vending machine in Japan - the gashapon - gacha games have players earn currency in a game that they can then spend pulling or spinning on a mechanism to win virtual items. Players also have the option to spend their own funds to get more in-game currency. These games have been extremely popular in Japan and East Asia, and their popularity is now spreading all over the world. So you check to see which gacha games the new Xbox has and come up with…nothing. How is that possible? How did Microsoft fail to take advantage of one of the fastest growing - and most lucrative - gaming markets in the world today? Turns out, you can’t even imagine how badly Microsoft fell on its face when it came to gacha games - since it could have been the first to carry them all. Shanghai-based MiHoYo approached Microsoft in 2020 with a pitch. A game called Genshin Impact, a free-to-play RPG that included plenty of in-app purchase options. Thanks mostly to this game idea, in 2022, MiHoYo would end up with better profit margins than both EA and Activision- legacy gaming companies and absolute giants in the industry. As of August 2023, Genshin Impact alone has 66 million players. And back in 2020, Microsoft heard the pitch and… passed. They skipped on what would become one of the fastest-growing games in existence. And Microsoft actually had first pick at this future hit, an opportunity they decided to throw in the garbage. Not to mention all the subsequent MiHoYo games they also didn’t feel like acquiring. Cut to a few years later, and Genshin Impact, along with similar games like Honkai Star Rail and Zenless Zone Zero are available on almost every platform except Xbox. When it was originally released, users could play Genshin on PCs, iPhones, Androids, and PlayStation…but not on Xbox. The game was finally released on Xbox in November 2024, but that was more than four years after its release on other platforms. By that time, Xbox could hardly be considered ahead of the curve. And anyone who really loved gacha games had probably downloaded them all on another system already.

So is there any bright news in Xbox’s future? Well, one silver lining is the Game Pass feature, which has done incredibly well. As of February 2024, the service had 34 million subscribers, proving that it’s really popular among Xbox customers. For $10 to $20 per month, Xbox Game Pass subscribers gain access to hundreds of games. Most users opt for the $15 or $20 tier, as the cheapest plan - offering only 25 games - is far less appealing. With Game Pass, players can enjoy titles that would normally cost $70 each, making it an incredibly cost-effective way to play. While the Game Pass has proven to be a successful model for customers, it’s been more of a mixed bag for developers. Some think that putting their games on the Game Pass model devalues their work, as they end up offering the final product for such a low price. Not to mention, it decreases the actual sales of their game - which Microsoft admitted. As the UK Competition and Markets Authority says, “Microsoft also submitted that its internal analysis shows a [redacted]% decline in base game sales twelve months following their addition on Game Pass.” Always a reassuring sign when a company says sales are down by a [redacted] amount. While smaller studios may see Game Pass as a way to reach more players, the situation is different for bigger developers. These companies can already rely on name recognition to drive strong sales, so the news of lower game sales makes Game Pass far less appealing to them. As a result, many of the biggest games are kept off Game Pass, which in turn lowers the service’s overall value - making it less enticing for gamers who expect access to top-tier titles. In the meantime, sales of the Xbox Series S and X continue to disappoint, as the console sells less than even the critically panned Xbox One in the US. Plus, Microsoft keeps insisting on a vision for Xbox that wants users to “play without a console”, something that continues to turn lifelong gamers and Xbox fans off. So it seems that at the end of the day, the future for Xbox isn’t all that bright, especially as its parent company barely seems to care about it or even understand the market it’s selling to. Is Xbox making the right moves by focusing on Game Pass and cloud gaming, or is it losing its place in the console market? Should Microsoft push for more exclusives, or is it too late to catch up to PlayStation and Nintendo? Drop your thoughts in the comments below. Now go check out The Real Reason McDonald’s Is Failing or click other on this video instead.