Asha Sharma’s Xbox reset traces back to Game Pass missing its subscriber numbers

When Xbox CEO Asha Sharma says “our business today is not healthy,” she is not speaking in vibes. She is pointing at a business model that did not scale the way Microsoft expected, and she is reshaping Xbox around the fallout.

Sharma has already cut 1,600 staff from Xbox, with plans for another 1,600 to go over the course of the current financial year. In the same reset, four studios are confirmed to be leaving Microsoft ownership, with another on its way, and Sharma has called it the most “significant” restructure in Xbox history. Her key claim is blunt: Microsoft bet on Game Pass to grow the business, but Game Pass “did not grow at the pace we expected,” weakening the core business and forcing the reset.

A former Forza Horizon series developer, Mike Brown, makes the causal link even more direct. Brown, who was creative director on Forza Horizon 5 before leaving Playground to found his own studio, Maverick Games (set to release an open world racer called Clutch), says the layoffs, studio exits, and game cancelations reflect that Xbox Game Pass failed to hit enough subscribers to justify Microsoft’s huge spending on content acquisition. He frames it as a failure of the underlying math: Microsoft invested a fortune in Game Pass as a service, acquiring teams, funding games, and hiring people to deliver regular releases to players. The problem, in Brown’s telling, is that not enough people subscribed at the prices Microsoft needed.

Brown anchors that argument on the price tag of Microsoft’s content strategy. He explicitly ties the business case to the $69 billion Microsoft spent on Call of Duty developer Activision Blizzard, adding that he “doesn’t know the number it needed to hit” but that it “never reached the number that would make a $70 billion acquisition of Activision Blizzard make financial sense.” In other words, the acquisition was not just a purchase of franchises, it was also a bet that Game Pass would deliver the subscriber growth and retention to monetize that content at scale.

This is where the regulatory backdrop matters for decision-makers. The Wall Street Journal reported that Microsoft expected Game Pass subscriptions to hit around 77 million this year, but it currently has only about 30 million. During the FTC vs Microsoft trial of 2023, Microsoft had hoped for 100 million subscribers by 2030, which now seems very unlikely. The exact number of subscribers Microsoft has in early 2026 is unclear, but the source notes Game Pass had at least 34 million members as of February 2024, and by July 2025, Game Pass revenue reportedly reached nearly $5 billion for the first time. That mix of “revenue up” and “subscribers not up enough” is the uncomfortable position that can squeeze a content-heavy strategy: you can have meaningful cash flow while still missing the growth curve that made the capital allocation feel rational.

Sharma’s own quoted explanation also spells out the cost and scale mismatch. She said Xbox entered Gen 9 with a smaller install base and a higher cost structure, and that to grow it bet on Game Pass, multi-platform, and a broader portfolio of content. She acknowledged that while these businesses created meaningful value, they did not grow as fast as expected. She also pointed to margins: operating at margins “3-10x lower than comparable platform and publishing businesses,” and she flagged an industry shock: “the most severe hardware crisis in its history.” The response, she said, is to reset Xbox.

Brown’s remarks go a step further by defending intent while still landing the consequence. He says it is “really sad and really, really unfortunate” because the concept of Game Pass was “good,” aiming to make a subscription affordable and bring more diverse games to more people, including games that “probably couldn't exist otherwise.” The problem is that it did not land with the subscriber adoption required to keep studios funded and teams intact. That is the second-order risk: even when the idea is directionally right for consumers, content economics can still break if the subscriber funnel does not hit targets. In practical terms, that is what shows up as studio shutdowns or spinoffs, and “loads of people” losing jobs.

For executives, the headline risk is not just Xbox’s specific decisions. It is the question other platform owners and publishers now face: how much can you restructure based on subscription contribution when the growth targets slip? The source adds that Sharma recently told Bloomberg Xbox has “been able to reset Game Pass after an eight-month decline,” with growth returning and expanding retention, and an emphasis on being “closer to our players and our community.” Still, the future is unclear. The open questions include whether Microsoft will pull games out of the subscription as day one launches, whether Bethesda’s The Elder Scrolls 6 will launch day one on Game Pass, whether the next mainline Halo game will do the same, and whether Game Pass could move closer to PlayStation Plus, which does not launch first-party games day one. Meanwhile, Microsoft is “doubling down” on big franchises, which for now means more Fallout more quickly. The strategic stake for every board and CFO is simple: when a platform model misses its growth assumptions, the reset is not a marketing pivot. It is an employment pivot, a studio portfolio pivot, and often a regulatory narrative pivot, too.