Hope Is Not A Strategy
Joost van Dreunen sees the unbundling of Xbox as "an admission that its decade-long campaign of buying up studios and intellectual properties did not yield the desired result":
After spending close to $80 billion, Xbox struggles to produce the hits needed to drive adoption of its Game Pass service and fails to capitalize on its existing portfolio of proven IPs.[...]
As Xbox is repositioned from a growth engine to a value-creation engine, studios will be held to a different financial standard. Given the early signaling we’ve seen so far, I’d wager that many, if not most, of Xbox’s current studios aren’t financially self-sustaining.
Sharma all but confirms it, conceding that in a typical year, Xbox “lost 64 cents for every dollar we invested,” and that it is “not the best home for every type of studio.”
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Xbox entered this console generation with a smaller install base and a higher cost structure, but bet on Game Pass and a sprawling content portfolio to close the gap. When those bets didn’t grow fast enough, it responded by adding more. More teams, more investment, more time, all “hoping for a better outcome.” That is the opposite of discipline. It is what an organization does when no one is willing to make the hard call.
And the bloat is quantified, again by Xbox itself.
Work in some parts of the company passes through as many as fourteen layers of management. Platform teams are 40 percent larger than at the start of the generation, even as players and playtime have declined. Sharma’s remedy, to cut to no more than five layers, halve vendor spend, on the logic that “great technology gets better when it gets simpler, not bigger,” is really an admission of how heavy the thing had become.
This is bigger than Xbox. It's the whole market correcting:
After a decade spent chasing scale through acquisitions, the games industry is shifting back toward distribution, where efficiency, reach, and organizational discipline matter more than the size of your portfolio.
Eighty billion dollars buys a lot of output.