Xbox CEO Asha Sharma told staff during an internal town hall last week that the company “will not survive” unless it develops new intellectual property, according to Polygon. The comment came as Microsoft continues to pull funding from studios that built original franchises and works through a wave of layoffs and project cancellations across its gaming division.
“I would also like to see us continue to create enduring new IP. We will not survive if we only revive the past. We have to find new ways, and courage, to have invention on new IP, that reaches new sets of audiences,” Sharma said, according to Polygon.
Sharma’s Stated New IP Strategy
Sharma also told staff Xbox is “backing our strongest franchises” while pushing for new creative swings at the same time, Polygon reported. “I want our great games to become great global billion-dollar franchises,” she said.
That dual message, lean on proven hits while demanding new ones, arrives after Xbox ended funding for Double Fine, Ninja Theory, Compulsion Games and Undead Labs, four studios that built new IP for Microsoft rather than working on existing franchises, according to Polygon. Ninja Theory, Double Fine and Compulsion Games each completed management buyouts to keep operating after Microsoft’s divestment.
Those studios’ recent work shows what Xbox is walking away from. Double Fine released Kiln, a multiplayer pottery-focused action game, and Keeper, which casts players as a sentient lighthouse, over the past two years. Ninja Theory created the Hellblade series.
Undead Labs worked on State of Decay. Compulsion Games built South of Midnight, an action-adventure set in the American South with a stop-motion animation look.
What It Means For Xbox Studios And Fans
Arkane Studios, which created Deathloop and is currently developing Marvel’s Blade, is in negotiations with Microsoft over its future, according to Polygon. Xbox is also shifting development of the Halo series to Call of Duty publisher Activision, and moving Obsidian Entertainment under Bethesda as it works on a new Fallout game, PC Gamer reported. Amid the cuts, Xbox has picked up new IP elsewhere.
The company signed Hideo Kojima for his next two projects, OD and Physint, according to GameSpot. Next year brings a new Fable and InXile Entertainment’s Clockwork Revolution, while Call of Duty: Modern Warfare 4 launches Oct. 25.
Context Behind The Studio Closures
Sharma, who replaced former Xbox chief Phil Spencer, has previously said Microsoft’s Game Pass strategy sent Xbox’s balance sheet into “freefall,” according to IGN. “Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses,” Sharma told staff, per IGN.
“We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected.
As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox.”
Xbox has cut nearly 2,000 staff in 2026 as part of that reset, IGN reported, with GameSpot putting the figure at a minimum of 1,600 job cuts. The company spent $69 billion to acquire Activision Blizzard, according to IGN. Sharma’s early moves as CEO included cutting the price of Game Pass and pulling Call of Duty out as a day one addition to the service.
“We’ve been able to reset Game Pass after an eight-month decline. It’s now returned to growth and expanding retention, and most importantly, we’re starting to get back to being closer to our players and our community,” she said, per IGN. She also told staff the broader business has started returning to growth “more than 2 to 3 times what we were,” and said she expects that trend to continue.
What’s Next For Xbox
Arkane’s negotiations with Microsoft remain ongoing, and the outcome will determine whether it joins the list of studios parting ways with Xbox or stays intact to continue developing Marvel’s Blade. Fable and Clockwork Revolution are both set to launch next year, giving Xbox two tests of its franchise-first approach, while Kojima’s OD and Physint represent the clearest examples so far of the new IP push Sharma says the company needs.
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