Xbox, which was previously known as Microsoft Gaming, is the part of Microsoft that makes video games and digital entertainment. Microsoft is a large technology company based in Redmond, Washington, and Xbox was created in 2022. Xbox works with five groups to develop and publish games: Xbox Game Studios, Bethesda Softworks (which owns ZeniMax Media), Activision, Blizzard Entertainment, and King (the last three are part of Activision Blizzard). Xbox makes the video game consoles and services with the same name, and it manages production, sales, and is led by CEO Asha Sharma.
Before 2022, Microsoft had separate sections for video games, including hardware, operations, and game studios. Microsoft Gaming was formed when Microsoft announced plans to buy Activision Blizzard, which brought all of Microsoft’s gaming groups together under one division. After completing the purchase of Activision Blizzard in 2023, Microsoft became one of the largest gaming companies, ranking third by revenue and first by the number of employees. The company has 500 million people who use its games every month across all platforms.
Xbox owns the rights to some of the most popular and best-selling game series in history, including Call of Duty, Candy Crush, Warcraft, Halo, Minecraft, and The Elder Scrolls.
History
Up through 2000, Microsoft had few efforts to publish video games. In 2000, Microsoft announced the first Xbox, which was released in 2001. This led to the creation of Microsoft Game Studios (MGS), a division responsible for developing video games for the Xbox and Windows. The Xbox hardware remained part of a separate division within Microsoft. After Steve Ballmer left his role as Microsoft’s CEO, investors tried to push the company to sell or close its gaming business. These efforts did not succeed. Microsoft continued to focus on its gaming division, including the Xbox console. Under Satya Nadella, who became CEO in 2014, Microsoft kept investing in and growing its presence in the gaming market. Since 2009, Microsoft’s games operations, including the Xbox division, have been based at Microsoft West Campus.
MGS acquired several studios to expand the Xbox’s software library during its first decade. These included Bungie, Lionhead Studios, and Rare. Microsoft also created internal studios, such as 343 Industries for Halo games and Turn 10 Studios for Forza games. In 2014, after Satya Nadella became CEO and Phil Spencer took charge of Xbox, Microsoft began a new strategy of acquiring studios. This included buying Mojang Studios, the maker of Minecraft, for $2.5 billion. Between 2014 and 2019, MGS acquired other studios, such as Ninja Theory, Playground Games, Obsidian Entertainment, and inXile Entertainment. These purchases aimed to make MGS Microsoft’s top studio for creating games, similar to PlayStation Studios at Sony.
In 2017, Microsoft launched Xbox Game Pass, a major step in shifting its strategy to focus on a service-based business model rather than relying only on exclusive games. This helped Microsoft stand out from other console makers. Instead of competing only with exclusive titles, Microsoft offered a subscription service that gave users access to a large collection of games. In 2017, Phil Spencer became Executive Vice President, Gaming at Microsoft.
In 2019, MGS was renamed Xbox Game Studios (XGS) to match the Xbox brand. Microsoft also acquired Double Fine. In 2020, Microsoft bought ZeniMax Media for $8.1 billion, which included companies like id Software, MachineGames, Arkane Studios, and Bethesda Softworks. ZeniMax remained a separate company but was overseen by Phil Spencer.
In 2022, Microsoft announced it would buy Activision Blizzard for $68.7 billion in cash. At the same time, Microsoft said Xbox Game Studios, ZeniMax Media, and Activision Blizzard would be part of a new division called Microsoft Gaming. Phil Spencer explained that one reason for the purchase was to enter the mobile gaming market. Activision Blizzard’s CEO, Bobby Kotick, said the company accepted the offer to gain more talent, meet growing demand in gaming, and compete with companies in China and Japan. Microsoft signed 10-year agreements with companies like Sony, Nintendo, and Nvidia to bring Call of Duty games to their platforms. Due to regulatory issues, Microsoft sold Activision Blizzard’s cloud gaming rights to Ubisoft for 15 years. After overcoming legal challenges, the deal was completed in October 2023 at a total cost of $75.4 billion. This made Microsoft the third-largest video game publisher, after Tencent and Sony Interactive Entertainment. Phil Spencer became CEO of Microsoft Gaming, while Matt Booty led Xbox Game Studios.
In 2022, ZeniMax Media acquired Nemesys Games, a Hungarian studio, which was later renamed ZeniMax Online Studios Hungary. After completing the Activision Blizzard purchase, Microsoft reorganized its gaming division. Sarah Bond took charge of the Xbox hardware line, while Matt Booty became president of game content and studios, overseeing Xbox Game Studios and ZeniMax Media. Activision Blizzard remained directly under Phil Spencer, with Bobby Kotick staying as CEO until early 2024 to help with the transition. Kotick left Activision Blizzard on December 29, 2023.
After Kotick’s departure, Activision Blizzard changed its leadership structure. Several top executives, including Thomas Tippl, Rob Kostich, Mike Ybarra, and Tjodolf Sommestad, began reporting to Matt Booty. Leadership teams at Activision, Blizzard Entertainment, and King remained the same. Lulu Meservey, Activision Blizzard’s chief content officer, left the company in January 2024. Thomas Tippl and other executives left in March 2024.
In January 2024, Microsoft Gaming laid off 1,900 employees, about 8% of its workforce. Blizzard Entertainment’s president, Mike Ybarra, and co-founder Allen Adham left the company. Project Odyssey, a game Blizzard had worked on for six years, was canceled. Toys for Bob and Sledgehammer Games lost over 30% of their staff. Microsoft also laid off Activision Blizzard’s customer support team and the team responsible for selling Xbox games in physical stores. Johanna Faries became president of Blizzard Entertainment in February 2024, and Matt Cox became general manager of the Call of Duty franchise. Toys for Bob’s office closed, and employees began working remotely.
In early February 2024, rumors suggested Microsoft might allow its first-party games to appear on PlayStation 5 or Nintendo Switch and might exit the hardware business. A special Xbox Podcast with Phil Spencer, Sarah Bond, and Matt Booty discussed plans to release some first-party games on other consoles. Spencer said this decision aimed to grow Microsoft Gaming’s franchises and predicted that exclusive console games would become less common in the next 5–10 years. In the following months, Spencer noted the gaming industry was changing in how games were developed and distributed.
Products
Xbox makes and creates the Xbox line of home gaming consoles and related accessories. The company provides online services for these consoles using the Xbox network. Since the late 2010s, Microsoft started combining its standard paid subscription service, originally called Xbox Live Gold, with Xbox Game Pass. This service offers subscribers online multiplayer and matchmaking support, as well as a collection of games that changes over time. These games can be played on Xbox consoles, Windows computers, or through Xbox Cloud Gaming.
Xbox owns several well-known video game series, including Xbox Game Studios titles such as Halo, Gears of War, Forza, Fable, Age of Empires, Microsoft Flight Simulator, Banjo-Kazooie, Sea of Thieves, State of Decay, Hellblade, and Minecraft. Other franchises include Bethesda Softworks titles like The Elder Scrolls, Fallout, Doom, Quake, Wolfenstein, and Dishonored; Activision titles such as Call of Duty, Crash Bandicoot, Spyro, Tony Hawk's, Guitar Hero, and Skylanders; Blizzard Entertainment titles like Warcraft, Diablo, StarCraft, and Overwatch; and King titles such as Candy Crush.
Organization
Xbox has a large presence worldwide and operates studios in many countries. Microsoft owns 40 studios globally and employs more than 20,100 people. Most of Microsoft’s gaming work is based in the United States, but the company has grown its presence in other countries, including the United Kingdom, Canada, Sweden, France, and others.
The business is not about selling many consoles. It is about having many players enjoy the games they buy and how they play them.
Microsoft aims to reach more people and offer games that fit different preferences by publishing games on mobile devices, computers, and Xbox platforms. The Xbox Game Pass subscription service is a key part of Microsoft Gaming’s strategy. This service provides a variety of games for a monthly fee, showing a focus on games and services rather than just selling consoles. Microsoft Gaming’s chief financial officer, Tim Stuart, said the company stopped sharing the number of consoles sold in 2016 because their focus shifted to games, services, and increasing customer spending.
Phil Spencer has said his vision for Xbox is to move the brand away from being focused only on consoles and instead prioritize games and player engagement. He explained that the business is not about selling many consoles but about having many players actively enjoy the games they buy and how they play them.
By February 2024, Microsoft Gaming planned to release games on other platforms to grow its franchises and compete with online platforms like Fortnite and Roblox. Phil Spencer said Xbox will continue to make exclusive games and keep Game Pass as a central part of their strategy. However, the goal is to expand games with large communities.
Under Asha Sharma’s leadership, Microsoft’s strategy focuses on growing the number of daily active players through four areas: hardware, content, experience, and services. The plan includes expanding popular game series, strengthening partnerships with other companies, creating a five-year plan for new games, and growing in China, emerging markets, and mobile gaming.
As of October 2023, Xbox is the third-largest video game publisher, behind Sony and Tencent. Microsoft Gaming owns three major publishers: Xbox Game Studios, ZeniMax Media (through Bethesda Softworks), and Activision Blizzard (including Activision, Blizzard Entertainment, and King). Microsoft also publishes games from other companies and helps independent studios release their own games through ID@Xbox. Since entering the video game industry in 2001, Sony has been Microsoft’s main competitor. However, Microsoft now says its main competitors are big tech companies like Amazon, Google, and Apple. Among Microsoft’s games, Minecraft is the best-selling game ever, with 350 million copies sold. Call of Duty is the fourth-best-selling game series, with 500 million copies sold and $30 billion in revenue. Microsoft CEO Satya Nadella said the company owns 20 game series that each earned over $1 billion. Candy Crush Saga alone earned $20 billion. After buying Activision Blizzard, Microsoft doubled its number of employees, studios, and revenue. In 2023, Phil Spencer said Microsoft plans to release a first-party game every three months using Activision Blizzard’s resources. By July 2025, Microsoft had nearly 40 games in development.
Microsoft entered the home console market in 2001 with the first Xbox. Since then, it has released three generations of consoles, with the latest being the Xbox Series X and Series S, launched in November 2020. The Series X is a high-performance console for 4K gaming, while the Series S is a more affordable option for digital games. By 2023, 21 million Series X/S consoles were sold. Phil Spencer said Microsoft sells consoles at a loss, losing $200 per unit, but makes up for it by taking 30% of sales from third-party games on its platform.
Microsoft and Sony have been competitors in the console market since 2001. During the seventh generation, the Xbox 360 competed with Sony’s PlayStation 3. In the next generation, Sony’s PlayStation 4 sold twice as many consoles as Microsoft’s Xbox One. In the eighth generation, PlayStation 4 sold 117 million units, Nintendo Switch sold 133 million units, and Xbox One sold 58 million units. Sony’s success came from its exclusive games and marketing. Microsoft initially focused more on multimedia features than gaming, but later shifted to emphasize exclusive games. Even with the Xbox Series X/S, Microsoft still faces challenges competing with the Nintendo Switch and PlayStation 5.
The console gaming market includes hardware, games, and subscriptions. As of 2023, Sony leads the market with 45% of the PlayStation system’s hardware, games, and services. Nintendo has 27.7%, and Microsoft has 27.3%. Sony holds 70% of the high-end console market, while Microsoft has 30%.
During a trade discussion between the United States and Japan, Senator Maria Cantwell from Washington raised concerns about PlayStation’s dominance in Japan’s high-end game market. She said PlayStation has a 98% monopoly there and criticized Sony for exclusive deals and payments to game publishers. She also criticized Japan’s Fair Trade Commission for not investigating Sony’s practices.
Xbox offers several services, including Xbox Game Pass, Xbox Cloud Gaming, Xbox Network, Microsoft Store, and Battle.net. As of December 2022, the Xbox Network had 120 million monthly active players.