Down $500M in Five Years, Xbox Fast-Tracks Fallout

Half a billion dollars. That's how much Xbox's annual revenue has dropped over the past five years, according to figures shared by Xbox CEO Asha Sharma in an internal memo earlier this week. Hardware costs are up four times year-on-year, the studio system is "overextended," and layoffs are expected by the end of June. Against that backdrop, Microsoft's response is to throw more money at Fallout and The Elder Scrolls and hope the biggest names in its catalogue can reverse the slide.

The Information reported that Sharma plans to accelerate development on new games in Xbox's marquee franchises, with Fallout and The Elder Scrolls singled out as her personal priorities. Halo is also on the list. Microsoft CEO Satya Nadella and CFO Amy Hood have reportedly approved additional spending for the fiscal year starting in July, though the sources note that budget could still be changed. Nobody has specified what "accelerate" actually means here: whether we're talking about fast-tracking Fallout 5 and The Elder Scrolls 6, greenlighting spin-offs, or pushing remasters like the long-rumoured Fallout 3 remaster. The vagueness is doing a lot of heavy lifting.

I'm skeptical that you can speed up a Bethesda RPG without cutting corners. These are games that routinely take five-plus years in full production. Starfield shipped after years of development and still failed to become the cultural event Microsoft needed. Fallout 76 limps along but isn't the live-service juggernaut the company wanted. The last mainline Fallout came out eleven years ago. The Elder Scrolls 6 was announced eight years ago with a teaser that showed a mountain and nothing else. Telling Bethesda to move faster on these franchises isn't a strategy; it's a prayer.

The Spin-Off Question

What makes this story more than a routine "publisher wants games sooner" headline is the other half of The Information's report. According to three sources, Microsoft hasn't ruled out spinning Xbox off into a wholly-owned subsidiary, structuring it as a joint venture with partners, or positioning it to be sold entirely. The report stresses there are no imminent restructuring plans, but these options are actively on the table says everything about where Xbox sits inside Microsoft right now.

The model would apparently follow LinkedIn and GitHub, both of which Microsoft operates as subsidiaries with more autonomy from the parent company. In theory, this would let Xbox set its own budgets and strategies. In practice, it would also make the division much easier to offload if the numbers don't improve. Microsoft spent over $69 billion on the Activision Blizzard acquisition alone and reportedly invested another $20 billion into the gaming division in recent years. Nadella himself said at Hard Fork Live that Microsoft needs to turn Xbox into a "sustainable business" after 25 years of investment, and joked that streamers playing Xbox games on YouTube are making more money from them than Microsoft is.

The timing of all this is brutal. Xbox Games Showcase landed well just days ago, with strong showings for Gears of War: E-Day, Fable, and Spyro: A Realm Beyond. Then leaked art showed a PS5 logo on Gears of War materials, reports emerged about potential studio closures, and Sharma's internal memo painted a picture of a division bleeding money. Accelerating Fallout and Elder Scrolls development while simultaneously warning staff about July layoffs creates an obvious tension: you can't ship games faster with fewer people unless you're farming work out or narrowing scope.

Microsoft's bean counters have signed off on more spending for now, but even with unlimited budget, a new mainline Elder Scrolls or Fallout is years away from store shelves. The Oblivion Remastered Deluxe Edition and standard version just got ESRB ratings for Switch 2, suggesting Bethesda is still actively pushing last year's remaster onto new platforms. If "accelerate" turns out to mean more remasters and ports rather than genuine new entries, the backlash from a fanbase that's waited over a decade for Fallout 5 will be severe. Xbox can't afford to buy time with half-measures when the clock on its existence as a Microsoft division might already be running.