Xbox CEO Asha Sharma has announced a sweeping restructure of the company via a publicly distributed staff memo, involving 3,200 layoffs, the divestment of four or five studios, and significant management changes over the coming year. Although Game Pass — Xbox's flagship subscription service and central strategy since the pandemic — was barely mentioned, the shake-up is expected to significantly reshape it, chiefly by weakening its long-standing perk of offering first-party games on day one.

Sharma's memo candidly described the business as "not healthy," citing margins far below comparable rivals and a costly bet on Game Pass and multi-platform releases that failed to grow as hoped. Four studios (Compulsion Games, Double Fine, Ninja Theory and Undead Labs) will leave Xbox Game Studios, with France-based Arkane's fate uncertain, meaning fewer first-party titles to launch on the service. This follows other signs of dilution: Call of Duty: Modern Warfare 4 will not arrive day one, day-one access is now limited to the priciest tier, and although the top tier has dropped from $29.99 to $22.99, analysts suggest subscribers are increasingly getting less for more.