Microsoft Overhauls Xbox Game Pass and Cuts 3,200 Jobs

Microsoft is restructuring its Xbox division through a combination of workforce reductions and a fundamental shift in its subscription business model. The company is cutting 3,200 positions, with additional rounds of layoffs scheduled for October, November, and January.

CEO Asha Sharma is leading an overhaul of the Xbox Game Pass service, moving it from a flat-fee model to a tiered, à la carte arrangement. This new structure will allow subscribers to pay for specific add-ons, including cloud gaming, multiplayer access, and console-only games. The shift follows a plateau in subscriber growth at 35 million, significantly missing internal targets of 100 million. As part of this strategy, Microsoft may remove more first-party titles from the day-one offering, a move expected before the release of Fable in February 2027.

Parallel to these cost-cutting measures, the company is developing new hardware. A next-generation handheld device is targeted for a 2027 holiday release, while a new console is projected for 2028 with internal cost estimates between $1,200 and $1,800.