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Microsoft shocked the gaming community this week when it announced that it was closing four Bethesda-owned studios, Arkane Austin, Tango Gameworks, Alpha Dog Studios, and Roundhouse Games. The biggest surprise was Tango Gameworks, the studio behind Hi-Fi Rush, a game that was critically acclaimed and recently saw a PS5 port in March 2024. This move by the Xbox brand was unexpected by the community, but a former Microsoft has shed light on its decision and what the future could hold for Xbox.
Brad Hilderbrand, the former Senior Public Relations Manager at Microsoft, released a detailed LinkedIn post explaining the reasoning for Tango Gameworks and other Bethesda studios being shut down by Microsoft. Following the announcement, some members of the gaming community called for Phil Spencer to resign, citing his poor decisions as CEO of Xbox Gaming dating back to the launch of the Xbox One.
In the post, Hilderbrand attributed it largely to Game Pass causing games to not meet sales expectations, as well as Microsoft looking to recoup its investment following the acquisition of Activision Blizzard.
“The biggest paradox with Game Pass is that basically every game that launches on the service badly misses its sales goals. Makes sense though, why pay full price to buy a game when you can play it for “free” as part of your subscription?”
Hilderbrand then gave some insight into how games earn revenue from Game Pass, something that many gamers have wondered which has never really been publicly discussed by Microsoft. Top-performing games see a bump in revenue, but many single-player games fall off the charts quickly, meaning that revenue stagnates for the titles very quickly.
He also noted that Redfall “never had a chance” as it launched dead on arrival due to the outdated graphics and mediocre gameplay, which disappointed many of the players who were looking forward to playing it.
“This is accounted for somewhat by attributing portions of revenue to top-performing Game Pass games every month, but there are factors working against games. Namely, the fact that most games don’t stay at the top of the chart for more than a month or two, and also that Game Pass growth has stagnated. So games like Hi-Fi Rush, which is incredible mind you, gets a very small bump in revenue from being the hot Game Pass game for a month, then it falls off a cliff when everyone moves onto the next thing. Poor Redfall had it even worse since it launched so rough, it never had a chance.”
The former PR manager explained that the eventual closure of the four Bethesda studios can be attributed to Microsoft’s recent spending spree, which saw the company purchase Bethesda for $7.5 billion, followed by Activision for close to $75 billion. Although the company now has an impressive roster of titles and IPs under its belt, the investment does need to be recouped and one way to do this is by cutting costs, noting that both Redfall and Starfield failed to add as many new subscribers as the company expected.
When it comes to what could help grow Xbox Game Pass again, Call of Duty is the franchise that players will immediately look toward. But, as Hilderbrand notes, it is a risk to give up guaranteed sales revenue in favor of Game Pass subscriptions. Call of Duty games regularly exceed $1 billion in sales, but when it comes to the Xbox portion of the revenue, and to a lesser extent PC, much of that revenue will be lost if players opt for checking it out on Game Pass instead. If Microsoft goes ahead with the day 1 release of the new Call of Duty game on Xbox Game Pass, it is possible that we could be about to see one of the worst-selling Call of Duty games of all time.
“The best bet is COD, but do you really risk the guaranteed sales revenue that franchise brings by putting it on Game Pass on Day 1 and potentially lose massive sales? I don’t know what the plans are, but either you put it on Game Pass and lose money, or you don’t and the subscribers revolt because they think that’s what they signed up for.”
Hilderbrand concluded his post by noting that while Call of Duty will likely never be shut down, he does fear that we will see more studios close in the future.
“COD will be fine though, as will the other mega-studios with huge IPs, but you’re seeing the impact; all those smaller studios making really interesting games are going to fall away, simply because as good as games like Hi-Fi Rush are, they’re never going to make enough money to make up that $70B hole that Xbox now has to dig itself out of.”
Some gamers have already begun to worry about studios such as Ninja Theory, who are about to release the highly anticipated Hellblade 2 on May 21st. Many are worried that if it fails to meet expectations, the studio could also be shut down in the near future.