Sharma Unwinds Game Pass After Xbox Hit Freefall

Xbox CEO Asha Sharma told staff on October 6 that the old Game Pass strategy sent the business into “freefall.” Hours played, player counts, and revenue were falling at the start of 2026.

The rebound she then put on a chart was first-party games, more than two to three times their low, after Xbox stopped putting new Call of Duty titles on Game Pass at launch and cut the top subscription price.

Sharma Tells Staff Game Pass Sent Xbox Into Freefall

Sharma, who became CEO on February 20, 2026 after Phil Spencer, spoke to the whole gaming group at an internal town hall with Microsoft employees. Jez Corden obtained a transcript of the session and verified it with people inside the company.

She opened on purpose. “We exist to be where the world plays, we will know when we have a billion daily active people, and we have a right to win because we’re now focused on our fans and franchises,” she said.

She also said Xbox had seen a 30% rise in positive brand sentiment over the past year, and she named Gears of War: E-Day, Minecraft Dungeons 2, and World of Warcraft Forever as having “strong” starts. She did not attach sales or player counts to those titles.

We’re making the right decisions to reinvest in the business, after an all time low, we’ve started to return to growth, more than 2 to 3 times what we were, and we expect that continue.

Asha Sharma, CEO of Xbox, October 6 town hall

Corden later clarified that the chart behind that line was first-party growth, meaning games Xbox owns and publishes. It was not a Game Pass member chart, and it was not a figure for the whole division.

That distinction is the whole meeting. A publishing line can jump when a $70 shooter is sold again instead of bundled on day one. A subscription can still sit far below the plan that paid for Activision.

The 2-to-3 Times Figure Is First-Party Games

Sharma said Xbox had been declining in hours spent, players, and revenue when the year began. Hours spent have now stabilized, she told the room, and first-party output has turned up from that all-time low.

2 to 3 times is a multiple without a public baseline. She did not say 2 to 3 times 2024, or 2 to 3 times last quarter, or 2 to 3 times Game Pass revenue. Treat it as a first-party recovery off a trough, which is still a real turn if the chart is honest, and still a narrow one.

The turn sits on a reversal she made in April, two months after she took the job. New Call of Duty games left day one. Game Pass Ultimate got cheaper. Xbox also began talking about exclusive games and console marketing again after years of selling the brand as a service that lived on other people’s hardware.

People hearing “return to growth” will map it onto the whole company. The tape does not do that. The July staff note still pointed at 2027 for a broader recovery. The October chart is the games Xbox publishes, after those games stopped being the free launch perk that defined Game Pass.

After the $29.99 Hike, Call of Duty Left Day One

In October 2025, still under Spencer, Game Pass Ultimate went to $29.99 a month, about 50% above the prior $19.99. The hike was sold as the cost of putting new Call of Duty games on the service the day they shipped, after Microsoft’s $69 billion Activision deal.

Matthew Ball, Xbox’s chief strategy officer, said in June that the increase cost the service millions of members in a few months. Sharma’s first big product move was to unwind both sides of that trade.

On April 21, Xbox said Game Pass Ultimate drops from $29.99 to $22.99 a month, effective that day. PC Game Pass fell from $16.49 to $13.99. Future Call of Duty titles “won’t join Game Pass Ultimate or PC Game Pass at launch,” the company wrote. They land “during the following holiday season (about a year later).” Games already in the library stay.

The $7 cut still leaves Ultimate $3 above the old $19.99. Sharma put the reason in plain words on her own account: Game Pass Ultimate had “become too expensive for too many players.”

GAME PASS PRICE AND CALL OF DUTY ACCESS

Corden’s read of the “freefall” line is the damage at both ends. Day-one Call of Duty trained people not to pay $70, and the $29.99 price trained people not to keep paying for the pass. Pulling the game and cutting the price is an attempt to collect on both sides again.

Xbox still says Ultimate members get “major day one releases.” Call of Duty is the exception in writing. Other first-party launches have not been officially pulled from day one, and Xbox has not confirmed a full shift toward Sony’s model, where first-party games stay off the subscription at launch.

How Far Game Pass Fell Short of 77 Million

Microsoft has not posted a Game Pass total since February 2024, when then-Xbox president Sarah Bond put membership at 34 million. That figure already folded in people moved over from Xbox Live Gold.

A person familiar with the numbers put the service at about 30 million in July 2026, 4 million below that last official count. Documents from the Activision deal review had set a target of 77 million by fiscal 2026, which ended June 30, 2026. The same files pointed at 100 million by 2030.

GAME PASS AGAINST ITS OWN PLAN

• Last official count: 34 million members in February 2024, per Sarah Bond.
• Mid-2026 read: about 30 million, according to a person familiar with the figure.
• Fiscal 2026 target: 77 million, from documents in the Activision review; well under half.
• 2030 target: 100 million, from the same review files.

Those are different facts sitting next to each other. Sharma said in June that Xbox had reset Game Pass after an eight-month decline, that it had returned to growth, and that retention was expanding. An eight-month slide from the October 2025 hike lands in June. A 30 million headcount can rise off a low and still sit 4 million under 2024 and miles under 77 million.

The 77 million number was the scale at which giving away launch-day blockbusters was supposed to make sense. At about 30 million, each day-one Call of Duty is a larger hole in retail. Taking the series off day one is how you stop digging. It is also how you remove the clearest reason a lot of people paid for Ultimate in the first place.

3,200 Cuts and the Studios Walking Out

On July 6 Sharma told staff Xbox was starting the most significant restructure in its history. The plan is to cut approximately 3,200 throughout FY27, about 20% of the division, with about 1,600 roles eliminated that day. Microsoft cut 4,800 jobs company-wide in the same round.

Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected.

Asha Sharma, CEO of Xbox, July 6 staff note

The same note said that in a typical year Xbox “lost 64 cents for every dollar we invested” in the studio push that began in 2018. Platform teams were 40% larger than at the start of this console generation, even as the player base and playtime declined. Management ran as many as 14 layers. The plan is no more than 5, 3 where possible, plus a 50% cut in vendor spend.

Helen Chiang, a longtime Xbox executive who ran Mojang and Minecraft, became chief operating officer with P&L across content, hardware, platform, and services. Dave McCarthy retired after 17 years. Mojang and King now report to Sharma.

STUDIOS LEAVING MICROSOFT’S BOOKS

• Compulsion Games: Returns to its managers as an independent studio, with its IP, catalog, and runway, including South of Midnight.
• Double Fine Productions: Same independent path, with Psychonauts and the rest of its catalog.
• Ninja Theory: Terms to join new owners, with funding to finish and grow Senua.
• Undead Labs: Same new-ownership path, with funding for State of Decay 3.

Arkane in France opened a required works-council consultation on “potential strategic options.” Sharma said none of Xbox’s publicly announced first-party games were being cancelled in that round. She also wrote, “We will return to growth in 2027,” a company-level date that is not the first-party multiple she cited in October.

“I know this is painful,” she wrote. The October town hall was the first all-hands after that pain, and the growth line was the reassurance. It does not put 3,200 jobs back, and it does not put those four studios back on the roster.

Game Pass Gets Cheaper While Ads Stay on Paper

Sharma told the October room that Game Pass will get “more flexible for more players,” with users able to tailor what they pay for. That is the next version of the April unwind: a cheaper, narrower pass, not a return to day-one everything.

Plans are not finished. In September, after details circulated of a $12.99 ad-supported tier and a $19.99 plan without day-one games, a Microsoft spokesperson said final decisions had not been made and there was nothing to announce. Sharma has talked before about ads as a way to lower the price of services like Game Pass. Talk is not a SKU.

WHAT WE KNOW

• Official price: Ultimate is $22.99 a month; PC Game Pass is $13.99; new Call of Duty is delayed about a year.
• Cloud tests: Xbox has already tried free, ad-backed cloud sessions for Insiders, with ads before a session and tight hourly caps.
• Patent filing: A published U.S. application, US 2026/0260258 A1, describes pausing a game at a natural break, showing an ad, then granting a “credit” of extra play.

WHAT IS UNCONFIRMED

• Ad tier price: A $12.99 ad-supported Game Pass plan has been described in leaks, not in an Xbox post.
• All day-one games: Xbox has not said Bethesda or Halo launches will follow Call of Duty off day one.
• Shipped ads in disc games: The September filing is an application, not a feature on Series X.

The application, published September 3, 2026, is titled “Contextually Aware Management of Interactive Software Application Access.” It talks about trigger events such as loading screens, the end of a round, or a finished mission, then a credit of 15 minutes to an hour or a chunk of progress. A patent application is a fence around an idea. It is not a store listing.

If the cheaper pass arrives without day-one Call of Duty and with ads on the bottom tier, Game Pass starts to look like a catalog with a cloud pipe, closer to a conventional extra-life subscription than to the all-you-can-eat launch machine Xbox spent a decade promising. That may be the only version the 30 million members can fund.

Console First, Then a Family of Devices

Sharma’s other October message was hardware. Core, content, creation, and connection are the “four C’s” she said will lead Xbox. She argued the company still has room to grow on console even though the segment is not growing for the industry as a whole, and that Xbox does not have “the right” to grow beyond console if it cannot serve its most valuable players.

Gen-9, the Xbox Series X|S pair, is the near-term bet: cloud gaming, the disc-to-digital program, Play Anywhere, and simpler APIs so it is easier to ship on Series X|S, on Helix, and on PC. Play Anywhere is still uneven. Some new games remain console-only, which is the first thing a PC-curious buyer hits.

Gen-10, Xbox Helix, she described as a family of devices. “There is not one device that fits all. We will certainly have a great console first, but we also know that many players will be on the go. There are some things that we are the best in the world to manufacture, and there are other things that will we partner on.” She said the operating system is “starting to look really good.” She gave no date.

She also talked up Battle.net, saying it is almost on par with Steam for user retention, and pointed to CD Projekt Red games such as The Witcher 3 landing there. A claim that Xbox PC is the top store in China was later narrowed: she was referring to the Windows Store, which ships on most PCs and carries titles such as Fortnite and Roblox that Steam does not.

The through line is the same as Call of Duty leaving day one. Xbox is collecting money the old way again, on boxed and digital full-price games and on a console it had stopped treating as the center, while Game Pass is being resized to a price people will keep paying. First-party games can rise on that mix. The 77 million subscriber machine cannot, because that machine was the mix she just took apart.