Xbox Co-Founder Believes it 'is Being Sunsetted' as Microsoft Focuses on AI - News
by William D'Angelo , posted on 23 February 2026 / 3,828 Views
Xbox co-founder Seamus Blackley in an interview with GamesBeat discussed the latest shakeup at Xbox with Microsoft Gaming CEO Phil Spencer retiring and Xbox President Sarah Bond resigning. Asha Sharma, the President of Microsoft’s CoreAI product, has been brought on as the new head of Xbox, while Matt Booty has been promoted to Chief Content Officer.
Blackley believes Microsoft is sunsetting Xbox, which is why Sharma was brought on as the new CEO.
"From Microsoft Satya Nadella has made an incredible number of bets and invested an incredible amount of money and credibility in the transform model AI future," said Blackley. "Xbox, like a lot of businesses that aren’t the core AI business, is being sunsetted. They don’t say that, but that’s what’s happening. I expect that the new CEO, Asha Sharma, her job is going to be as a palliative care doctor who slides Xbox gently into the night.
"It just seems really true. I imagine asking somebody if it made sense to put a major motion picture studio into the hands of somebody who didn’t like movies, or a major record label into the hands of somebody who’d never seen a live show. Why would you do that? Well, you only do that if you’re looking at the problem in a more abstract way. The natural consequence of the focus on AI is that AI abstracts every problem from the minds of the executives who believe in it. We’re abstracting the problem of games as well. There’s a core belief, and you can see it in what Satya said, that AI will subsume games like it will subsume everything.
"The job of all these people is to just gently usher all of these business units into the new world of AI. That’s what you’re seeing here. Whether or not you agree with it, whether you agree with AI having the potential to do that, whether AI will be successful, is a separate matter. But that’s what we’re seeing. That is in no way surprising.
"It would have been shocking if they had somebody in there in a meaningful role who was passionate about games, passionate about the creator-driven business of games, because it would be in direct conflict with everything else Microsoft is doing.
"Microsoft is a company that is now about enabling its customers by enabling AI to drive things. That’s at odds with the auteur model of any art, but specifically of games. Microsoft doesn’t have the problem that Apple does, or that Netflix does, where they have an auteur-driven content model to manage. Games are the only place where they have a content business."
Blackley was asked about the new CEO saying "we will not chase short-term efficiency or flood our ecosystem with soulless AI slop" and he is skeptical.
"A, you want to believe that. B, that’s what every single person who’s been brought into games from other industries has said when they’re hired, in every press release, probably going back longer than you and I have been in this business," he said. "I know that John Riccitiello said that when he was brought in from sporting goods to EA. But that’s just what occurs to people to say when they bring in someone from an outside business into games.
"Some people coming from outside businesses succeed in games and others just hit the wall, because it’s a content business and they don’t expect that. They’re not ready for that. They think it’s a compute business, or they think it’s a rendering business, or they think it’s a software business. Games is none of those things. It’s hilarious, but it’s none of those things.
"Her statement, or the statement that was written for her in the press release, saying that she was looking forward to seeing what makes games work or something like that, was hilarious. It reminded me of that meme. “Hello, fellow kids!” I’ll now figure out what’s interesting about games! Oh, boy. Wow. There may be more than you think.
"People have succeeded at that before. Maybe she will."
Blackley also gave Sharma some advice stating that "should find a way to leave this job soon" if she "can’t develop a passion for games."
"Two things. If I was talking to her I would say, look, if you’re not really passionate about games, or if you can’t develop a passion for games, then you should find a way to leave this job soon. You shouldn’t do it," he said. "Because it’s harder than you think. You’re a very smart person who’s accomplished a lot in your career. You’re going to think I’m wrong, but you will discover that I’m right. There’s a long history of extremely smart people in games who have hit this wall.
"The second is, if you can get the trust of the gaming community, then you can build a real business on the scale of the Microsoft AI business that will make you very powerful. But that happens if you gain the trust of the audience, if you gain the trust of the community.
"If you want to look for people to emulate, you look at Shuhei Yoshida. I’d tell her to go and spend a day with Shu. Go and spend a day with Peter Moore. Go and spend a day with Phil Harrison. Go and spend a day, if you can, with some of the guys from Nintendo. Find Reggie. Spend a day with Reggie. Go and talk to those leaders about how they succeeded and failed in the business. Learn from them. Don’t try to make it up on your own. Go get that data. They’re all out there. I’m sure Reggie–shit, there’s a recently-departed executive from Nintendo who might be very interesting for her to talk to, right? That would be my advice. Go talk to all of those people.
"In the end, if this isn’t something you’re really passionate about, I think she’s clearly very passionate about e-commerce and about AI. But that’s not games. Games are a passion business. The audience and everyone in the ecosystem reward that passion.
"At every industry event, at every award show, at every business meeting, at every fight that you have about shelf space, every fight you have about who gets what tariff at what online store, everyone sits around for a minute and talks about what games they love and the passion they have about that. If you’re not ready to hang like that, you’re not going to do well in those meetings. Microsoft is not enough of a gorilla that someone who doesn’t know what they’re talking about can walk in and do things."
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can follow the author on Bluesky.
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Well, nobody really cares about Xbox; a tainted brand is all it is now.
Plenty of people would rather have Xbox attempting to return to it's glory days, or at least putting up a fight, than the slow agonizing death thats unfolding.
Honestly I read this as drive up the business value to sell it off or IPO it to make their money back.
If they develop AI for game production, that´s worth keeping to licence to other gaming publishers.
Staying in the content business just doesn´t seem long term play for MS at this point.
Unlike Sony which is mostly content, and getting rid of more of their electronics side.
Yeah. I have no idea if this guy knows what he's talking about. It sounds like he's just saying stuff. But, if he's right that Microsoft is exiting gaming, it's not going to happen by them just shutting it down. They would sell the gaming business, or spin it off.
I actually thought they were going to sell Xbox several years ago, before they started their acquisition spree. And I could see it happening now. Their focus has changed. But it's a huge business. Would be tough to sell out right (although maybe the Saudis would bite). A spin-off is much more likely.
I wonder how much longer Xbox as a brand and part of Microsoft Gaming will even continue.
Provided there's new hardware like Microsoft says, how long will it last and how long will Xbox be used as a brand for controllers, Game Pass and such.
Shoot, how long will Game Pass last?
That would be insane, investing nearly $100 billion just in acquisitions alone, to shutting it all down in less than a decade. At this point, Satya Nadella only cares about 1 thing....AI. Everything else is getting in the way. We've already seen huge Xbox projects get cancelled just to divert money to his AI obsession.
I can see a scenario where Activision and Bethesda get spun back off into independent entities. They're too valuable to just shut down.
Is there any aspect right now where they aren't already? The games and studios, outside of what like 2 Bethesda titles are all available on multiple platforms and in nearly all instances of their games they are still published under the Bethesda or Activision/Blizzard banners.
They are owned by MS but outside of that, they feel independent. MS won't make their money back by limiting their revenue streams.
In every aspect that matters, they are still under the rule of Satya Nadella, and they still answer to Microsoft leadership. If he tells them to do something, they have to do it if they want to keep their jobs. I'm guessing there were serious discussions between Activision leadership and Microsoft leadership over the performance of the latest BLOPS 6, and it was Microsoft's suits that were doing the telling there. Todd Howard, likewise, has to demonstrate to Microsoft that key titles like ES6 are proceeding in a timely manner. Their revenue is what Microsoft uses to call itself the third largest video game company (after Sony and Tencent).
Which quotes discuss the console hardware element of the business?
Everything I see is about content as auteur art.
So if he was thinking about it, I would say he must have kept that part to himself.
Wouldn't be the first time. Remember Windows Phone and the acquisition of Nokia's handset business for what was then an eye-popping amount of money? Remember what happaned to WP three years later?
This dude is just making stuff up. But, even if he's right, the reality is that they're not just going to close the gaming business. They would sell it off, spin it off, or just let it ride along generating cash flow and not putting any serious additional resources into it. There is no scenario where they just decide next year that Call of Duty, Candy Crush, Halo, and the rest are just going to be put on the shelf.
Microsoft needs all the hardware they're not selling with XBox to fuel AI, so now that it's at its lowest point, it makes sense to give it the axe. There won't be a next generation XBox.
No, they are not looking to sunset. They are looking to turn it into a core test bed for GenAI capabilities.
Getting good AI results might become more important than making successful games though.
Well, they do have to focus on something... since they're unable to focus on video games.
Co-pilot will revolutionize the way we play games.
