Microsoft Reportedly Considering Spinning Off Xbox, Accelerating Development of Fallout, The Elder Scrolls

Microsoft is reportedly considering spinning off Xbox or restructuring it as a wholly owned subsidiary. The tech giant is said to be weighing all options, including a sale, as its faltering gaming division prepares for a major business reset. The Xbox parent is also reportedly planning to pour more money into its biggest first-party franchises like Fallout, Halo, and The Elder Scrolls to accelerate development.

The Information reported Microsoft's restructuring plans for its gaming division on Friday. Citing three people with direct knowledge of the discussions at the company, the report said (via Reuters) that Xbox could potentially be spun off or restructured into an independent subsidiary.

Microsoft, whose priorities lie firmly on its AI and cloud businesses, is reportedly also considering bringing in other partners and resetting Xbox as a joint venture, a move that could potentially make it easier to sell the gaming unit. Xbox will not be restructured imminently, but Microsoft is weighing all options, the report said.

Xbox Preparing Business Reset, Layoffs

The report comes just days after Xbox CEO Asha Sharma said the company needed to reset its business over the next 100 days across hardware, content, and services. In a memo to staff, Sharma painted a grim business reality for Xbox, revealing the company was at 3 percent “accountability margin” — Microsoft's internal metric for profitability of its divisions. The Xbox boss also confirmed that Xbox revenue had declined nearly half a billion during the last five years.

Xbox's reset plans will reportedly lead to major layoffs at the company, as well, Bloomberg reported after Sharma's business update. The new round of cuts will reportedly begin next month. Aside from layoffs and budget cuts across verticals, Xbox could also shut down some of its studios.

However, Sharma, who admitted in her memo last week that Xbox's biggest franchises had not been “adequately funded” to compete with rivals, is planning to invest more into games like Fallout, The Elder Scrolls, and Halo, as per The Information's new report. Microsoft CEO Sayta Nadella and CFO Amy ⁠Hood have reportedly approved the Xbox boss' plan to increase spending on its most successful franchises in the next fiscal year starting next month to accelerate development.

Xbox has been slow to release new entries in its tentpole franchises like Halo, The Elder Scrolls, and Fallout. A remake of the Halo: Combat Evolved is set to release next month on PC, PS5, and Xbox platforms. Meanwhile, Bethesda is working on new Fallout projects, alongside The Elder Scrolls 6, but these games are likely a long way off from launch.