Microsoft is changing the way it measures success in its Xbox business, focusing on daily active players rather than longer periods of time — a tighter measure that reflects the way the biggest social media platforms have evolved to gauge engagement and retention of users.
Xbox will also reevaluate its approach to game exclusivity, the timing of releases across platforms, and the use of AI, while looking for opportunities for strategic acquisitions.
And yes, it’s the Xbox business again, not “Microsoft Gaming,” the broader name the company adopted for the division internally around the time of its giant Activision Blizzard acquisition.
Those are some of the highlights from a memo that Xbox CEO Asha Sharma and Chief Content Officer Matt Booty sent to employees Thursday, laying out a strategic vision for the division about two months into their tenure in the roles.
The memo, titled “We Are Xbox,” opens with a blunt admission that players are frustrated, and frames Xbox as a challenger with work to do.
“From the beginning, Xbox was built by people willing to try things that others wouldn’t,” they write. “We placed a consumer bet inside an enterprise company because we believed gaming would define the living room, and we were at risk of missing it.”
The memo comes amid financial pressure on the gaming business. Revenue fell 9% in the most recent holiday quarter to $5.96 billion, with Xbox content and services coming in below internal projections. Hardware sales dropped 32%.
Earlier this week, Sharma made her first major move, cutting the price of Game Pass Ultimate from $29.99 to $22.99 a month while removing new Call of Duty games from the day-one lineup — unwinding a bundle that had driven a 50% price hike last October.
Sony’s PlayStation remains comfortably ahead in the current console generation, and Nintendo’s Switch 2 has had a strong launch.
The memo references Microsoft’s own next-generation console, Project Helix, which it unveiled at GDC in March, saying the machine will “lead in performance and play your console and PC games.” Alpha hardware is expected to go to developers in 2027.
Sharma took over as CEO of Microsoft Gaming in February, replacing Phil Spencer, who retired after 38 years at the company. She had been running Microsoft’s CoreAI product organization and previously served as chief operating officer at Instacart and as a vice president at Meta.
That social media background may help explain the shift to daily active players as the internal “north star,” a metric that defined how Facebook and Instagram measured their own success.
Microsoft has said its gaming ecosystem has more than 500 million monthly active users across platforms and devices. It’s not clear if Microsoft will shift to daily users in its public reporting.
The memo closes with 10 operating principles for the division, including “earn every player,” “protect our art,” “stay rebellious,” and “clarity is kindness.” They conclude, “We’re here to do the most creative and courageous work of our lives, and that’s what we’ll do together.”
Microsoft reports earnings for the March quarter next week, including Xbox results.
Read the full memo here.
