When Microsoft first revealed that it would be giving day-one Game Pass releases to all of its own Xbox games back in 2018, it suddenly turned the subscription service into a must-have for many fans. It was lauded as “the best deal in gaming,” with memes about just how good a value Xbox Game Pass was.
But after a massive price hike this week, the top Xbox Game Pass tier is now $29.99 per month, adding up to a steep $360 a year, which is more than the $299 debut price of the Xbox Series S. It comes at a time when Microsoft is also increasing console prices and trying to convince people to buy a $1,000 Xbox Ally X handheld.
So, why are we suddenly in an Xbox $360 era? Microsoft obviously didn’t explain it during its announcement, but I suspect some of the price hikes are related to its costly acquisition of Activision Blizzard.
The stunning 50 percent increase has left many Xbox fans questioning the value of Game Pass. Microsoft didn’t even soften the blow with a discounted annual option, and the more affordable plans aren’t appealing as they don’t come with the main perk: day-one games. Some loyal fans think they’re being milked dry as Microsoft moves from attract mode to extract mode for Game Pass.
This year looked like it would be a great one for Xbox and Game Pass, but now everyone is turning against them. GameStop is mocking Xbox, and even Santa is pissed. It’s inevitable that such a price jump will result in mass cancellations, particularly as price hikes are the main reason people have given for unsubscribing from the service this year. Microsoft’s own account page for managing Game Pass has slowed to a halt this week, perhaps an early sign that a lot of people are trying to cancel their subscription.
And you can hardly blame them. Coupled with the price of an Xbox Series X increasing by $150 in just six months and Microsoft trying to convince everyone that a phone or a laptop is suddenly an Xbox, it’s a confusing and uncertain time for the platform.
Microsoft’s latest gaming challenges can be traced back to 2022. At the beginning of that year, the company announced a massive $68.7 billion deal to acquire Activision Blizzard, a move that has reshaped its gaming business. That same year, Microsoft also set an ambitious goal of reaching 100 million Game Pass subscribers by 2030, fueled by studio and content acquisitions and a plan to expand the Xbox playerbase far beyond the console.
But the division’s fortunes started to slip later that year. Starfield and Redfall were delayed, in what Xbox chief Phil Spencer called a “disaster situation” for Game Pass. A year later, the service got its first price hike, and Xbox console prices rose outside the US, too.
When the Activision Blizzard deal finally closed in late 2023, even more pressure was placed on Xbox’s margins. Microsoft’s gaming business suddenly had to justify this giant acquisition through new growth, and the cost cutting and price hikes began.
Sweeping layoffs hit first in early 2024, followed by studio closures. To boost Xbox revenues, Microsoft announced that it would start bringing some Xbox-exclusive games to PS5 and Nintendo Switch. It was part of a strategy shift to grow the company’s gaming business beyond Xbox hardware, but also a final admission that Microsoft had lost the console wars.
Naturally, Game Pass had to change, too. After months of turmoil, Microsoft hiked the price of Game Pass Ultimate last year and access to day-one console games was limited to its most expensive tier with the introduction of a new “standard” subscription. Even the $1 Game Pass trial went away.
Microsoft now finds itself this generation’s loser, saddled by a hugely expensive acquisition, under duress from tariffs on its console hardware, and trying to find more ways to make money. A price increase to Xbox games had to be quickly reversed, and now it’s Game Pass Ultimate subscribers that will have to pay up instead.
Microsoft is also increasingly looking to PC or cloud for growth, but it’s bumping the price of PC Game Pass just as it gets ready to launch the Xbox Ally handhelds with Asus. The $1,000 pricing for the top Xbox Ally X is already a clear test of the appetite for pricey next-gen consoles, and I have a feeling that it won’t be long until there are further PC Game Pass changes. Microsoft didn’t mention the PC Game Pass price increase in its blog post this week, and it feels inevitable that it’ll eventually rug pull day-one games for PC players just like it did for console subscribers last year.
The other intriguing aspect of this price increase is that Microsoft has promised that Xbox-published games will arrive on the more affordable Xbox Game Pass Premium tier within a year. The big exception is Call of Duty titles, which won’t be available on Premium. I wouldn’t be surprised if Black Ops 7 preorder numbers are down this year, particularly with Battlefield 6 on the horizon. If they are, that will be putting further pressure on Game Pass, particularly because Microsoft had a long debate internally over the revenue impacts of putting Call of Duty on the service.
As Microsoft pushes forward with its Xbox Everywhere strategy, the challenge of its shift to PC with next-gen consoles looms large. Everything about Xbox is changing rapidly, and the expensive era of Xbox hardware and subscriptions could leave even more fans, and even retailers, looking elsewhere.
More Microsoft leadership changes
Microsoft unified its Windows teams again this week, and Satya Nadella appointed a new CEO to run Microsoft’s biggest businesses. Both of these changes are linked to Microsoft’s AI efforts, and are part of even more unreported changes inside Microsoft.
Windows chief Pavan Davuluri, who was just promoted to president of Windows and devices earlier this month, is now looking after all of the Windows engineering teams. This is a reversal of Microsoft splitting the Windows team up in 2018, and it means the leaders of the teams for Core OS, Data Intelligence and Fundamentals, Security, and Engineering Systems all now report up to Davuluri.
“This change will increase agility and simplify our end-to-end work across Windows + Devices, as we support over 1 billion Windows customers and deliver our vision of Windows as an Agentic OS,” Davuluri wrote in an internal memo.
I think this will result in a Windows 12 release, or whatever Microsoft calls it, being even more focused on AI features. I’d be surprised if Microsoft requires an NPU for the next version of Windows, but I think most of the new features it builds will need that additional hardware to work well.
AI is also continuing to reshape the rest of Microsoft. Nadella is effectively deputizing some of his responsibilities so he can focus more on technical and engineering work. Judson Althoff, who led Microsoft’s global sales organization for the past nine years, is now Microsoft’s new CEO of commercial business. He will also be responsible for the operations and marketing teams that help sell Microsoft’s software and services to businesses, but not the engineering teams that help build them.
Althoff has just returned from an eight-week sabbatical, and many Microsoft employees had presumed he would be leaving the software giant instead of taking on an expanded role. Althoff will still report directly to Nadella, but I can’t help but feel like Nadella’s delegation is similar to when cofounder Bill Gates stepped down as CEO and took on a chief software architect role instead. It’s not the same situation, but the parallels are there.
Microsoft is also reshuffling some of the engineering teams responsible for Azure and its cloud work. The Microsoft 365 engineering teams responsible for Microsoft’s core collaboration and communications tools are moving from Rajesh Jha’s experiences and devices team to Scott Guthrie’s cloud and AI organization. The security teams responsible for identity, network access, and Microsoft Threat Protection are also moving from the Microsoft Security division to Guthrie’s org. The Azure Core team is also picking up some groups from experiences and devices.
Microsoft is consolidating a bunch of teams responsible for its sovereign and specialized clouds into a single team within cloud and AI that will be led by Douglas Phillips. This cloud work is key for Microsoft, particularly as many of its lucrative enterprise and government contracts rely on Azure security being the best it can be. “In a time of radical technological transformation and a high-threat landscape, it is crucial to continue bringing teams closer together to optimize how we operate,” Philips wrote in an internal memo this week.
- Microsoft embraces OpenAI rival Anthropic to improve Microsoft 365 apps. Microsoft brought Anthropic’s Claude Sonnet 4 and Claude Opus 4.1 AI models to its Microsoft 365 Copilot last week. It’s a move that expands model choice beyond just OpenAI’s range of models in Microsoft 365 Copilot, and it will allow Microsoft’s customers to access Anthropic models in Researcher and Copilot Studio.
- Microsoft launches “vibe working” in Excel and Word. Microsoft followed the launch of Anthropic models in Microsoft 365 Copilot by announcing a new Office Agent this week that is also powered by Anthropic AI models. It can create full PowerPoint presentations or Word documents from a chat prompt. Microsoft is also launching an Agent Mode in Office apps like Word and Excel that’s a more powerful version of the Copilot experience that Microsoft has added to its Office apps. Agent Mode essentially takes a complex task and breaks it down with planning and reasoning that you can follow. It’s like watching an automated macro in real time, showing everything it’s doing in the sidebar. Microsoft is calling these new agentic features in Office “vibe working,” a nod to vibe coding, in which novices write apps by creating a simple AI prompt.
- Forza Horizon 6 is set in Japan and arrives in 2026. The Xbox Tokyo Game Show stream last week delivered a teaser trailer for the next installment in the Forza franchise. Forza Horizon 6 will be set in Japan and is releasing in the same year Microsoft is releasing Gears of War: E-Day, a Halo CE remaster, and Playground Games’ Fable. A PS5 version of Forza Horizon 6 is also coming “post-launch.”
- Microsoft Flight Simulator 2024 is coming to PS5 in December. Sony revealed during its State of Play last week that Microsoft Flight Simulator 2024 is debuting on PS5 later this year. Asobo Studio, the developers behind the game, are also working on PS VR2 support. The PS5 version of Flight Simulator 2024 will even include communications from air traffic control towers playing through Sony’s DualSense controller speaker. Microsoft Flight Simulator 2024 arrives on PS5 on December 8th.
- Microsoft forced to make Windows 10 extended security updates truly free in Europe. Windows 10 end of support is approaching in less than two weeks, and Microsoft has now been forced to make its extended security updates truly free, without a catch, in certain markets in Europe. When Windows 10 goes end of support on October 14th, some European customers will no longer be required to turn on Windows Backup to enroll into its Extended Security Updates (ESU). Microsoft had wanted everyone to turn on Windows Backup to get the extra year of security updates, but thanks to pressure from the Euroconsumers group this is now changing in the European economic area. You’ll still need to sign in with a Microsoft account though, but at least Windows 10 users in Europe can avoid going over the 5GB of free storage on OneDrive by not having to enable Windows Backup.
- Microsoft opens the doors to more AI-powered Windows apps. Microsoft has now officially launched its Windows ML platform, making it easier for developers to add AI to their Windows apps. Developers including Adobe, McAfee, and Topaz Labs are now working on adopting Windows ML, allowing apps like Adobe’s Premiere Pro and After Effects to use a local NPU for semantic search, audio tagging, and scene edit detection features.
- Microsoft blocks the Israeli military from some cloud and AI services. Microsoft is blocking the Israeli military’s access to cloud and AI services that have been used in the mass surveillance of Palestinian civilians. Microsoft vice chair and president Brad Smith announced the decision in an internal memo to employees last week, after The Guardian and others reported last month that the Israeli government stored recordings and data on Azure of up to “a million calls an hour” made by Palestinians. The block applies to a “set of service” used by a unit within Israel’s Ministry of Defense, and doesn’t affect other contracts that Microsoft holds with the Israeli government. It comes after more than a year of pressure on Microsoft to properly review its contracts with the Israeli government, and multiple protests during the company’s 50th anniversary and Build developer conference. Former Microsoft employees even set up encampments at the company’s headquarters last month and even managed to gain access to a company building and livestream themselves inside the office of Microsoft president Brad Smith.
- Microsoft Photos will soon auto-categorize your pictures. Microsoft is testing a new way to sift through the clutter of your photo library in Windows 11. If you own a Copilot Plus PC then a new AI-powered feature on the Photos app that will place images of receipts, screenshots, identity documents, and handwritten notes in their own folders. It sounds like one of Microsoft’s more useful implementations of AI in Windows 11.
- Trump’s new target: Microsoft head of global affairs. President Donald Trump wants Microsoft to fire its head of global affairs, Lisa Monaco. Trump claims that Monaco, who only started at Microsoft in May, is “corrupt,” “deranged,” and “a menace to US national security.” Trump claims Monaco’s role at Microsoft lets her access “highly sensitive information,” and that he’s already stripped Monaco of security clearances. Monaco worked as the 39th Deputy Attorney General of the United States under President Biden and AG Merrick Garland. Garland was in charge of the federal prosecution of Trump.
- Microsoft’s Windows 11 2025 update is available now. Microsoft started rolling out its annual Windows 11 update (known as version 25H2) this week. Because 25H2 has a shared code base with 24H2, it means there aren’t any immediate new features. That also makes it a small update that’s delivered as a simple “enablement package.” Microsoft will continue to deliver new features to both 24H2 and 25H2 on a monthly basis.
- Microsoft is giving Copilot AI faces you can chat with. After experimenting with a floating blob as a Copilot character, Microsoft has now turned to human-looking avatars instead. A new experimental “Portraits” feature in Copilot Labs includes 40 stylized human avatars that respond with natural expressions during real-time voice conversations. Microsoft is using its VASA-1 technology to power this feature, and after trying it briefly it’s the sort of feature Microsoft will have to be careful with — particularly given the concerns around harmful interactions with character-driven AI chatbots.
- Xbox Cloud Gaming comes out of beta with improved 1440p resolution. Alongside the price hikes to Game Pass Ultimate, Microsoft also revealed that Xbox Cloud Gaming is finally coming out of its preview state this week. It has been in beta since its launch in 2020, and the full release now includes 1440p resolution and improved bitrate for select games and devices. This new resolution support is limited to Xbox Game Pass Ultimate subscribers, and Microsoft is also bringing cloud access to its Essential and Premium tiers.
- Microsoft Excel turns 40. Microsoft originally launched Excel for the Mac in September 1985. It was a time when GUI was replacing the command line, and PCs were starting to get more accessible. Lotus dominated the spreadsheet market with its Lotus 1-2-3 product, but that didn’t stop Microsoft from taking over the spreadsheet market for the past four decades. Excel is so popular now that there’s even a competitive world championship held in Las Vegas each year for spreadsheet experts.
- Microsoft 365 Premium bundles Office and AI for the same price as ChatGPT Plus. Microsoft is finally combining its Microsoft 365 Family plan with Copilot Pro into a new Microsoft 365 Premium subscription. Priced at $19.99 a month, it’s the same price as OpenAI’s ChatGPT Plus subscription and offers the highest usage limits in features like GPT-4o image generation and voice, as well as Copilot Podcasts, Deep Research, Vision, and Actions. Unlike ChatGPT Plus, it will also include all of the Microsoft 365 Family benefits, with access to Office desktop apps for six people, 1TB of storage per person, and more. Microsoft is also allowing Microsoft 365 Personal, Family, and Premium subscribers to bring their Copilot license to work, and enable Microsoft 365 Copilot in their Office apps.
- Microsoft’s new Office icons are more curvy and colorful. Microsoft is officially unveiling its new Office icons this week, after they leaked earlier this year. The icons have a modern design that’s more colorful and playful, with subtle changes that match Microsoft’s recent work with its Fluent illustrations. All of Microsoft’s 10 core Office icons are being refreshed, with a focus on gradients of color that improve contrast and accessibility. I think the new icons look great, and they’re rolling out in the coming weeks across web, desktop, and mobile for both consumers and commercial users of Microsoft 365.
- Microsoft’s Windows XP Crocs are here. I first revealed the Windows XP Crocs were coming in August, after employees were able to purchase them for $80. Now, Microsoft has made them official and revealed its holding a sweepstakes for anyone to win a pair. The Crocs have a design inspired by Windows XP’s Bliss wallpaper, and have Clippy and Internet Explorer shoe charms. It doesn’t look like Microsoft will be selling them though, so if you want a pair you’ll have to enter the competition and cross your toes.
- Halo Studios plans “deep dive” on what’s next for Halo. After a tease of Halo Studios’ Unreal Engine plans for Halo last year, it now looks like we’re about to hear more about where Halo is heading next. Halo Studios is now teasing a “deep dive” panel about what it’s been working on during the Halo World Championship Series event later this month. It’s a panel “that you won’t want to miss,” apparently.
I’m always keen to hear from readers, so please drop a comment here, or you can reach me at [email protected] if you want to discuss anything else. If you’ve heard about any of Microsoft’s secret projects, you can reach me via email at [email protected] or speak to me confidentially on the Signal messaging app, where I’m tomwarren.01. I’m also tomwarren on Telegram, if you’d prefer to chat there.
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