Mainstream Xbox consoles are on their way out

In any market it feels like the end of an era when too many changes are taking place too fast – truth be told, though, even a handful of numbers can drive the same point home. This seems to be the case with the Xbox as a physical home entertainment product, which has not been successful for Microsoft despite the company’s investment of around $100 billion in supporting software and services over the past decade: it’s slowly becoming apparent that, if recent numbers are any indication, there may be no point in Microsoft releasing such a product ever again. Not a mass-market one, anyway, despite Phil Spencer’s past promises.

That is the obvious conclusion many will arrive at by reviewing the numbers that Take-Two – the publisher expected to release the much-discussed, highly anticipated Grand Theft Auto VI in the autumn – has recently disclosed. In its latest note to investors (PDF) Take-Two estimates that more than 94 million current-generation consoles, the total addressable market for GTA VI and its GTA Online component for this year (the PC version is not expected until late 2026 at the earliest), have been sold worldwide based on November 2024 data.

The Xbox Series S/X not managing to build a customer base of 30 million consoles before entering its 5th year means they won’t even reach the customer base of the failed Xbox One.

We already know, though, that Sony had shipped more than 65 million PS5 consoles by the end of September 2024 and that it had probably sold through around 64 million of them by the end of November. Meaning that, by Take-Two’s estimates, the Xbox Series S/X had sold through less than 30 million consoles in the same timeframe.

This is not new information by any means: the Series S/X has been underperforming since 2022, allowing for the PS5 to grow its customer base at a faster pace (once Sony finally solved that system’s availability problems). The latest Xbox models, though, not breaking 30 million in sales before entering their 5th year in the market means that Microsoft’s current systems are not going to even reach the lifetime sales of their failed predecessor, the Xbox One S/X (less than 58 million units).

This changes things for the worse, for everyone. Here’s why.

What these Xbox sales numbers actually mean for consumers

It was already known that the PS5/PS5 Pro has been outselling the Xbox Series S/X by a wide margin, but most of us were under the impression that this was still a race… of sorts. That is, we all knew that the Xbox consoles had fallen behind in terms of sales numbers, but many of us thought they could still serve as decent, meaningful alternatives to the PS5, offering some much-needed competition in the gaming market. It would be better for everyone involved if consumers have more than one choice for a home gaming console after all, no?

What’s happening here, though, does not leave much room for optimism. The sales ratio between the latest PlayStation and Xbox systems would already sit at around 2.15:1 based on November data, but at over 2.25:1 based on VGChartz’ (unofficial but trustworthy) latest data, less than three months later.

The latter data put the PS5/PS5 Pro userbase at 72.31 million and the Xbox Series S/X one at 32 million – which does not look that bad for Xbox at first glance… until one realizes that most of Microsoft’s Series S/X consoles were sold back in 2021-2022. Xbox sales have been slowing down considerably ever since, quarter after quarter. Sony’s systems are not selling as fast as they did in 2022-2023 either, but they are still selling at a pace that allows the gap between PlayStation and Xbox to widen every year.

If sales of Sony’s and Microsoft’s systems remain on their current trajectories, then it’s not hard to imagine a ratio of around 3:1 between their respective user bases – i.e. around 110 million PlayStation systems versus around 35 million Xbox systems – by the end of 2027. That would be mainly due to (a) Microsoft’s crystalized focus on software/services and (b) the snowballing effect that historically works in the dominant format’s favor.

If this generation ends with a ratio of 3:1 between PlayStation and Xbox systems, there will probably be no real market competition to speak of in the next generation of mainstream gaming consoles.

It’s fair to say that, should that come to pass, there will be no point talking about real, effective competition in the home console market anymore. The sheer momentum of PS5’s dominance in the global market in the years before would probably give the PS6 enough of a boost to make it the default gaming format in the eyes of consumers everywhere. As far as mainstream home consoles are concerned, it would essentially be “game over” for Microsoft as a platform holder regardless of its products or marketing message. It is that simple.

What are Microsoft’s choices regarding the Xbox going forward

None of this is news to anyone watching what’s happening in the gaming market closely enough: Sony won this round of the Console Wars early on and, on that note, there may not even be such a thing as Console Wars in the traditional sense anymore. Microsoft would certainly like everyone to think so too, but gaming platform holders are still fighting over consumers’ entertainment dollars and entertainment time as they always have, regardless of their efforts to address a larger audience or attach services to content.

For better or worse, when it comes to video games as loved by around 120-140 million consumers worldwide, the home console remains an important focal point that defines a platform’s character and shapes consumers’ expectations. This is not something that Microsoft can just conveniently ignore, especially since Sony and Nintendo won’t change their approach in terms of exclusive content anytime soon. The Redmond giant is on its way to becoming a larger games publisher than either of them, but as a platform holder it would be facing a losing battle against the Switch 2 and the PlayStation6 if there was no Xbox equivalent out there as an option.

The problem is that Microsoft has been walking a very fine line by being cryptic about its plans and future strategy regarding the Xbox. Over the last 12 months Phil Spencer has stated that “there definitely will be a next Xbox console” (along with that promise of “the largest technical leap in a hardware generation”), that he sees “a lot of opportunity in the handheld gaming space for Xbox” (implying that Microsoft is working on such a device), that “the Xbox identity is evolving” (suggesting that its future lies in multiplatform releases), even that “there are no red lines when it comes to which Microsoft Studios games are made available for what systems” (confirming that the best Xbox fans can expect in the future is timed exclusives later released on other formats too).

It’s currently difficult to imagine a world where Microsoft becomes competitive in the mainstream gaming console space ever again.

All of that is very confusing even if it’s not intentional on Microsoft’s part. But, in the eyes of long-time Xbox console fans, Microsoft has already betrayed their trust, making a sharp turn in its software strategy that blatantly disregards their patience and support. If Microsoft sticks to its “This is an Xbox” mantra, insisting that every PC, mobile, TV or handheld capable of accessing the Game Pass library is actually an Xbox, then there is little point in buying an Xbox, well, box from Microsoft. It is that simple.

Based on the above, as well as the current place of the Series S/X in the consumer market as a whole, it’s difficult to imagine a world where Microsoft becomes competitive in the mainstream gaming console space again. Since the company is now officially focused on Game Pass subscriptions, cloud gaming and multi-platform releases, there’s no reason for any consumer to invest in a next-generation Xbox system – even one that’s priced below $500 – if Xbox titles can be played on other devices he/she already owns or plays other games on.

While some people do entertain the possibility of Microsoft exiting the gaming console business altogether despite Spencer’s promises, what the company may ultimately choose to do – or rather be forced to do – is probably something else. It could, for instance, release an impressively powerful next-generation Xbox home console and/or a capable Xbox handheld, in the hopes that its hardcore fans will choose one or the other over the next mainstream PlayStation or a gaming PC.

It could also decide to help its system(s) out by releasing all new Xbox Game Studios titles on them first in a 6-9 month exclusivity window, essentially elevating the Xbox brand to a “premium” status in terms of hardware (despite it meaning more in terms of access to Game Pass).

This approach is not without its risks, though, because – by doing that – the company cannot possibly expect to even reach the sales of the Series S/X again. The powerful Xbox will most probably be quite expensive (as costly or costlier than the PS5 Pro or a half-decent PC) and a portable Xbox would face extremely strong competition from dozens of other handheld PCs out by then. Microsoft’s devices would essentially corner themselves to niche categories, an outcome that may or may not work for the Xbox long-term.

The mainstream Xbox console is on its way out because, frankly, it just doesn’t fit into Microsoft’s future plans anymore.

It’s all hypothetical right now, obviously, but there does not seem to be much room for maneuver or a lot of options currently available to Microsoft. The company’s many failures in the console space for more than a decade have brought things to a head, leaving it no choice but to explore other strategies. At the end of the day, that’s why the mainstream Xbox console is on its way out: it just doesn’t fit into Microsoft’s future plans anymore. Whether that’s something that will benefit consumers or just its own bottom line, remains to be seen.