Xbox has undergone major changes since a new leadership team took over. Under Xbox CEO Asha Sharma, Microsoft’s gaming division has had waves of mass layoffs, parted ways with several studios, and consolidated its remaining developers under Activision, Blizzard, King, and Bethesda. All of this is being done to make Xbox a profitable part of the Microsoft empire and to grow its reach, but former PlayStation boss Shawn Layden has suggested that the company should “pick a lane” and narrow its focus.
“I said in another interview a couple of months ago, you’ve got to pick a lane,” Layden said to The Expansion Pass when he was asked if he had any advice for Sharma. “Either you’re going to be a platform competitive with PlayStation–which Xbox has not been competitive with PlayStation for years–but that’s not out of the window. You can still make another run at it. And there are certain decisions you have to make around that about the platform. We talked about exclusivity. We talked about how do you incentivize third parties to support your platform in a meaningful way. These are all things around the platform business, or you sit back and realize you are the biggest game publisher in the world–maybe Tencent’s bigger–but in the Western world you are the biggest game publisher out there with Activision, Blizzard, Bethesda, and all the other pieces.”
“Be that. This is your Dreamcast moment. When Sega decided, ‘We’re just going to be on PlayStation 2 and we’re going to get out of the hardware business and just be a great software company. It can be done. It has been done before. That’s my advice. Pick a lane.”
The “Dreamcast moment” that Layden refers to is the rise and fall of Sega’s last home console–the moment when Sega realised it could no longer compete in the gaming hardware market and had to shift entirely to software. Microsoft has been notoriously secretive with the sales of its Xbox hardware, as it’s believed that it trails far behind Sony’s PlayStation 5 (95.3 million units sold as of June 2026).
The future doesn’t look too good for Xbox console sales either, as analysts predict that only 2.5 million Xbox Series X|S units will be sold in 2026, as Microsoft prepares for a “rapid wind-down toward zero” ahead of its next-gen console launch.
Would it make sense for Xbox to shift towards being a software-only company then? There’s certainly evidence to suggest that it might be a viable path forward, as several of its first-party games have done very good numbers on PC and PS5, and if it’s streamlining operations to focus on hit franchises like Fallout and Forza Horizon, there is an audience for those games.
Of course, releasing games on PlayStation and Steam also means that Xbox has to give up a cut of its revenue, whereas it gets to keep 100% of first-party game sales when they’re sold through Xbox console and PC storefronts. Microsoft also charges a fee to third-party developers, so there’s a lot of nuance behind the math of sticking with gaming hardware or focusing purely on software.
