Editor’s note: This story has been updated with details from the Washington State Employment Security Department.

Bungie, the Bellevue, Wash.-based creator of the Halo and Destiny video game franchises, was hit by a new round of layoffs Wednesday as the Sony-owned studio undergoes a reorganization following the end of development on its long-running online shooter Destiny 2.

In an email to Sony Interactive Entertainment employees, Hermen Hulst, CEO of Sony’s Studio Business Group, said the company is cutting “a significant number of employees, including most of the Destiny team and some Marathon team members.” 

Later on Thursday, a Worker Adjustment and Retraining Notification (WARN) filing with the Washington State Employment Security Department put the number of Bungie job losses in Bellevue at 292. The effective separation date is July 9.

The WARN notice listed a variety of impacted job titles, including artists, engineers, producers, designers, technical animators, audio leads, and more. The cuts also extend to Sony teams that support Bungie’s operations.

In a statement posted on Bluesky, Bungie said that “Destiny 2 fell short of expectations these past several years” and that with “future projects still in early incubation, we unfortunately could not continue operating at our previous size.”

Bungie has now cut more than 600 jobs across three rounds of layoffs since Sony acquired the studio for $3.6 billion in 2022. The company cut roughly 100 jobs in October 2023 and another 220 in July 2024, when 155 additional roles were also transferred to Sony Interactive Entertainment.

The studio had more than 1,400 employees before the cuts began.

Hulst said in his email that Marathon “remains an important part of our portfolio” and that the company is working on “incubation efforts for future projects,” but offered no specifics.

The developers for a video game based on Magic: The Gathering announced on Tuesday that they’ve successfully unionized, following a petition filed with the US National Labor Relations Board.

United Wizards of the Coast, in partnership with the Communications Workers of America, represents the team that develops Magic: The Gathering – Arena. Made in-house at Wizards of the Coast in Renton, Wash., Arena is an online adaptation of the long-running collectible card game.

UWOTC previously announced on June 2 that it had begun the official NLRB election for recognition of its union, with in-person voting beginning on that day. Now that the union has been officially elected via the NLRB, its next step is to seek a ratified contract.

The union’s stated goals include seeking layoff protections; addressing Hasbro’s mandates of required AI usage; dealing with pay discrepancies; keeping the option to work remotely after Hasbro issued a return-to-office mandate; clarifications about workers’ side projects; and transparency regarding career progression and pay scales.

As per UWOTC’s official website, the union is made up of roughly 100 workers in Washington state and elsewhere.

UWOTC previously announced its union efforts in late April, which were originally spurred by the surprise wave of Hasbro layoffs that impacted Wizards in Dec. 2023, despite Wizards as a whole having one of its most successful years on record. (2023 was, after all, the year that Baldur’s Gate III came out.)

The new union initially sought voluntary recognition from Wizards with a May 1 deadline, but Wizards didn’t issue a direct response. Instead, in late May, several Arena team members reported that Wizards had sent them multiple anti-union messages. Other sources noted that Wizards had allegedly hired a legal team that has a reputation for counteracting unionization efforts, which is suggestive.

When asked for comment, a Wizards representative pointed GeekWire to the company’s official statement, shared via LinkedIn.

GeekWire has reached out to UWOTC for further comment.

Arena is a free-to-play digital version of Magic for Windows, MacOS, and mobile devices, which saw full release September 2019. It operates on a “freemium” model where players can play the game at no up-front cost, but have the option to acquire new virtual cards and in-game currency in exchange for real money.

According to official announcements from Hasbro, there were over 13 million registered accounts on Arena as of 2023. At time of writing, independent trackers such as SteamCharts have logged just under 7,700 daily players on Arena for the last 30 days, which is a respectable number for a modern live-service game.

It’s worth noting that many of the issues that UWOTC was formed to deal with are traditional, endemic issues in the video game industry, particularly in the higher-end, “AAA” sector. The last three years in gaming have been punctuated by studio closures, waves of layoffs, allegations of toxic “crunch culture,” and executive mismanagement, despite the industry itself being bigger and more popular than ever.

Valve Software abruptly opened reservations for its latest Steam Machine on Monday, but due to the ongoing PC component shortage, did so at a significantly higher price than expected.

The company, headquartered in Bellevue, Wash., first announced the new version of the Steam Machine late last year. It’s a small-scale, high-powered gaming PC that’s designed for your living room, which runs the same Linux-based SteamOS as Valve’s Steam Deck.

The 2026 Steam Machine starts at a whopping $1,049 through Valve’s digital storefront Steam, which gets you the base model with an internal 512GB SSD. A higher-end model with a 2TB drive costs $1,349, and both also come in bundles with one of Valve’s new Steam Controllers.

It is, on paper, an impressive overall device, particularly as a sort of gateway product for anyone who’d like to break into gaming on PCs and/or Linux. However, its price tag is a significant barrier. A comparatively powerful PC would still cost as much or more, but Valve’s old strategy with the Steam Deck, by comparison, was to practically give it away.

As it turns out, Valve isn’t particularly happy about the price either, preemptively addressing concerns via a post on the official Steam blog. The short version is that the planned launch of the Machine has been complicated by the ongoing component crisis that surrounds SSDs and RAM.

The prices “reflect the state of the world for manufacturing; or, more accurately, it reflects the price of the components as we’ve secured them over the past 6 months,” the company said in the post.

The two Steam Machine models’ internal storage capacity is the only difference between them. Both are gaming PCs that pack “semi-custom” AMD CPUs and GPUs, 16 GB RAM, Bluetooth capability, an ethernet port, and a MicroSD card slot into a 6” black cube, complete with a removable faceplate.

The high cost of entry for the Steam Machine is another knock-on effect from the ongoing global RAM and SSD shortages, which were initially created by high demand from the burgeoning AI industry. The same problems have resulted in multiple price hikes for current-generation gaming consoles and spiked the costs for new-built gaming PCs. It’s been a bad time for the hobby overall, especially for newcomers and players on a budget.

The Machine isn’t likely to fail, but its costs may mean that for the time being, it turns into little more than an expensive toy for gadgetheads. One of Valve’s quiet ambitions for years has been to bring more people into PC gaming, and especially PC gaming on Linux, but for a thousand bucks a throw, the Machine isn’t likely to draw in any new customers.

That suggests that if a company like Valve, which controls roughly half the PC gaming on Earth via Steam, is having problems like this, then it’s wise to expect further disruption for the foreseeable future. Xbox in particular was talking about launching a new console at the end of 2027, but with RAM and SSD costs on the rise, it looks like the next generation of hardware will either be prohibitively expensive or best pushed off for a few years.

As with the Deck, you get games onto the Machine via direct download from Valve’s digital storefront Steam. Also as with the Deck, the Machine is designed so it can also be used as a desktop computer, with no particular guardrails to keep out tinkerers and modders.

Even with their high cost, and with a lower number of available units at launch than Valve had planned, the 2026 Steam Machine was already listed as “out of stock” within 10 minutes of the store page opening, which was before Valve itself had officially announced it had done so.

However, Valve has implemented a lottery system in order to stymie resellers and attempt to make the process as fair as possible. Any interested buyers can sign up for a Steam Machine reservation at any time before this coming Thursday, at which point Valve will randomize the queue. Anyone who doesn’t get in on Thursday will be added to a waiting list.

Microsoft has spent years subsidizing Xbox rather than profiting from it, CEO Satya Nadella acknowledged this week, as he addressed the gaming division’s need for a new approach. 

His comments came during a Wednesday evening taping of The New York Times’ “Hard Fork” podcast, released Friday. Hosts Kevin Roose and Casey Newton pressed Nadella on the future of Xbox a few hours after the division’s leadership signaled an upcoming reset.

“No one can accuse Microsoft of not having invested for the last 25 years,” Nadella said of the Xbox and games business. “And now we have to turn this into a sustainable business.” 

For all the entertainment value Xbox provides, he said, Microsoft hasn’t been monetizing that entertainment, and has actually been subsidizing it. He added with a chuckle, “In fact, there’s more monetization of Xbox games happening on YouTube than at Microsoft.”

Earlier in the day, Xbox CEO Asha Sharma had told employees in a memo that the division’s heavy spending and declining revenue cannot continue. Sharma, about 100 days into the job, said Xbox will finish the fiscal year at roughly a 3% margin by an internal Microsoft measure, after the company spent more than $20 billion over five years even as annual revenue fell.

Bloomberg News reported that the division is planning major job cuts next month. 

On the podcast, Nadella described two pressures on the business. One is temporary: a run-up in prices driven by the shortage of semiconductors and memory, which is squeezing PCs, phones and other consumer electronics, and which he said Microsoft will get through. 

The other is lasting — the question of what the Xbox business model should be going forward. 

“I think we have to find ways to deliver the games in which it’s economically relevant for the customer and for us,” Nadella said when Newton asked whether he could offer any sort of “carrot” for gamers, or whether consoles and games would simply get more expensive. 

Nadella didn’t detail what the new model would look like. Sharma said in her memo that she’ll spend the next 100 days taking what she called a fresh look at the business.

The Information reported Friday that Microsoft hasn’t ruled out restructuring Xbox — potentially as a wholly owned subsidiary, a joint venture, or a spin-off — though it has no imminent plans to do so. The outlet, citing three people with direct knowledge, said Sharma plans to pair layoffs with heavier investment in big franchises like Halo and Fallout, a plan Nadella and CFO Amy Hood have signed off on.

See above for the full conversation, which otherwise focuses largely on artificial intelligence, including the AI backlash over data centers, AI’s impact on jobs, whether the U.S. government should take stakes in AI companies, and how much he buys the idea that AI is about to automate entire jobs.

Xbox CEO Asha Sharma, roughly 100 days into her tenure, delivered a blunt assessment of Microsoft’s gaming business in a memo to employees Wednesday, saying that heavy spending with thin profit margins and declining revenue “cannot continue.” 

The memo, posted publicly on the Xbox blog, came as Bloomberg News reported that the division is planning major job cuts next month, soon after the close of Microsoft’s fiscal year on June 30. Xbox is also planning significant cuts to marketing and other budgets, according to the report.

The exact scale of the layoffs is not yet clear. Microsoft declined to comment. The Verge also reported that Xbox “will be hit with significant layoffs next month,” citing people familiar with the plans.

Sharma’s memo did not mention layoffs but described a business that needs a sweeping reset. She and Xbox content chief Matt Booty, who co-signed the memo, cited rising hardware component costs, an overextended studio system, and aging platform infrastructure among the challenges facing the division.

Xbox will end the fiscal year at about a 3% “accountability margin,” an internal metric Microsoft uses to measure the profitability of the business, according to the memo.

“Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time,” Sharma and Booty wrote. “Going forward, this cannot continue.”

Microsoft’s most recent quarterly filing illustrates the challenge. Gaming revenue fell 7% to $5.3 billion in the quarter ended March 31, with Xbox hardware revenue down 33% on lower console sales, and Xbox content and services revenue down 5%.

The memo follows Sunday’s Xbox Games Showcase, where Sharma reversed course on the company’s multiplatform strategy, announcing that Gears of War: E-Day and Clockwork Revolution will be Xbox console exclusives. Bloomberg reported Wednesday that a PlayStation 5 version of the new Gears of War game had been in development, and was canceled, before the announcement.

Sharma took over in February from Phil Spencer, the longtime Xbox leader who announced his retirement after 38 years at Microsoft. A former Instacart COO and Meta product executive, she previously ran Microsoft’s CoreAI product organization.

Nightdive Studios, based in Vancouver, Wash., has made its reputation from remasters and re-releases of dozens of out-of-print PC gaming classics. On Sunday, it announced its next project is the 1998 cult classic Thief: The Dark Project.

The news came as part of PC Gamer’s PC Gaming Show for 2026, which was part of this year’s Summer Game Fest in Los Angeles. The Fest, meant to replace the now-shuttered E3, is a loosely organized series of livestreams, presentations, and broadcasts that sets the schedule for the rest of the year in the video game industry.

Thief, from the legendary Looking Glass Studios, is one of the most influential PC games of the 1990s. Even if you’ve never played it or one of its sequels, such as 2004’s Deadly Shadows, you’ve likely played one of its spiritual descendants.

Thief is one of the first games that didn’t rely on scripts to move its levels forward. There’s nothing that you’re “meant” to do to progress; you’re simply dropped into an elaborate environment and left to figure the rest out for yourself.

That open-ended approach made Thief one of the seminal titles in a sub-genre that’s become known as the “immersive sim,” such as BioShock, Deathloop, and 2017’s Prey, where the challenge and attraction is in coming up with your own solutions on the fly.

Thief puts the player in the role of Garrett, a professional burglar in a fantasy metropolis known only as the City, who takes a job to steal a magical gem. This places Garrett, against his will, in the center of a conflict between two warring factions of zealots, which will determine the fate of the City.

While Garrett can fight if he has to, he’ll usually lose. Instead, you’re meant to use stealth, wits, and evasion to accomplish his goals, with tools such as rope arrows, flash bombs, noisemakers, and a blackjack for stealthy knockouts.

“Thief didn’t just introduce stealth mechanics, it defined them,” Stephen Kick, CEO at Nightdive Studios, wrote in a press release. “With this remaster, we’ve preserved the tension and intelligence of the original while enhancing it for modern players, ensuring that its legacy continues to influence how stealth games are played today.”

The Nightdive remaster of Thief is planned to include everything from all versions of the game, including the extra missions from 1999’s Thief Gold re-release. It will also include a few quality-of-life bonuses such as a mission select, improved graphics, a weapon/item wheel to make it easier to use items in-game, and support for custom campaigns.

Kick co-founded Nightdive in 2012 when he discovered that he couldn’t play his own legal copy of System Shock 2 anymore. Since then, Nightdive has rescued and re-released dozens of out-of-print PC games, such as System Shock 2, Killing Time, Star Wars: Dark Forces, and Rise of the Triad, in addition to both publishing and developing a full remake of the original System Shock.

Nightdive’s Thief: The Dark Project remaster is planned for launch this winter on PlayStation 4 and 5, Nintendo Switch and Switch 2, Xbox Series X|S, and PC via Steam, GOG, and the Epic Games Store.

Microsoft released a new pre-recorded Xbox Showcase on Sunday morning as part of this year’s Summer Game Fest event, which also marked new CEO Asha Sharma’s first big public event since taking over the company’s gaming division.

Back in February when Sharma took over Xbox, some analysts, including me, openly wondered if she was there to shut down the department. Instead, Sharma appears determined to give Xbox a shot in the arm, telling Bloomberg News earlier this week that she aims to make Xbox “the number one gaming and entertainment company” by 2030.

For a product that seems to be permanently stuck in third place behind Sony and Nintendo, and which is facing at least one significant consumer boycott, that’s a frankly awe-inspiring level of ambition. That set up high expectations for this year’s Showcase.

Instead, Sharma and Xbox chief content officer Matt Booty seemed content to let their games do the talking. The focus of this year’s hour-long Showcase was firmly on new and upcoming releases from the Xbox studio network and its partners, as part of a low-key celebration of the Xbox project’s 25th anniversary.

The Showcase began with a new look at gameplay for the forthcoming Gears of War: E-Day (Oct. 6). The Gears of War series has, since the beginning, been focused on the conflict between humanity and a subterranean species called the Locust Horde.

E-Day is a prequel set on the first day of that conflict (“Emergence Day”), 14 years before the original Gears of War. It once again puts the player in the role of the series’ traditional protagonists Marcus Fenix and Dom Santiago.

We’ve known that E-Day was coming for a couple of years, and Gears has traditionally been one of the bigger franchises in Xbox’s network. The big surprise here isn’t the game itself, but rather the quiet announcement that E-Day is an Xbox console exclusive.

This is a big reversal of policy from Microsoft, which made headlines over the last couple of years by deliberately publishing several of its first-party games on competitive platforms such as the PlayStation 5. While this appeared to be financially successful for the company, it’s also traditionally been the kind of move that video game companies (i.e. Sega) do right before they leave the hardware market.

Now Xbox is at least attempting to chart a new course. Both E-Day and the forthcoming steampunk action-RPG Clockwork Revolution (2027) were specifically identified as Xbox console exclusives. While several other first-party Xbox titles weren’t, including the Fable reboot and Halo: Campaign Evolved, any move towards console exclusivity is a big departure for modern Xbox.

The company later specifically confirmed via Xbox Wire that E-Day and Clockwork are not timed exclusives. For the foreseeable future, if you want to play either of these games on a console, you’ll have to own Xbox hardware to do so.

This suggests that Sharma’s Xbox may be moving back towards more proven market strategies for the platform, as opposed to the Spencer/Bond tactic of attempting to redefine the terms of success or the product itself.

Fable may be the next biggest news out of this year’s Showcase, as it’s been suspected of being vaporware for several years now. The original games were some of the biggest Xbox exclusives, as famously open-ended fantasy RPGs that allowed you to play as a hero, a villain, or something in between.

The series has been on hiatus since Fable III in 2010, so Microsoft got fans’ attention back in 2020 when it announced plans for a reboot. Then, nothing happened for quite some time. Every major press event at Xbox would feature some small piece of information about Fable, just as proof of life, before the project vanished again.

Now we actually have a release date for the new Fable: Feb. 23, 2027. In addition, the Showcase trailer marks the debut of Fable’s villain, Isabel, who’s played by British actress Hayley Atwell (Captain America).

Speaking of projects that seemed like they’d never come out: this year’s Showcase featured a new trailer for Seattle-based Undead Labs’ State of Decay 3.

This co-op zombie survival game, set in the post-apocalyptic Pacific Northwest, has been in development for years, but a 2022 scandal about its toxic work culture nearly sank Undead Labs before it could be released. It’s frankly shocking that Microsoft never pulled the plug. Instead, State of Decay 3 is coming in 2027.

This summer, we’ll finally see the next project from the rebranded Halo Studios, as the Unreal Engine remake of the original Halo is coming on July 28. In addition to the remake ofHalo’s story,Campaign Evolved will feature three new missions set one year before the game’s events, which team the Master Chief with fan-favorite character Sergeant Major Avery Johnson.

Other first-party news out of the Xbox Showcase includes:

• To celebrate the Xbox’s 25th anniversary, Microsoft plans to release a new edition of the Xbox Series X in November which features a translucent green shell and a matching controller. This is meant to recall the limited-edition Halo Xbox that released in 2004.
• This year’s Call of Duty is a fourth entry in its Modern Warfare subseries. It features a new mode, DMZ, set in the fictional Hajin Exclusion Zone in Korea, which is the setting for a high-stakes extraction shooter.
• Mojang Studios’ Minecraft Dungeons II is coming out on Sept. 29.
• Activision plans to revive the Spyro series, featuring one of the most recognizable mascots of the 2000s, with A Realm Beyond, coming in the spring of 2027.
• Ninja Theory’s award-winning Hellblade series is getting a third entry next year, simply titled Senua.
• Last year’s Doom: The Dark Ages will receive a DLC expansion, Revelations, on July 7.
• Microsoft Flight Simulator 2024 has a new “world update” planned for July 4, which is meant to “celebrate the beauty of the United States” by adding multiple national parks to the game’s environments. Now you can fly through an ultra-realistic Grand Canyon or over the Dry Tortugas.

Announcements from Xbox partners included:

• Atlus debuted a remake of its popular Japanese urban-fantasy RPG Persona 4 and, after a long period of silence on the topic, has confirmed it’s making Persona 6. While nothing is known about P6 aside from its existence, that’s still new information.
• As a celebration of the Castlevania series’ 40th anniversary, Konami plans to publish Belmont’s Curse, the first new entry in the core series since 2008’s Order of Ecclesia. It follows Rose Belmont as she and her father Trevor investigate a monster attack on the streets of Paris in 1499. It’s due out on Oct. 15.
• The French developer Asobo Studio revealed another trailer for its forthcoming prequel Resonance, which is a new entry in the Plague Tale series. These action-horror games, set in 14th-century France, deal with a supernatural take on the Black Plague and its protagonists’ attempts to survive it.
• Sega plans to revive its Crazy Taxi racing series with a new entry, World Tour, coming next year. Within minutes of the reveal, fans noticed that World Tour‘s Steam page features an AI-usage disclaimer, which has already begun a mild furor on Western social media.
• Koei Tecmo and Team Ninja revealed Wo Long 2, a sequel to its fantasy action-game, set during China’s Three Kingdoms period.
• Serenity Forge, an indie studio that specializes in both weird horror and “cozy” games, seems to be splitting the difference with its newest project. Vivarium is an anime-inspired, hand-animated game about life inside a small town… which is contained in a glass jar in what appears to be an abandoned house. It’s due out next year.

This week marks one of the biggest events on the modern video game calendar, as studios from around the world bring their newest projects to the annual Summer Game Fest event in California. This includes a new look at Amazon Game Studios’ impending reboot of the long-running Tomb Raider franchise, coming in early 2027.

Tomb Raider: Legacy of Atlantis is a ground-up “reimagining” of the original 1996 Tomb Raider, which celebrates its 30th anniversary in October. Once again, it follows British archaeologist Lara Croft (Alix Wilton Regan) on an expanded look into her journey to collect the scattered pieces of an artifact from the lost civilization of Atlantis. Along the way, she’ll solve puzzles, navigate treacherous labyrinths, and fight dinosaurs, as one does.

The original Tomb Raider’s story and environments have been rebuilt with Unreal Engine 5 for Legacy of Atlantis, which turns the game into less of a series of vaguely connected puzzle boxes and more of an open-ended area that you can freely explore. It’s currently planned for release on Feb. 12, 2027.

Legacy of Atlantis is a co-production between the Polish studio Flying Wild Hog (Hard Reset, Shadow Warrior) and Crystal Dynamics, which maintains offices in Texas, California, and Bellevue, Wash.

It’s also the first step in Amazon’s planned franchise reboot of Tomb Raider, which was first announced back in 2022. Legacy will lead directly into a brand-new game, Catalyst, which is planned for release later next year and is a direct follow-up to 2008’s Tomb Raider: Underworld.

The new Legacy of Atlantis trailer premiered as part of Sony’s semi-regular State of Play, a livestreamed showcase of new and upcoming games for the PlayStation platform.

Other Pacific Northwest gaming news out of the State of Play included the official debut of Marathon’s second “season” of content, Nightfall, which resets players’ progress in order to present them with new challenges and an even playing field.

It’s the last day of school for Rec Room, and there’s no next year.

The social gaming platform, set on a virtual college campus where 150 million players built worlds and friendships over the past decade, shuts down at noon Pacific today.

The Seattle startup, founded in 2016 by former Microsoft engineers, raised $294 million and hit a $3.5 billion valuation at its peak in 2021. But the company couldn’t figure out the economics. Rec Room announced in March that it would close due to its inability to turn a profit.

“Rec Room was a very special place, built by a very special group of people,” said co-founder and longtime CEO Nick Fajt via email. “I’d like to thank everyone who went on the journey with us over the past 10 years. It was an absolute pleasure to build this fun and welcoming world with all of you!”

An end credits video, published by Rec Room overnight, lasts more than 4 minutes and ends with the line, “We created another dimension. With the span of our attention.”

Rec Room’s challenges included thin margins on user-generated content — the games and items made by players themselves — which were central to the platform. Rec Room kept only about 30 cents of every dollar from that player-made content, after paying app store fees and the creators, compared with about 70 cents on the dollar from first-party content that the company made itself. 

Following the announcement, a small internal team built tools that let players export their room data and avatars in standard file formats, to preserve the creative work they’d put in. 

The idea was to make Rec Room an example of “an ending done right,” wrote Tyler Wolf Leonhardt, principal tech lead for user-generated content, in a post about the work.

“Our players put their heart and soul into the product. They took ideas which only lived in their heads and brought them to life,” Leonhardt wrote in the post. “How could we make those creations live on in a way that made our players proud?”

Rec Room’s users, meanwhile, leaned into the school theme one last time. On fan-made sites, players have been uploading the “report cards” the platform issued them (summarizing stats like the friends they made and rooms they visited) so they can sign them like yearbooks. 

The shutdown comes amid a broader shift away from social virtual reality. Meta has been retreating from the VR version of its Horizon Worlds experience in favor of a mobile version, as the Facebook parent company pivots toward AI and smart glasses. 

An alternative platform, VRChat, has been pitching itself as a new home for displaced Rec Room players. Launched in 2014, it’s a social VR platform where people interact via customizable avatars in user-built worlds, similar in some ways to the Rec Room experience.

VRChat co-founders Graham Gaylor and Jesse Joudrey wrote in a post after Rec Room’s announcement that VRChat “is not going anywhere,” citing record traffic and a growing creator economy. VRChat has experienced its own challenges, acknowledging issues with predatory behavior on the platform, and announcing a series of safeguards to address the issue.

Some of the Rec Room team has landed elsewhere. After the shutdown announcement, Snap acquired select assets from the company, bringing some employees into the Snapchat parent’s hardware group to work on its Specs augmented reality glasses. 

Fajt, the Rec Room co-founder and former CEO, now lists himself on LinkedIn as a director of product management at Snap.

For others, the goodbye doubles as a job hunt. A site called Rec Room Grads lists former employees looking for new roles, including engineers, moderators, and trust-and-safety staff. It also lists others who have already landed jobs elsewhere across the industry. 

On the Rec Room subreddit, players are spending the final hours saying goodbye. 

One person who logged back in for the first time in years, only to discover they couldn’t recover their old account, wrote that the memories of “playing VR with your homies just make me want to cry my eyes out.” Some posted countdowns and asked exactly when noon Pacific would hit in their time zones, planning to gather in the virtual Rec Center one last time. 

A parent unfamiliar with Rec Room asked the community for tips for an autistic son distraught over its closure and unsure how he’ll stay in touch with the friends he made there.

Among the advice: save his photos before noon, exchange Discord handles to keep the friendships alive, and look into the fan-run servers: unofficial projects, recommended by other players, that aim to keep versions of Rec Room playable after the shutdown.

Others weren’t ready to let go. “I pray to whatever gods exist that this isn’t my very last time logging off,” one Rec Room user wrote, describing a final party in the Rec Center: emptying their virtual food, exchanging gifts, and taking one last group photo before the end. 

Thursday abruptly became a big news day for fans of Bellevue, Wash.-based video game developer Bungie, which announced that it plans to cease development on its popular online shooter Destiny 2.

Eight hours after Bungie’s announcement, Bloomberg’s Jason Schreier released a piece that alleges Bungie plans “a significant number of layoffs” once Destiny 2 is brought to a close.

Bungie posted on its official blog Thursday morning that it will release its final content update for Destiny 2 on June 9, with plans by Bungie to “ensure that Destiny 2 remains playable” afterward.

In the blog post, Bungie said it had become clear that the Destiny franchise needs to move beyond Destiny 2, particularly after the 2024 expansion The Final Shape. It further noted that Bungie plans to turn towards “a new beginning.”

According to Schreier’s piece, however, Bungie allegedly has no firm plans in place to move on to its next major project, besides shifting more resources to support its recent release Marathon. While Marathon received a warmer reception than anticipated upon its release in March, Schreier’s piece states that Marathon still has not met sales expectations at Sony.

All this has happened in the wake of recent cost-cutting measures by Bungie’s parent company Sony, such as shutting down its subsidiary Bluepoint Games in March. As a result, there’s heavy speculation online that Bungie itself may be at risk of closure, or at least significant reorganization.

Bungie, founded in 1991, was originally known as the creator of the Halo franchise, which it developed for Microsoft before splitting off in 2007 to go independent. The studio launched the original Destiny in 2014.

Destiny 2, first released in 2017, is a massively-multiplayer online shooter set in the 28th century. Players take on the role of Guardians, empowered fighters who seek to defend what’s left of humanity from the hostile alien forces that have moved into Earth’s solar system. Further, the Guardians make up one side, and the aliens the other, of a cosmic proxy war between the forces of Light and Darkness. (Note: I am dramatically simplifying the storyline of a decade-long sci-fi epic.)

At its height, millions of people played Destiny 2 on a daily basis. The elevator pitch for Destiny as a series has traditionally been its unique blend of MMO mechanics with a team-based first-person shooter. Players could team up or go solo to fight computer-controlled aliens or compete with one another, all in search of improved weapons and armor so they could take on greater challenges.

It was one part Diablo, one part Halo, in a genre model that gaming fans often refer to as a “looter shooter.” Destiny didn’t invent the format, but it’s often credited with popularizing it, alongside other high-profile games like Borderlands.

When Destiny 2 was originally released, it was published by Activision Blizzard. Bungie subsequently broke ties with Activision Blizzard in early 2019 and opted to publish Destiny 2 by itself under a free-to-play model, which was an unprecedented move for a game the size of D2.

Off the back of Destiny 2’s subsequent success, Bungie remained independent until 2022, when it was purchased by Sony for $3.6 billion. This was the first of several moves made by Sony to adjust its creative output from award-winning single-player games (i.e. The Last of Us, God of War) to constantly-updated “games as a service,” a business plan that also saw the acquisition of Bellevue, Wash.-based Firewalk Studio and subsequent abrupt cancellation of its game Concord.

In 2024, Bungie released The Final Shape, the eighth full expansion for Destiny 2 and the ending of the series’s overall story arc. However, The Final Shape also seems to have inadvertently served as Destiny 2’s swan song.

While Bungie tried to continue D2’s story with further expansions such as 2025’s The Edge of Fate, independent population trackers such as SteamDB suggest that D2’s overall player numbers have dwindled since Final Shape’s launch.

D2 is still comfortably one of the top 20 online games in the current market, at least as far as can be determined from outside Bungie itself, but fans have complained since Final Shape about glitches, an emphasis on repetitive “grinding,” and newly aggressive monetization policies.

Microsoft is pulling the plug on its AI-powered Copilot assistant for Xbox, winding down the feature on mobile and canceling its planned launch on consoles.

The pullback, announced Tuesday by new Xbox CEO Asha Sharma, comes barely a year after the company debuted the gaming chatbot as a centerpiece of its AI push into gaming, demonstrating the limits of Microsoft’s strategy of embedding AI across its product lineup.

Microsoft first unveiled Copilot for Gaming at the Game Developers Conference in March 2025, pitching it as an AI sidekick that could offer gameplay tips, coaching, and recaps of where players left off. A beta launched on the Xbox mobile and PC apps and later on the ROG Xbox Ally handheld. The console version was expected to arrive later this year.

Sharma’s decision to kill the feature aligns with the AI strategy she outlined in an April 30 post on X, where she said Xbox was “refocusing our AI efforts to solving player problems like enhancing real-time graphics, improving discovery, and deepening personalization.” 

She pointed to Automatic Super Resolution, which boosts image quality and performance in the background, as an example of AI done right — a contrast with the chatbot approach.

It’s part of a broader set of changes by Sharma, who told employees in a memo Tuesday that she’s overhauling Xbox’s leadership team, including bringing in executives from the Microsoft CoreAI engineering group where she previously worked.

“Xbox needs to move faster, deepen our connection with the community, and address friction for both players and developers,” Sharma wrote on X, noting that the company promoted leaders who helped build Xbox while bringing in new voices to the gaming unit. 

According to CNBC, which saw the memo, the changes include the addition of four executives from CoreAI: 

• Jared Palmer, formerly a vice president of product in CoreAI and a senior vice president at GitHub, will work on engineering, developer tools, and infrastructure.
• Tim Allen, a vice president of design who previously led design and research at Instacart, will lead Xbox design.
• Jonathan McKay, a former Meta director and head of growth for ChatGPT at OpenAI, will lead Xbox growth.
• Evan Chaki, a general manager, will run a forward-deployed engineering team focused on simplifying development.

In addition, David Schloss, a senior director of product and growth at Instacart, will take charge of Xbox’s subscription and cloud business.

Two execs with more than two decades each at Microsoft are departing: Kevin Gammill, who oversaw Xbox user experience and game development platforms, and Roanne Sones, who led devices and ecosystem and will take a leave of absence before moving to an advisory role.

Sharma took over as Xbox CEO 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.

Since arriving, she has moved quickly, cutting Game Pass prices, dropping the “Microsoft Gaming” name in favor of Xbox, and adopting daily active players as the division’s new internal success metric.

The changes come as Xbox faces a sustained revenue slump. Gaming revenue totaled $5.3 billion in the most recent quarter, down from $5.7 billion a year earlier, and has declined in four of the past six quarters. Hardware revenue fell 33%.

Microsoft’s recent 10-Q filing also disclosed impairment charges in the gaming business, meaning the company has written down the value of some gaming assets, suggesting that parts of its gaming portfolio aren’t performing as expected.

Sharma described the decision to wind down Copilot on mobile and stop its development for consoles as part of a plan to “retire features that don’t align with where we’re headed.” Her post did not address the status of the Copilot beta on the Xbox PC app or the ROG Xbox Ally handheld.

The feature drew skepticism from the start. Gaming writer Thomas Wilde called it “a solution looking for a problem” in a March 2025 analysis on GeekWire, questioning whether players wanted an AI chatbot alongside their games.

More recently, Wilde raised additional concerns about the feature pulling guide content from the open internet without attribution, writing that Gaming Copilot was “eating its own seed corn” by undermining the ecosystem of online guides it depended on.

The feature’s full lifecycle, from announcement to cancellation, spanned roughly 14 months.

The team developing a video game based on Magic: The Gathering announced on Tuesday that they’ve unionized, describing the move as part of an attempt to improve working conditions at Renton, Wash.-based Wizards of the Coast and create better games.

United Wizards of the Coast, operating in partnership with the Communications Workers of America, specifically represents the team working on Magic: The Gathering – Arena, an online adaptation of the long-running collectible card game. UWOTC-CWA says it represents “the collective labor of over a hundred game designers, programmers, producers, artists, QA, and more.”

“We believe that, through our collective power, we can bring about better working conditions for ourselves and the industry at large,” the union wrote on its website. “United Wizards of the Coast is just one of an ever-increasing number of union efforts in the gaming world. We are not the first to fight for our rights, and we will not be the last.”

UWOTC-CWA’s stated goals include addressing “unfair decisions” by Wizards, which allegedly include forced return-to-office mandates, severe pay discrepancy, “crunch” (a games-industry term for significant mandatory overtime), and more.

According to Kotaku, the UWOTC-CWA’s efforts to unionize were initially spurred by the surprise layoffs that were implemented at Wizards December 2023.

“This has been years in the making, but things really took off in the last year or so,” says Rogue Kessler, Digital Product Manager at Wizards of the Coast, in an email to GeekWire. “The threat of unpredictable layoffs, combined with the RTO mandate that’s been rolled out over the last year, has driven a lot of us into union conversations.”

The union also plans to address initiatives by Wizards that required workers to use AI tools.

“There’s been a strong push from management to adopt AI tools in our work, but there aren’t any strong guidelines in place that put guardrails around how AI will get used in the workplace,” Kessler says. “With a union and then eventually a union contract, we are working toward ensuring that AI gets used effectively and responsibly across all of our teams and projects.”

Kessler continues, “Workers should have a say in what AI tools are used for, and there should be reasonable limits on how those tools are allowed to be used.”

GeekWire has contacted Wizards of the Coast for further comment.

Update, April 29: “We have received the filing and are reviewing it carefully. Our employees are the lifeblood of what makes us great, and we are committed to fostering a workplace where every person feels heard, valued, and supported,” a Wizards of the Coast representative said via email.

“We believe we have a strong connection with everyone at Wizards of the Coast and that direct relationship with our employees is essential to how we work together to capture the imagination of our fans and players, inspiring a lifetime love of our games. We appreciate hearing about the needs and interests of our employees through this filing, and will respond through the appropriate process.”

The organization’s next step is to request that Wizards of the Coast and its parent company Hasbro voluntarily recognize the union, and requests that Magic fans sign its official petition. The deadline on the petition is May 1, International Workers’ Day.

Arena is a free-to-play digital version of Magic for Windows, MacOS, and mobile devices, which saw full release September 2019. It’s operated on a “freemium” model where players can play the game at no up-front cost, but have the option to acquire new virtual cards and in-game currency in exchange for real money.

According to official announcements from Hasbro, there were over 13 million registered accounts on Arena as of 2023. At time of writing, independent trackers such as SteamCharts have logged around 7,700 daily players on Arena for the last 30 days, which is both a respectable number for a modern live-service game and a significant year-over-year improvement.

This story has been updated since publication with statements from Wizards of the Coast and UWOTC-CWA member Rogue Kessler.

Someone misused Rec Room’s friend-finder feature to match phone numbers to the user names of hundreds of thousands of players on the social gaming platform — assembling a database that connects their online identities directly to their real-world contact information.

The incident, which took place in January, hasn’t been previously reported or publicly acknowledged except in a brief response by a Rec Room staffer to a question in an online forum. It’s not directly related to the subsequent announcement that the Seattle-based company will shut down the social gaming platform June 1, after 10 years in business.

In messages to GeekWire, a person familiar with the incident expressed concern that Rec Room has never proactively notified users whose phone numbers and user identities were linked through the brute-force attack — leaving them unaware of the situation and vulnerable to harassment, phishing, or other attacks, especially as the platform shuts down.

Responding to our inquiries about the incident, the company acknowledged that it learned in January that an individual was running a high volume of queries against its friend-finder API. After discovering this, the company said, it disabled the feature and banned the user. 

Rec Room said it engaged an outside legal and forensics firm to conduct a review, which concluded that disabling the API was sufficient and no regulatory notification was required. The feature only returned a username when matched with a phone number or email, Rec Room said, and did not expose additional account information or credentials.

“We take user safety and security seriously and have robust measures in place to protect user data,” a Rec Room spokesperson said in a follow-up statement, adding that the company “reviewed our privacy settings and confirmed they’re working as intended.”

What happened: The incident didn’t involve someone breaking into Rec Room’s servers or accessing its database directly.

Instead, it happened through the platform’s friend-finder feature, which let players upload their phone contacts to see which of their friends were already on the platform. Under the hood, the system accepted a phone number and returned a Rec Room username if there was a match. 

The feature was designed for individual users checking their personal contacts. However, the system had no apparent safeguards to prevent someone from querying it at a massive scale.

That’s what happened in January, according to the person familiar with the matter. Someone systematically ran all US and Canadian phone numbers through the system, collecting every hit. The result, the person said, was a database of nearly 279,000 records.

The database was subsequently sold to others, according to the person familiar with the incident, who said the system used to distribute it was itself not secure, potentially making it accessible to a wider audience. 

Rec Room’s response: Asked about the size of the database, Rec Room said it did not recognize the number provided by the source, but did not offer its own count of affected users. Without additional information, it’s unclear if the company has determined the size of the assembled database or the full scope of the incident. 

Rec Room said no phone numbers or emails were acquired directly from the company. 

Responding to a user question about the incident in the company’s Discord server on Feb. 19, a Rec Room staffer said the platform had previously allowed users to find friends by searching their contacts, and that some users were “abusing this functionality at scale.” 

The message said the feature had been disabled “out of an abundance of caution.” 

Why it matters now: The company has not proactively notified affected users. Rec Room said its support team has been responding to players who’ve contacted the company after receiving unsolicited texts that were apparently connected to the assembled database. 

With the platform now scheduled to shut down June 1, the window for proactive notification is closing. After that date, Rec Room will no longer have an in-app channel to reach its players. 

Rec Room’s shutdown itself could increase the risk. An attacker with the database could use the closure to craft convincing phishing messages — for example, a text or email impersonating Rec Room and urging players to click a link to export their data before the platform goes dark. The shutdown would give such a message built-in plausibility.

Phone numbers can also be used to find real names and home addresses through publicly available records, or to attempt SIM swapping, in which an attacker takes over a victim’s phone number to intercept calls, texts, and authentication codes. Users can lock their phone number through their wireless carrier’s app or website, typically with a PIN, to help prevent this. 

Privacy settings: One issue in dispute involves Rec Room’s privacy settings. The platform offered users a toggle to prevent others from finding them by phone number or email address. 

But the person familiar with the incident said the setting did not protect against the type of mass queries used in the attack. This person said their own data appeared in the database despite having the setting turned off, and provided a screenshot supporting this assertion.

(The person declined to be identified, citing concerns that publishing their name could allow someone to use the data to connect their identity to their home address and other personal details using public records.)

Asked about the privacy setting, Rec Room said it verified that it worked as designed.

Historical precedents: It’s not the first time a social platform has faced this type of incident. 

In 2014, an attacker used the same approach against Snapchat’s friend-finder feature, matching usernames to 4.6 million phone numbers. Snapchat was criticized for initially dismissing the vulnerability and took more than a week to apologize, but later acknowledged the breach, updated its app, and let users opt out of the feature.

In 2021, a similar technique was used to assemble a database of phone numbers and personal information from more than 530 million Facebook users. Facebook said it had fixed the underlying flaw in 2019 but declined to individually notify affected users, saying it couldn’t be certain which users needed to be notified.

Rec Room’s approach has more closely resembled Facebook’s: maintaining that the incident did not create a security or privacy risk and that no user data was acquired from its systems.

Rec Room’s user base: Rec Room attracted more than 150 million lifetime players across phones, consoles, PCs, and VR headsets, with millions still active each month before the shutdown was announced. 

Rec Room CEO Nick Fajt told the Wall Street Journal in 2021 that the bulk of the platform’s users were between the ages of 13 and 16 — meaning many of the phone numbers in the assembled database would belong to minors or their parents.

The company’s path: Rec Room launched in 2016 as a platform for building and sharing virtual worlds. Founded by a group of former Microsoft engineers, the company went on to raise $294 million in venture funding over its lifetime, and was valued at $3.5 billion at its peak in 2021. 

But it never found a way to become profitable, cutting staff in two rounds of layoffs last year. 

The person familiar with the matter said last year’s layoffs significantly impacted the company’s cybersecurity team. The company also paused its bug bounty program on the security platform Bugcrowd on Feb. 10, halting new vulnerability reports. The program has not reopened. 

After the March shutdown announcement, Snap acquired select assets from Rec Room, and some members of the team joined the Snapchat parent’s hardware subsidiary to work on its Specs augmented reality glasses. It’s not clear if any were impacted in Snap’s cuts last week.

What to know: Rec Room users who linked a phone number to their account should be aware that their number may have been connected to their user name in the assembled database. 

Users should be skeptical of any unsolicited texts or emails related to Rec Room or to the upcoming shutdown, particularly messages urging them to click links. 

With the platform closing in less than seven weeks, the person familiar with the incident said they hope bringing public attention to the issue will help users be alert to the risks.

Polyarc, the Seattle-based VR gaming developer behind the award-winning Moss series, announced that it’s had to “significantly reduce the size of the company.”

The announcement, via LinkedIn on Monday, notes that the layoffs come after “an unsuccessful team-wide effort to secure funding following the cancellation of a major project.”

The company, which had around 52 employees according to LinkedIn, did not specify how many were affected, but said it plans to share a spreadsheet with information about those who were impacted to help them make connections in new job searches.

Polyarc was founded in 2016 by Tam Armstrong, Danny Bulla, and Chris Alderson, all three of whom had formerly worked on Destiny at Bungie. The studio’s debut project, the fantasy adventure Moss, came out in 2018 to critical and commercial success, which led to both a 2021 sequel and a multiplayer spinoff in 2023.

The Moss series, which began as exclusives for the PlayStation VR platform before going multiplatform, is on the short list of candidates for VR gaming’s “killer app.” In Moss, players take the role of a Reader, an unseen individual who discovers a magical book in a forgotten library. That book allows you to watch and affect events in the fantasy world of Moss, where a young mouse named Quill is on a quest to save her kingdom.

The problem for the VR market, however, is that much of it is driven by Meta, and Meta has been steadily stepping back from its VR endeavors for the better part of the last couple of years. In January, another wave of VR layoffs at Meta closed several studios and dramatically lowered the headcount at Bellevue, Wash.-based Camouflaj.

There are still major players in VR gaming, such as Valve and its upcoming Steam Frame. It’d be a mistake to say the sector is dead or dying, but Meta drove so much of the conversation around VR that its slow abandonment has destabilized the format.

In addition, the last three years have been a tough time to work in the video game industry, as numerous companies have been forced to slim or shut down. Other recently affected studios in the Pacific Northwest include Phoenix Labs, Monolith Productions, and Rec Room.

The despair among Rec Room players is real.

Users of the popular social gaming platform expressed their disbelief and sadness over the demise of the Seattle-based company, which announced Monday that it is shutting down on June 1, and that some of its assets are being acquired by Snap.

Rec Room — ranked No. 49 on the GeekWire 200 ranked index of the Pacific Northwest’s top startups — surged in popularity during the pandemic and was once valued at $3.5 billion. It attracted 150 million lifetime players who have been creating and sharing games, virtual goods and experiences across phones, consoles, PCs and VR headsets for a decade.

In the Rec Room Discord server on Tuesday, thousands of posts illustrated the impact that the loss of the gaming app will have on players. Many questioned whether the news was a joke, what went wrong, and where they will go now for such entertainment and community. Similar conversations were taking place on Reddit.

We rounded up a number of reactions from a variety of threads:

“If it is true, I guess thats it. Ive had alot of great memories in rec room and its really sad to see it finally shut down. From 2018/2019 I started playing. Or during the lockdown era in other words, I will surely miss this game from the deepest parts of my heart.”

“its an experience that i dont think could ever be recreated, whether thatd be because of the charm of the style and theming rec room had from the beginning or rather just the cost and difficulty of running something of this scale.”

“I grew as a person on this game from 2017 to 2025 lol… Earned money on it learned to code learned to model learned alot.”

“My 17 y/o son who had been playing almost 6 years came in to tell me it was shutting down and even asked if he could come home early from school that day so he doesn’t miss the shut down…he is BUMMED!!! He was in a few bands that play regular “concerts” and he been part of habit live streams, room tours, costume builds and even whole band costumes. I HOPE something can be done to keep it!!!!!”

“Rec Room was a game where it was clear the devs really ‘got’ vr (at least, pre-2021, many newer updates felt more catered towards screenmode). Small things like weapons locking in your hands and being able to pick stuff up from a distance is done so well in rec room and i still havent found another vr game that genuinely feels like it understands how to make a vr game comfortable to play.”

“This is such a sad day for all of us… This is such sad news about the fact that Rec Room will shut down on June 1st, i’ve been an avid dedicated player of this game for the last 4 nearly 5 years. I have Autism, it is difficult for me to get out of the house and this has been a safe environment to play with my friends who are also autistic. To lose this will be like losing a friend, but definitely losing the connection that has been so important to me over the years.”

“my friend group literally only played rec and we bonded so much over the stuff we can do in this game. theres no other game like rec room and its really a shame its shutting down cuz i doubt there will be another game like it.”

“This all feels so bizarre. I heard the news last night, went “oh well they did this to themselves” and went to sleep. I woke up this morning super happy (since I actually managed to go to bed at a decent time), then I remembered the news and this day just doesn’t feel real. This shutdown probably hurts me the most as it was a VR game and I felt like time slowed down when I could put on a headset and be heavily immersed in a whole new atmosphere that I could never experience in real life.”

“I started playing at a low in my life played for six years. I’ll never forget recroom I met my best friend on there who I will forever keep in contact with I learned how to build got good at it too.”

“i dont think anything will ever replace recroom the people who played vr for recroom will probably stop playing vr in general when recrrom dies there was nothing to me that felt as fun as recroom.”

“I think we should all just try and have fun with the game still being up right now and we should all just be happy that recroom was a fun experience yet it unfortunately has to go.”

“its good to move on. its upsetting and sad but like we have the memories they were good.”

Related:

• Rec Room shutting down: Once valued at $3.5B, social gaming platform finds profits elusive
• Snap acquires assets from Rec Room as social gaming platform announces shutdown

Rec Room, the Seattle-based social gaming company once valued at $3.5 billion, is shutting down its platform on June 1, leaving the future of the company and its employees unclear.

The company made the announcement Monday afternoon, saying it couldn’t find a path to profitability even after serving more than 150 million players over the past decade.

“Despite this popularity, we never quite figured out how to make Rec Room a sustainably profitable business,” the company said in its post announcing the news. “Our costs always ended up overwhelming the revenue we brought in.”

The platform will go dark at noon Pacific on June 1. Starting immediately, Rec Room is blocking new account creation, new friend requests, and new subscriptions to its Rec Room Plus membership. Creators can no longer publish new monetized content. Token purchases end May 1, creator earnings stop May 18, and a final creator payout will be processed on June 1.

Rec Room users, posting in the community Discord server, expressed shock and surprise, with some holding out hope that the announcement was an early April Fool’s joke.

Alas, it appears not.

“We spent a long time trying to find a way to make the numbers work,” the post said. “But with the recent shift in the VR market, along with broader headwinds in gaming, the path to profitability has gotten tough enough that we’ve made the difficult decision to shut things down.”

The company said it was making the decision now “while we still have the ability to wind things down thoughtfully and do right by the people who built this with us.”

Rec Room was founded in 2016 by Nick Fajt, Cameron Brown and a handful of other co-founders under the name Against Gravity. The Seattle startup built a cross-platform social gaming app that lets players create and share games, virtual goods and experiences across phones, consoles, PCs and VR headsets.

The company attracted backing from Sequoia Capital, Index Ventures, Madrona Venture Group, Coatue Management and others, raising $294 million across six rounds. Its December 2021 Series F valued the company at $3.5 billion, making it one of Seattle’s most prominent unicorns.

Rec Room’s popularity surged during the pandemic as players flocked to virtual hangouts, and the company said it surpassed 100 million lifetime users. But growth in the broader gaming market slowed in the years that followed, and Rec Room’s ambitions outpaced its revenue.

Rec Room laid off 16% of its staff in March 2025 and then cut roughly half its remaining workforce five months later, eliminating 141 positions and shrinking from about 310 employees to just over 100 people at the time.

Fajt said back then that the company needed to become self-sustaining and could no longer count on raising more money, but noted that Rec Room had enough runway to operate into 2029.

“If we had just kept going, we would have run out of money in the next couple of years,” he wrote at the time. “And with no money left, we would have had to lay everyone off.”

The company bet heavily on a vision of letting anyone create games on any device. It rolled out AI features including Maker AI for game creation and an artificial intelligence companion called Roomie, though the per-user costs of AI exceeded subscription revenue.

As of last September, revenue from user-generated content was growing about 70% year over year, and creators earned more than $1 million in a single quarter for the first time.

However, as noted by Fajt in public posts, the margins on user generated content were thin: Rec Room keeps only about 30 cents of every dollar of sales of user-generated content, after paying platforms and creators, compared with 70 cents on sales of first-party content.

By all indications, Bungie’s revival of its Marathon franchise should not have worked out. Despite a CEO’s departure, an indefinite delay, several controversies, and targeting a saturated genre, Marathon came out earlier this month and has become one of this year’s unexpected successes.

Marathon, developed by Bellevue, Wash.-based Bungie (Halo 2, Destiny), is a multiplayer online shooter and a follow-up to Bungie’s classic Marathon trilogy on the Mac. Originally announced in 2023, Marathon is also a competitive, player-vs-player “game as a service” (GaaS, or simply live-service), which is meant to be consistently updated so it can be played indefinitely.

That was the first warning sign. As a GaaS, Marathon was up against heavy competition from the moment it debuted, both from other online shooters such as Fortnite and Call of Duty and other “forever games” like World of Warcraft and Dead by Daylight.

A successful GaaS can be a license to print money for its publisher, which has led to many game studios adopting the model in the last few years. Bungie itself was purchased by Sony Entertainment in 2022 as part of a plan by Sony to shift its internal game development to emphasize GaaS, owing largely to Bungie’s expertise running the Destiny series.

However, that same widespread publisher interest has flooded the market, especially in the last few years. The problem with a game that’s meant to last forever is that once it gets its hooks into a player, it’s rare for them to switch away from it, due to time investments, community ties, and — let’s face it — the sunk cost fallacy. Many live-service games are even designed to reward players who consistently log in every day, so a player who uses some of their finite leisure time to check out a competitor’s product can actively harm their overall experience.

As a result, anyone who wants to launch any kind of GaaS (or really, any video game at all) in 2026 has an uphill battle ahead of them in order to find an audience. They not only have to reach interested consumers, but they often have to implicitly convince them to stop playing something else.

If you’re trying to market a “hero shooter,” for example, you have to be aware that almost all of your prospective players are already heavily invested in Overwatch, Marvel Rivals, or Valorant. It’s not enough to offer them a good game. You have to give them a reason to switch.

It’s a tall order. Even major publishers working with famous licenses have had difficulty getting into this market sector, which has created a bloodbath. There’s already an entire virtual graveyard for recently discontinued live-service games, featuring releases such as Anthem, Multiversus, Rumbleverse, and most recently Highguard, which was infamously shut down less than 50 days after its launch in late Jan.

It didn’t help that Marathon in particular kept racking up warning signs. It was indefinitely delayed last summer, which followed several waves of layoffs at Bungie; longtime CEO Pete Parsons departed the company in Aug. 2025; Marathon’s publisher Sony abruptly abandoned another GaaS, Concord, in Oct. 2024, which seemed to suggest it was backing off of its bets on live-service gaming; and there was a controversy, since resolved, regarding visuals used in Marathon that had been stolen from a Scottish freelance artist. It initially looked like Marathon was headed into disaster.

Instead, Marathon has taken off. At time of writing, it has a Very Positive rating on Steam with over 33,500 simultaneous players, as well as a respectable 79 on Metacritic. Against the odds, Bungie appears to have a solid hit on its hands.

Marathon is a revival of one of Bungie’s earliest franchises. The first three Marathon games were some of the first and only exclusive games for the Mac back in the ‘90s, and can be seen as a spiritual precursor to Halo: Combat Evolved. (Both games are first-person shooters about a cyborg in power armor following an AI’s orders while they fight aliens. The finer strokes are different, but there’s some connective tissue.)

2026’s Marathon is an interquel set 99 years after the events of the first game, on the planet Tau Ceti IV. It’s been several hundred years since the UESC Marathon left Earth’s solar system on a mission to establish an offworld colony and subsequently vanished. In 2893, Earth finally receives a distress signal from the ship.

Earth reacts by sending a squad of “runners,” humans who’ve digitized their minds and can download them into cybernetic shells, to Tau Ceti IV. Once there, the runners are thrown into an ongoing struggle between UESC forces, alien invaders, rogue AIs, and each other. Each individual runner is a wild card, who can opt to work for multiple factions from both on- and offworld.

Marathon, as a game, is what’s often called an “extraction shooter.” Players team up in groups of one to three to infiltrate various locations throughout Tau Ceti IV and must take on both computer-controlled and human enemies in order to grab whatever they can find. If you’re able to survive your mission and successfully evacuate the area, you can keep what you’ve found and use those salvaged resources to improve your equipment for your next run.

That gives Marathon, and other extraction shooters such as Escape from Tarkov, a unique tension compared to more typical PVP action games. Your survival actually matters, as opposed to another shooter where you might die 6 times in a good match, and you have something to lose.

Marathon combines that with strange dreamlike visuals that are reminiscent of ‘90s cyberpunk, particularly Ghost in the Shell. Tau Ceti’s abandoned facilities are all colorful mazes, full of strange sights and narrow corridors, and all your fellow runners are barely humanoid robots. The whole game has a feel like it’s set inside a half-corrupted archive of experimental digital artwork, all the way down to its font choices and complicated menu structure. It’s a deliberate blend of the 1990s’ vision of the future with cutting-edge 2026 graphics, and looks like nothing else that’s currently on store shelves.

That also means that it’s got a couple of different learning curves. After spending a weekend with the game, I don’t feel like I’ve got a handle on it yet, either as a shooter or as an audiovisual experience. Marathon’s menus are a deliberate riot, and while its basic mechanics will be comfortably familiar if you’ve played other recent extraction shooters, it’s a little harder to navigate them than it needs to be.

For right now, my biggest takeaway from Marathon is that it’s beaten the odds. I wouldn’t have guessed at this time last year that Marathon would have a successful launch, between Bungie’s issues and current market forces, but it seems like there’s still at least a little room for this kind of FPS in the modern market.

Epic Games, the gaming giant behind Fortnite, is laying off 82 employees at its Bellevue, Wash.-based office, according to a WARN notice filed with Washington state regulators.

Epic announced Tuesday that it is laying off 1,000 employees across the company, or about 20% of its workforce, citing reduced engagement with Fortnite.

“This layoff, together with over $500 million of identified cost savings in contracting, marketing, and closing some open roles puts us in a more stable place,” Epic Games CEO Tim Sweeney said in the announcement. He cited challenges including tougher cost economics, slowing console sales, and competition “against other increasingly-engaging forms of entertainment.” He noted that the layoffs are not related to AI.

Epic has 349 employees in the Seattle region, according to LinkedIn. The company opened an office in Bellevue more than a decade ago. It previously laid off 39 employees in 2023 at its Bellevue office.

Epic, which currently works out of Lincoln Square in downtown Bellevue, acquired Kirkland, Wash.-based codec creator RAD Game Tools in 2021.

“Market conditions today are the most extreme we’ve seen since those early days, with massive upheaval in the industry accompanied by massive opportunity for the companies that come out as winners on the other side,” Sweeney wrote in his announcement.

Several tech companies have cut staff in the Seattle area this year, including Amazon, Expedia, T-Mobile, Smartsheet, Atlassian, MicroVision, and others. Many corporations are slashing headcount to address pandemic-fueled corporate “bloat” while juggling economic uncertainty and impact from AI tools.

Microsoft’s Gaming Copilot plans to answer players’ in-game questions by searching the open internet for guide content and presenting it to gamers without attribution, at least based on a demo at last week’s Game Developers’ Conference in San Francisco.

This is a potentially seismic event for what’s left of the gaming press. Microsoft says it’s exploring ways to license guide content from creators, but the details are vague, and the demo told a different story.

A wide variety of writers (full disclosure: including me) work on creating strategy guide content for video games, which can range from old-school .txt files on sites like GameFAQs to maintaining fan wikis to personal YouTube channels. It’s a big part of the gaming press, and one of its major remaining traffic drivers. Now Gaming Copilot plans to raid that store of knowledge.

This was illustrated during the Gaming Copilot demo that Microsoft’s Sonali Yadav and Haiyan Zhang put on at GDC. They showed off some of the LLM’s options, which include being able to ask it for advice through voice or text about what game to play next, or for tips on a current objective, such as a particular quest in Diablo 4.

You can also check with Gaming Copilot for details about your own account, such as when your Game Pass subscription is set to renew, or information such as your play time.

According to Ethan Gach at Kotaku, Yadav and Zhang said the company is exploring ways to license guide content from online creators. That addresses some of the more obvious issues.

In a perfect world, that would mean money actually changes hands here, whether it’s through sponsors, brand deals, or Microsoft simply writing some checks.

As Gach noted on Bluesky, however, the GDC demo had Copilot present that information to the user without attribution, and it’s unclear if that will change before it launches for Xbox consoles.

With this approach, Gaming Copilot provides another example of an AI initiative that’s eating its own seed corn. Should it take off in any measurable way, Xbox would be actively whittling away the audience for the online guides ecosystem that Copilot is specifically exploiting. If Copilot reduces the need for third-party guide websites, then before long, there won’t be any third-party guide websites for Copilot to draw upon.

It also creates a perverse incentive for bad actors to deliberately poison the well. Three years ago, World of Warcraft and Destiny players on Reddit made headlines by talking about a boss called “Glorbo” that didn’t actually exist in either game, in an attempt to trick scraper bots. At least one content mill fell for the scam, by auto-generating an article that acted as if Glorbo was a real upcoming boss in WoW.

Even with whatever content filters Microsoft has in place, Gaming Copilot is likely to come under similar attack within days of its release. It’s like Christmas for trolls.

The most obvious alternative is for Microsoft to build up its own online library of strategy guide content, so Copilot can stick to its own exclusive sources of information.

While it’d cost some money to hire a few dozen gaming freelancers to write guides for the roughly 7,200 games in Xbox’s 25-year-old library (give or take however many are no longer available), it would amount to a rounding error compared to the cash that Microsoft is throwing at AI research. In return, it’d dodge both the ethical and logistical issues that are inherent in the premise.

Initially announced almost exactly one year ago, Gaming Copilot (slightly rebranded from Copilot for Gaming) is currently available in beta for the Xbox PC and mobile apps and Microsoft’s portable console, the ROG Xbox Ally, which debuted back in October.

The feature is scheduled to launch on Xbox consoles later this year.

Copilot is one of three major AI-driven gaming features coming to Xbox, which also includes highlight reels and automatic “super resolution” for higher framerates. It also provides users with a sort of ersatz gaming buddy, so you’ve always got a virtual companion to chat with while you play.

At the end of the day, however, Gaming Copilot is a solution in search of a problem, like too many other AI-driven features. It addresses nonexistent issues in order to further a deeply unpopular initiative. In its current state, it’s difficult to imagine a situation where Gaming Copilot ends up as more than a curiosity.

In the days leading up to one of the games industry’s bigger trade conferences, Microsoft has quietly unveiled the code name for its next-generation Xbox console: Project Helix.

The name appeared without initial fanfare in a post on X on Thursday morning.

Xbox CEO Asha Sharma, who just replaced longtime leader Phil Spencer, followed up in a post on her own account, in which she briefly discussed her team’s “commitment to the return of Xbox.” Sharma also noted that Project Helix will “lead in performance” and “play your Xbox and PC games.”

Next week marks the annual Game Developers’ Conference in San Francisco, which has gained some prominence for news and announcements in recent years. It’s possible that some new information about this next-gen Xbox will come out of this year’s GDC, which is both Sharma’s first time at the show and her first time attending as the head of Xbox. Sharma reportedly has plans to meet with both partners and studios while at GDC.

That marks the end of the information about Project Helix that’s currently publicly available. The most remarkable fact about it for now may simply be that it exists, in the face of persistent rumors that Microsoft’s executives would like to sunset Xbox entirely and an ongoing memory shortage caused by the rise of AI data centers.

Despite industry expectations, it looks like Microsoft’s games division plans to stick it out for at least one more console generation. The start of that generation may be pushed off a couple of years from its initially rumored late-2027 starting point, as RAM is currently getting scarcer on the market, but whenever it begins, it looks like Xbox will still be there.

A new suit filed by the New York attorney general seeks to stop Valve Software’s use of “loot box” mechanics in its popular PC games, accusing the Bellevue, Wash.-based company of making billions of dollars by luring children and teenagers into gambling on rare Counter-Strike skins.

The lawsuit alleges that Valve’s first-party games are essentially an illegal gambling operation aimed at younger players. It seeks to stop Valve from implementing loot box mechanics in its games going forward, as well as hit the company with a fine equal to “three times the amount of its gain from the illegal practices alleged herein.”

While it’s arguably best known for running the digital gaming marketplace Steam, Valve Software also owns and operates several of its own popular PC games, including Counter-Strike 2, Dota 2, and Team Fortress 2.

All three games feature an optional mechanic where players can pay real money in exchange for “loot boxes”: a virtual item that drops a randomly-generated piece of cosmetic gear that can be used in-game. Most of these items have no mechanical impact and are there strictly for looks, such as silly hats in TF2 or neon-painted “weapon skins” in CS2. This might not make sense to you, but there are people in this world who will pay any price to get an appropriately ugly virtual rifle, and these people are part of why Valve CEO Gabe Newell has a superyacht.

Despite their lack of actual effect, loot boxes and item trading are both an extraordinarily lucrative market for Valve. Virtual items for these three games have been sold for staggering amounts of real money. One estimate cited by the AG’s office indicates that the market for Counter-Strike skins alone was worth over $4.3 billion as of last year.

While Valve absolutely benefits from the strangely frenetic market for virtual items in CS2, TF2, and Dota 2 — it sells these loot boxes in the first place, and hosts the secondary market for them via the in-app Steam Marketplace — the occasionally shocking prices for these items is part of a player-created economy. The lawsuit may be partially aimed in the wrong direction.

In an official press release, New York Attorney General Letitia James wrote that “illegal gambling can be harmful and lead to serious addiction problems… Valve has made billions of dollars by letting children and adults alike illegally gamble for the chance to win valuable virtual prizes. These features are addictive, harmful, and illegal, and my office is suing to stop Valve’s illegal conduct and protect New Yorkers.”

GeekWire reached out to Valve for further comment.

The suit against Valve marks the latest in a series of moves by James to tamp down on gambling operations within New York state, such as shutting down 26 online casinos last year, as well as taking aim at Meta and TikTok for those platforms allegedly posing “harms to young people’s mental health.”

“And the thing about games is, if you get good at one game, you can be good at any game. … They’re all hand-eye coordination and observing patterns.”

That’s a line from Tomorrow, and Tomorrow, and Tomorrow, Gabrielle Zevin’s 2022 novel about two friends who build a video game company from nothing — struggling with the tension between art and commerce, and ultimately with the challenges of operating a business at scale.

This describes almost perfectly what Asha Sharma will be attempting to do in her new role leading Microsoft’s Xbox and video-game business: She’ll need to take all the patterns she’s observed as an executive with Facebook, Instacart, Seattle startup Porch, and Microsoft’s AI platform, and apply them to a world she hasn’t played in before.

And get this: it’s one of her favorite books.

Speaking last year on Lenny Rachitsky’s podcast, Sharma mentioned she had read the novel every year for the past three years. “I love it so much,” she said, calling it a “beautiful story.”

She didn’t mention on the podcast speed round that it’s a story about video games. It wasn’t really relevant at the time. But it is now, given the news Friday that Sharma will succeed 38-year Microsoft veteran Phil Spencer as CEO of Microsoft Gaming, in a shakeup that also saw Xbox President Sarah Bond — previously seen as Spencer’s likely successor — decide to leave.

Sharma was a surprise pick, in part because she has no prior video-game industry leadership experience, and limited background as a gamer, which is creating skepticism in gaming circles already. However, she has experience running large tech platforms, the clear trust of Microsoft CEO Satya Nadella, and a belief in the potential of AI to reshape every business.

On that last point, she quickly offered some reassurance to Microsoft employees and the broader universe of Xbox gamers in her introductory memo last week.

“As monetization and AI evolve and influence this future, we will not chase short-term efficiency or flood our ecosystem with soulless AI slop,” she wrote. “Games are and always will be art, crafted by humans, and created with the most innovative technology provided by us.”

Sharma laid out three priorities in the memo: great games above all else, a recommitment to Xbox’s core console fans, and what she called the “future of play” — new business models and a shared platform where developers and players can create together. 

She vowed not to treat the company’s iconic franchises as “static IP to milk and monetize,” and said she wants to return to “the renegade spirit that built Xbox in the first place.”

Her first act was promoting longtime studio chief Matt Booty to executive vice president and chief content officer, pairing her platform background with his decades of gaming credibility. 

“My first job is simple,” she wrote. “Understand what makes this work and protect it.”

The challenge ahead

There’s a lot to protect, and plenty of work to do.

Microsoft has been in gaming for decades, from early PC titles like Flight Simulator to the launch of the original Xbox console in 2001. 

Under Spencer, the company made massive bets on expansion, acquiring ZeniMax Media and its family of studios — including Bethesda — for $7.5 billion in 2021, and then closing the $69 billion acquisition of Activision Blizzard in 2023, the largest gaming deal in history. That brought Call of Duty, World of Warcraft, Candy Crush, Diablo, and Overwatch under Microsoft’s roof, making it the third-largest gaming company in the world by revenue. 

Spencer also expanded Xbox’s reach across PC, mobile, and cloud gaming, and built Game Pass into a major subscription service, transforming the division’s business model.

But the financial picture has been rough. Microsoft’s gaming revenue fell 9% in the most recent quarter, with hardware revenue down 32%. The division represents about 7% of the company’s total revenue, and has faced pressure in recent years to meet aggressive profit targets.

Xbox’s challenge has not been a lack of talent or popular franchises. GeekWire gaming contributor Thomas Wilde observed that the biggest problem has been instability: waves of layoffs and studio closures that left even successful teams uncertain about their future.

In his memo about the transition, Nadella said Sharma brings “deep experience building and growing platforms, aligning business models to long-term value, and operating at global scale.”

The implication in the selection is clear: Xbox spans console, PC, mobile, and cloud platforms, requiring an operator who knows how to make all the pieces work together. 

That’s the job Sharma has done everywhere she’s been.

From Wisconsin to Redmond

Sharma’s career and biographical details have been widely scrutinized over the past few days, as the video game and business press have scrambled to figure out who this person is, who arrived seemingly out of the blue to lead one of Microsoft’s biggest consumer brands. 

Now 37, she grew up in Wisconsin and started working at 17, with an early role at SC Johnson, according to a 2014 MarTech profile. She earned a bachelor’s degree in business from the University of Minnesota’s Carlson School of Management, and by the time she left college had worked at Cargill, Deloitte, and Microsoft, and lived abroad in Hungary.

As of last fall, she was a second-degree black belt in Taekwondo, explaining to Rachitsky on his podcast that the discipline is “more mental than it is physical.”

She has been at Microsoft for two years, running the CoreAI product organization, the team behind Azure AI Studio, the company’s AI model catalog, and the developer tools for Microsoft Copilot. She was previously COO of Instacart, and before that VP of product at Meta, where she ran Messenger and Instagram Direct. She’s on the Home Depot and Coupang boards.

What’s lesser known is that she got her start at Microsoft, interning at the company and then working in marketing right out of college before leaving to help build Porch, the Seattle home services company, where she was COO during the company’s early years.

In a 2024 interview with GeekWire at Microsoft’s Build developer conference, not long after rejoining the company, Sharma talked about what brought her back. After years working across different types of organizations, she said, the lesson she drew from her career was the importance of working with great people on problems that matter. 

She described feeling fortunate to be working on “some of the most important technology of our lifetime” at a critical juncture, with people embracing a growth mindset.

Winning over the gamers

Part of what made Spencer so beloved among Xbox fans was that he was one of them — a lifelong gamer with a prolific achievement history and a habit of wearing gaming T-shirts under blazers at industry events. 

Sharma knows she can’t replicate that overnight, but she’s clearly trying to close the gap.

Over the weekend, she began engaging directly with Xbox fans on social media, sharing her gamertag (AMRAHSAHSA, her name spelled backwards) and listing her top three games as “Halo, Valheim, Goldeneye” — Microsoft’s flagship franchise, a popular survival game, and classic title that first launched on the Nintendo 64 in 1997.

When one fan accused her account of being run by AI, she replied: “Beep Boop Beep Boop.”

She’s also getting public support from inside Xbox. Longtime exec Aaron Greenberg, the division’s VP of marketing, wrote on X that after spending time with Sharma during the past week, he was “incredibly optimistic about the opportunity ahead under her leadership,” describing her as “exceptionally bright, eager to listen and learn from others, no ego.”

The activity history in Sharma’s Xbox profile, which IGN and Windows Central quickly dissected, shows she’s played about 30 titles since mid-January, gravitating toward narrative-driven indie games like Firewatch, Gone Home, and What Remains of Edith Finch — the kinds of games you’d play if you wanted to understand games as art, not just entertainment.

She unlocked her first achievement Jan. 15, about five weeks before the announcement of her new role. It was a Halo: Master Chief Collection milestone, fittingly titled “Your Journey Begins.”

During Phil Spencer’s tenure as the CEO of Microsoft Gaming, he brought dozens of the games industry’s best developers and most beloved franchises under a single roof. As a result, his successor Asha Sharma is in a unique position where she really can succeed in the video game business, despite her inexperience in the field, without really trying.

The surprising departures of Phil Spencer and Sarah Bond from Xbox marks the end of a chaotic week for the global video game industry, as well as a new period of uncertainty for Microsoft’s already chaotic gaming division.

At first glance, the news doesn’t appear to be good. Observers have noted that Sarah Bond was posting on LinkedIn on Xbox’s behalf only a few hours before the story broke that she’d resigned. While Spencer has announced publicly that his retirement has been months in the making, Bond’s resignation initially seemed more sudden. (Bond has since posted on LinkedIn that this transition has been in the works for a while.)

Another point of cynicism comes from Spencer’s planned replacement. Sharma, the newly appointed CEO of Microsoft Gaming, is a relatively new face at Microsoft with no previous experience in the games industry.

She’s moving over to Xbox from a previous stint as a president at Microsoft’s CoreAI division, which comes at the same time as Microsoft is already drawing fire — from me, if no one else — for trying to wedge its Copilot LLM into every individual facet of its product lineup. Putting one of its AI leaders in charge of its games division sounds like an attempt to take another step in that direction.

In her defense, and to her credit, Sharma does appear to have anticipated that initial criticism, writing in an email to the Microsoft Gaming team: “…we will not chase short-term efficiency or flood our ecosystem with soulless AI slop. Games are and always will be art, crafted by humans, and created with the most innovative technology provided by us.”

Sharma’s arrival as CEO comes on the heels of last October’s report that Microsoft’s video game division has spent the last two years working to meet deeply unrealistic profit margins, as mandated by Microsoft CFO Amy Hood. That revelation served to at least partially explain some of the strange decisions Xbox was making, such as waves of layoffs, sudden studio closures, and abruptly canceling highly anticipated projects such as the Initiative’s reboot of Perfect Dark.

With that news in mind, it’s reasonable to wonder if today’s news is the beginning of the end for Xbox. Microsoft has seemingly set the division up to fail for at least the last two years, which has led to rumors that executives are simply looking for an excuse to sunset the department.

It’d even be a good time to jump out of the hardware game. Bond in particular had already been hyping up the next version of the Xbox, with last year’s portable ROG Xbox Ally as a sort of effective sneak preview thereof. However, recent memory shortages created by data center demand are currently changing every hardware manufacturer’s plans. If Microsoft were to decide to postpone or even cancel the next Xbox, which could’ve arrived as soon as next year, the current cost of memory would be a solid excuse. Also of note: Xbox hardware revenue fell 32% in Microsoft’s most recent quarter.

On the other hand, Sharma is counterbalanced by the promotion of Xbox’s Matt Booty to chief content officer. As the former head of Xbox Game Studios, Booty is one of the last big insiders left at Microsoft’s gaming division. In a perfect world, he’d form a good counterbalance to Sharma’s inexperience with the industry.

Further, while Xbox has significant and ongoing PR issues, it’s not doing as poorly as many of its detractors would prefer to believe. Xbox is currently saddled with a bad reputation based upon its seemingly permanent third-place status in the console market; its recent tendency to suddenly fire thousands of people while abruptly shutting down its subsidiaries; and there’s at least one significant organized boycott against the company. That all adds up, which has left the enthusiast end of the games industry convinced that Xbox is on the verge of collapse.

That aside, however, Xbox has shown some real signs of life in the last year. 2025 saw Xbox Game Studios release original IP like Avowed, South of Midnight, and Keeper, alongside franchise entries such as Doom: The Dark Ages, Ninja Gaiden 4, The Outer Worlds 2, Grounded 2, and a new Call of Duty. Many of these games were at least critically successful, and a few even sold well.

Xbox’s 2026 lineup currently includes the long-awaited reboot of the Fable series, an upcoming World of Warcraft expansion, a new Forza Horizon racing game, another Gears of War, and Halo: Campaign Evolved.

Xbox’s problem has never been a lack of in-house talent or not having any popular franchises. For the last few years, its biggest issue has been instability. Even its internal studios that produced popular and successful games, such as Tango Gameworks (Hi-Fi Rush), were potentially on the chopping block. If your potential reward for doing well was still getting laid off, what’s your incentive to perform?

As a result, the best move that Sharma could make as CEO, at least in the short term, might be to do nothing. In her memo to staff, the former Instacart and Meta exec laid out a big vision, noting that “we will invent new business models and new ways to play,” and that the company must “relentlessly question everything, revisit processes, protect what works, and be brave enough to change what does not.”

But perhaps the right move, at least initially, is to lay low. If Sharma and Microsoft are simply willing and able to let their studios work, in their own time and at their own pace, without the imminent threat of another wave of layoffs, it could be the first step toward restoring some of Xbox’s tattered reputation.

Phil Spencer, the Xbox leader who spent 38 years at Microsoft and helped reshape the gaming industry through big acquisitions and a bet on cloud gaming, is retiring from the company.

He will be succeeded as CEO of Microsoft Gaming by Asha Sharma, a former Instacart chief operating officer and Meta vice president who joined Microsoft two years ago, the company said Friday. 

The transition also includes the departure of Sarah Bond, the Xbox president who was widely seen as a potential Spencer successor, and the promotion of Matt Booty to executive vice president and chief content officer overseeing Microsoft’s nearly 40 game studios.

In an email to employees, Spencer said he told Microsoft CEO Satya Nadella last fall that he was ready to step back, and that they had been planning the transition since then. He called his nearly four decades at Microsoft “an epic ride and truly the privilege of a lifetime.”

Spencer “expanded our reach across PC, mobile, and cloud; nearly tripled the size of the business; helped shape our strategy through the acquisitions of Activision Blizzard, ZeniMax, and Minecraft; and strengthened our culture across our studios and platforms,” Nadella wrote in a separate memo.

The longtime Xbox leader will remain in an advisory role through the summer to support the handoff. Bond is also expected to remain at the company through a transition period.

Sharma, who is currently president of Microsoft’s CoreAI product organization, has roots in the Seattle startup community, with deep experience in consumer platforms and operations, and no prior experience in the video-game industry.

That’s where Booty’s new role will presumably come in — as chief content officer, the industry veteran will oversee Microsoft’s sprawling studio portfolio, pairing his decades of gaming experience with Sharma’s operational background.

In her first message to the gaming team, Sharma pledged to recommit to Xbox’s core console fans and vowed that the company would not “flood our ecosystem with soulless AI slop,” calling games “art, crafted by humans.”

Microsoft had been planning to make the announcement next week, but accelerated its timeline after IGN learned about the plans from inside sources. The gaming publication broke the news a short time ago.

Xbox is facing headwinds heading into the transition.

Gaming revenue fell 9%, or $623 million, during Microsoft’s most recent quarter, with Xbox content and services revenue declining 5% and hardware revenue falling 32%. Microsoft’s CFO Amy Hood attributed the decline in part to a prior-year quarter that benefited from stronger first-party game releases.

The business accounts for just over 7% of Microsoft’s total revenue — about $5.96 billion of the company’s $81.3 billion in the most recent quarter — but remains core to the tech giant’s consumer ambitions.

Here is the full text of the Microsoft memos announcing the news:

From Satya Nadella:

Gaming has been part of Microsoft from the start. Flight Simulator shipped before Windows, and you can practically ray‑trace a line from DirectX in the ’90s to the accelerated‑compute era we’re in today. 

As we celebrate Xbox’s 25^th year, the opportunity and innovation agenda in front of us is expansive. Today we reach over 500 million monthly active users, are a top publisher across all platforms, and continue to innovate across gaming hardware, content and community, in service of creators and players everywhere.  

I am long on gaming and its role at the center of our consumer ambition, and as we look ahead, I’m excited to share that Asha Sharma will become Executive Vice President and CEO, Microsoft Gaming, reporting to me. Over the last two years at Microsoft, and previously as Chief Operating Officer at Instacart and a Vice President at Meta, Asha has helped build and scale services that reach billions of people and support thriving consumer and developer ecosystems. She brings deep experience building and growing platforms, aligning business models to long-term value, and operating at global scale, which will be critical in leading our gaming business into its next era of growth. 

Matt Booty will become Executive Vice President and Chief Content Officer, reporting to Asha. Matt’s career reflects a lifelong commitment to games and to the people who make them. Under his leadership, Microsoft Gaming has grown to span nearly 40 studios across Xbox, Bethesda, Activision Blizzard, and King, which are home to beloved franchises including Halo, The Elder Scrolls, Call of Duty, World of Warcraft, Diablo, Candy Crush, and Fallout.  

Together, Asha and Matt have the right combination of consumer product leadership and gaming depth to push our platform innovation and content pipeline forward. Last year, Phil Spencer made the decision to retire from the company, and since then we’ve been talking about succession planning. I want to thank Phil for his extraordinary leadership and partnership. Over 38 years at Microsoft, including 12 years leading Gaming, Phil helped transform what we do and how we do it. He expanded our reach across PC, mobile, and cloud; nearly tripled the size of the business; helped shape our strategy through the acquisitions of Activision Blizzard, ZeniMax, and Minecraft; and strengthened our culture across our studios and platforms.  I’ve long admired Phil’s unwavering commitment to players, creators, and his team, and I am personally grateful for his leadership and counsel. He will continue working closely with Asha to ensure a smooth transition. 

We have extraordinary creative talent across our studios and a global platform that is second to none. I’m excited for how we will capture the opportunity ahead and define what comes next, while staying grounded in what players and creators value. 

Please join me in congratulating Asha and Matt on their new roles, and in thanking Phil for everything he has done for Microsoft and for our industry. 

From Phil Spencer:

When I walked through Microsoft’s doors as an intern in June of 1988, I could never have imagined the products I’d help build, the players and customers we’d serve, or the extraordinary teams I’d be lucky enough to join. It’s been an epic ride and truly the privilege of a lifetime. 

Last fall, I shared with Satya that I was thinking about stepping back and starting the next chapter of my life. From that moment, we aligned on approaching this transition with intention, ensuring stability, and strengthening the foundation we’ve built. Xbox has always been more than a business. It’s a vibrant community of players, creators, and teams who care deeply about what we build and how we build it. And it deserves a thoughtful, deliberate plan for the road ahead.  

Today marks an exciting new chapter for Microsoft Gaming as Asha Sharma steps into the role of CEO, and I want to be the first to welcome her to this incredible team. Working with her over the past several months has given me tremendous confidence. She brings genuine curiosity, clarity and a deep commitment to understanding players, creators, and the decisions that shape our future. We know this is an important moment for our fans, partners, and team, and we’re committed to getting it right. I’ll remain in an advisory role through the summer to support a smooth handoff. 

I’m also grateful for the strength of our studios organization. Matt Booty and our studios teams continue to build an incredible portfolio, and I have full confidence in the leadership and creative momentum across our global studios.  I want to congratulate Matt on his promotion to EVP and Chief Content Officer.  

As part of this transition, Sarah Bond has decided to leave Microsoft to begin a new chapter. Sarah has been instrumental during a defining period for Xbox, shaping our platform strategy, expanding Game Pass and cloud gaming, supporting new hardware launches, and guiding some of the most significant moments in our history. I’m grateful for her partnership and the impact she’s had, and I wish her the very best in what comes next.  

Most of all, to everyone in Microsoft Gaming, I want to say “thank you”. I’ve learned so much from this team and community, grown alongside you, and been continually inspired by the creativity, courage, and care you bring to players, creators, and to one another every day. 

I’m incredibly proud of what we’ve built together over the last 25 years, and I have complete confidence in all of you and in the opportunities ahead. I’ll be cheering you on in this next chapter as Xbox’s proudest fan and player. 

Phil 

XBL: P3 

From Asha Sharma:

Dear team, 

Today I begin my role as CEO of Microsoft Gaming.  

I feel two things at once: humility and urgency. 

Humility because this team has built something extraordinary over decades. Urgency because gaming is in a period of rapid change, and we need to move with clarity and conviction.  

I am stepping into work shaped by generations of artists, engineers, designers, writers, musicians, operators and more who create worlds that have brought joy and deep personal meaning to hundreds of millions of players. The level of craft here is exceptional, and it is amplified by Xbox, which was founded in the belief that the power of games connect people and push the industry forward.   

Thank you to Phil for his leadership, and to every studio, platform, and operations team that built this foundation. We are stewards of some of the most loved stories and characters in entertainment and bring players and creators together around the fun and community of gaming in entirely new ways.  

My first job is simple: understand what makes this work and protect it. 

That starts with three commitments. 

First, great games.     

Everything begins here. We must have great games beloved by players before we do anything.  Unforgettable characters, stories that make us feel, innovative game play, and creative excellence. We will empower our studios, invest in iconic franchises, and back bold new ideas. We will take risks. We will enter new categories and markets where we can add real value, grounded in what players care about most. 

I promoted Matt Booty in honor of this commitment. He understands the craft and the challenges of building great games, has led teams that deliver award-winning work, and has earned the trust of game developers across the industry. 

Second, the return of Xbox.  

We will recommit to our core Xbox fans and players, those who have invested with us for the past 25 years, and to the developers who build the expansive universes and experiences that are embraced by players across the world. 

We will celebrate our roots with a renewed commitment to Xbox starting with console which has shaped who we are. It connects us to the players and fans who invest in Xbox, and to the developers who build ambitious experiences for it.  

Gaming now lives across devices, not within the limits of any single piece of hardware. As we expand across PC, mobile, and cloud, Xbox should feel seamless, instant, and worthy of the communities we serve. We will break down barriers so developers can build once and reach players everywhere without compromise. 

Third, future of play. 

We are witnessing the reinvention of play. 

To meet the moment, we will invent new business models and new ways to play by leaning into what we already have: iconic teams, characters, and worlds that people love. But we will not treat those worlds as static IP to milk and monetize. We will build a shared platform and tools that empower developers and players to create and share their own stories.  

As monetization and AI evolve and influence this future, we will not chase short-term efficiency or flood our ecosystem with soulless AI slop. Games are and always will be art, crafted by humans, and created with the most innovative technology provided by us. 

The next 25 years belong to the teams who dare to build something surprising, something no one else is willing to try, and have the patience to see it through. We have done this before, and I am here to help us do it again. I want to return to the renegade spirit that built Xbox in the first place. It will require us to relentlessly question everything, revisit processes, protect what works, and be brave enough to change what does not. 

Thank you for welcoming me into this journey. 

Asha  

From Matt Booty:

I read Phil’s note with much gratitude. He has been a steady champion for game creators and our studio teams, and I’ve learned so much from his leadership over the years. All our games have benefited from his foundational support. I’m also grateful to Satya for his ongoing commitment to gaming and holding a vision of how it can connect back to the larger company. 

Looking forward, I’m excited to partner with Asha as our next CEO. Our first conversations centered on her commitment to making great games and the role that plays in our overall success. She asks questions, pushes for clarity, and wants our choices grounded in player and developer needs. That mindset matters as the industry around us is changing quickly: how players engage, how games are made, and how business models and platforms evolve. 

We have good reasons to believe in what’s ahead. This organization and its franchises have navigated change for decades, and our strength comes from teams who know how to adapt and keep delivering. That confidence is grounded in a strong pipeline of established franchises, new bets we believe in, and clear player demand for what we are building. 

My focus is on supporting the teams and leaders we have in place and creating the conditions for them to do their best work. To be clear, there are no organizational changes underway for our studios. 

Thanks for everything you do for players and for each other. 

-Matt 

The Seattle-area independent production studio behind the hit video game Pacific Drive raised $4 million in seed funding.

The round, led by Lifelike Capital, is aimed toward financing Redmond, Wash.-based Ironwood Studios’ next game.

Pacific Drive, released in Feb. 2024 for PlayStation, Xbox, and PC and published by Kepler Interactive, is a “driving survival” game set in 1998, where players build, fix, and customize an old station wagon in order to survive a science-warped zone in the rural Pacific Northwest.

Notably, PD features no traditional combat; instead, you must outwit and evade environmental dangers while using scrap metal and scavenged parts to keep your car in working order. (You can read GeekWire’s review of Pacific Drive here.)

“As a team we are very thankful for the opportunity to keep making games and at the same time so incredibly excited for what the future of Ironwood holds,” Cassandra Dracott, Ironwood’s CEO and creative director, said in an press release. “This funding round points us towards the best version of that future and we’re thrilled to work alongside Lifelike Capital to make it a reality.”

GeekWire reached out to Ironwood Studios for further comment.

As per an official release from Ironwood, PD has sold over 1.5 million units since its debut, in addition to being released on both the Xbox Game Pass and PlayStation Plus subscription services. Ironwood released a paid expansion for PD, Whispers in the Woods, in October.

In addition, filmmaker James Wan (Saw, The Conjuring) acquired the TV rights for Pacific Drive in 2024, though there has been no further public information about the project.

Sound Games, a new Seattle startup developing video games that work across multiple platforms with a single purchase, announced $6.5 million in seed funding.

The startup is betting on a “pay once, play anywhere” model — players buy a game one time and can play it across PC, console, and mobile devices. The company says its goal is to focus on high-quality, re-playable games without heavy in-game purchases or monetization mechanics.

Sound Games’ first title, Go Ape Ship!, is scheduled to launch Feb. 18. The game is designed as an early example of the company’s cross-platform approach, allowing players to move between devices without buying the game repeatedly.

The 12-person company was co-founded by Mike Schmid, who previously was head of publishing at Seattle startup Rec Room. Schmid was most recently vice president of growth at mobile gaming startup Backbone, and also spent four years at Apple. His co-founders include Jacobo Abril and Sergio Abril, who previously started and led video game development company nada studio.

The seed round was led by Point72 Ventures, with participation from Timeless, Daybreak, WOCstar, Hustle Fund, ZVC, and other investors. Sound Games said the funding will be used to ship multiple original titles, build cross-platform technology, and expand its development team.

Sound Games was previously featured in GeekWire’s Startup Radar.

A series of layoffs across Meta’s virtual reality division has affected Bellevue, Wash.-based studio Camouflaj (Republique, Batman: Arkham Shadow).

This week opened with reports that Meta had shuttered several game developers in its studio network, including Twisted Pixel (Marvel’s Deadpool VR) and Armature (Resident Evil 4 VR), both of which were headquartered in Texas.

Rumors subsequently entered circulation on Wednesday that the same wave of layoffs had affected Camouflaj. Several outlets, including Aftermath and The Verge, confirmed Thursday that while Camouflaj is still in operation, it’s been reduced to a “handful of employees.” The studio has around 30 employees, according to LinkedIn data.

In addition, a planned sequel to 2024’s Batman: Arkham Shadow has been cancelled, and the project’s developer Sanzaru has been shut down.

GeekWire has reached out to Meta and Camouflaj for further comment.

This wave of dismissals is reportedly a downstream effect from a 10% headcount reduction at Meta’s Reality Labs division. This follows a decision to shift Meta’s efforts away from VR and the Metaverse and towards AI research and wearables.

Camouflaj began as an independent studio led by Microsoft veteran Ryan Payton, which made headlines in 2012 for using crowdfunding to start work on its debut project. Republique, an episodic stealth game set in a fictional totalitarian state, was initially an exclusive for iOS devices. It was later released for PC, Mac, Android, and PlayStation 4.

Camouflaj later retooled Republique as a virtual reality game, which marked a shift by the company towards developing VR projects. Its next game, made with Sony Interactive Entertainment and Marvel Studios, was 2020’s Iron Man VR for PlayStation and Meta Quest. Camouflaj was then acquired by Oculus in 2022.

Its latest game, Arkham Shadow, is an official entry in the long-running “Arkham series” of Batman video games. Set early in Batman’s crime-fighting career, before many of his trademark villains had assumed their costumed identities, Shadow pits a young Batman against a villain known as the Rat King.

It’s worth noting that while Meta was not the only significant player in the virtual reality sector, it did command a large part of the overall market due to its standalone headsets. If Meta plans to back out of VR to any further degree, it could potentially pose an existential threat to the format. Valve’s recent announcement of a new VR headset does offer some hope to VR fans, however.

In the wake of the success of the Steam Deck, a portable gaming PC aimed at a casual audience, it was inevitable that Valve Software would dip its hands back into the hardware market. It just wasn’t expected quite this soon, or that Valve would pick quite so many fights at once.

Valve, headquartered in Bellevue, Wash., announced Wednesday that it plans to expand its line of Steam Hardware gaming products. In addition to the Steam Deck, next year will see the release of a new Steam Machine, which is designed for living room play; a new Steam Controller, a high-durability game pad with a similar design to the Deck; and the Steam Frame, an all-in-one VR headset.

We currently know very little about the three new pieces of Steam Hardware aside from their existence and, broadly, their specs. Valve has said the new Machine is “six times as powerful” as the Deck, for example. Other details such as pricing are currently planned for release early next year.

The pricing is the biggest X-factor here. It’s not discussed as often as other factors, but one of the major reasons behind the Steam Deck’s overall success is arguably its price tag.

You can walk away with a functional Steam Deck for as little as $399, although the higher-end models are worth the extra money. By comparison, competitors’ models such as Microsoft’s Xbox ROG Ally start at $599.99, and several break the $1,000 mark.

Valve can certainly afford to pursue a razor-and-blades strategy with its hardware. Depending on who you choose to believe, anywhere from half to 75% of PC gaming worldwide goes through Steam. While Valve has its share of controversies and detractors, it’s also found a real-life infinite money cheat.

While the PC sector of the games industry is currently smaller than the console and mobile markets, it’s still a multi-billion-dollar industry. It’s also growing, with larger numbers of both younger players and the Asian market shifting to PCs for their gaming. Appealing to those audiences with an all-in-one desktop device is a smart overall move, especially if Valve opts to keep the price tag as low as it did for the Deck.

If Valve takes that affordability approach, then the new Steam Hardware is potentially disruptive to several different areas within the gaming industry. It could pose particular issues for Microsoft, which has recently begun talking about plans for its next-generation Xbox, and to Meta’s current prominence within the VR space.

The rumored plans for the next Xbox, at time of writing, are that it’s coming in 2027 and will essentially be a small, ultra-specialized PC. The Xbox ROG Ally’s unique operating system is seen as a sneak preview of what’s next for the living-room model, which will abandon Xbox’s unique identity in favor of a Windows-based “Xbox Experience.”

Valve’s Steam Machine would theoretically ship with a similar overall feel. It would also have no capacity for physical media whatsoever, running entirely off of digital downloads from users’ Steam libraries.

Most crucially, it isn’t a Windows product. One of Valve’s stated goals for over a decade has been to promote PC gaming on Linux, in order to present players with an option besides Windows. With the next Xbox all but confirmed to be running Windows 11 (and thus Copilot), I’ve heard from a lot of players who are looking for alternatives.

For most of those players up until now, that alternative would’ve been buying a system from PlayStation or Nintendo. Now Steam is once again trying to take over consumers’ living rooms. If the Steam Machine is affordably priced, that could make it an attractive option for consumers who’re looking for a way out of Microsoft’s ecosystems.

Since the Steam Machine features the same plug-and-play options as the Steam Deck, it’s also an easy way to pick up a reasonably powerful computer that runs Linux out of the box. Plug a monitor, keyboard, and mouse into the Steam Machine and it automatically transitions into a Plasma desktop environment.

In a similar vein, the Steam Frame could not be more deliberately positioned as a competitive product for the Meta Quest line of virtual reality hardware. While the VR sector is still more active than people seem to realize, with steady growth in the market year-over-year, Meta currently controls an outsized amount of the conversation in the space. This is by virtue of selling the highest-end and most affordable headsets on the market.

Meta’s dominance in VR has actually been kind of a problem for me, because Meta is annoying. Meta Horizon is an obnoxious overall setup whenever I pull out my Quest; it keeps trying to shake me down for more personal details for some reason; and it’s got that inescapable Zuckerberg stink on it. If Valve can present a comparable option for a standalone headset, it could make some real headway in the space.

That having been said, I genuinely doubt that anyone at Valve itself is thinking in these terms. The general thrust behind the Steam Deck, according to its architects when I spoke to them a couple of years ago, was that it was done largely for the hell of it. While Steam higher-ups like Gabe Newell have always been forthright about their disdain for Windows, I’d be shocked if Valve’s new hardware venture is any kind of deliberate attempt at disruption. At most, it’s a new option.

It’s more likely that this round of Steam Hardware, and anything that comes in the future, is simply Valve finally kicking a project out the door. At this point in the company’s life, with no shareholders to appease, it’s still consistently content to pursue its own weird goals.

In a surprise Wednesday drop, Bellevue, Wash.-based Valve Software unveiled three new physical gaming devices intended to work with its digital storefront Steam.

Planned for release in early 2026, the devices are described as new parts of the “Steam Hardware family.” They include the Steam Machine, a small console intended for users’ living rooms; the Steam Frame, a lightweight VR headset; and a new Steam Controller, which features several new interfaces similar to those found on Valve’s Steam Deck.

“We’ve been super happy with the success of Steam Deck, and PC gamers have continued asking for even more ways to play all the great titles in their Steam libraries,” Gabe Newell, president of Valve, said in a press release.

“Our work over the years on other hardware and even more importantly on SteamOS has enabled Steam Controller, Steam Machine, and Steam Frame to do just that,” Newell said.

The Steam Machine is a 6-inch cube that’s designed to fit unobtrusively into a living room or entertainment center. It’s intended to quietly and efficiently run games from your Steam library, with a removable front panel for decorative purposes and an LED so users can readily tell when it’s on or off.

Like the Steam Deck, the Steam Machine runs on a Linux-based operating system that’s built around Steam. If plugged into a monitor and keyboard, it can be used as a standalone PC with a KDE Plasma desktop environment.

The Steam Frame is a standalone virtual reality headset that’s reportedly able to stream any game from users’ Steam library, with full controller input. It’s a PC in its own right, so it can be used by itself, rather than having to be hooked up to a desktop.

Finally, the Steam Controller “shares DNA” with the Steam Deck, and is described by Valve as “high-performance” and “ergonomic,” with magnetic thumbsticks, trackpads, a gyroscope, and buttons on the grips. In addition to being designed for the Steam Machine, the Steam Controller is compatible with PCs and laptops.

Valve’s announcement on Wednesday came roughly 10 minutes after a series of rumors and leaks that went viral in the PC gaming community, apparently spurred by an accidental release by one of Valve’s partner companies.

No announcements were made regarding exact release dates or prices for any of the devices, but Valve did state it hopes to share those details after the first of the year.

This is a full-circle move for Valve, which had previously attempted to break into both the controller and living room markets with similar devices. Previous editions of both the Steam Controller and Steam Machine were released in 2015 and discontinued in 2019. Valve still sells its high-end Valve Index VR system, which first came out in 2019, though it’s out of stock at time of writing.

This is a seemingly strange time for Valve to revisit its hardware divisions, but the Steam Deck’s success seems to have reignited its ambition to reshape the face of PC gaming. Newell has been vocal for years about how he believes Windows is a poor environment for computer games, and Valve has made a number of moves in recent memory that all come back to trying to expand Linux’s presence in the scene. Through that lens, the new 2026 Steam Machine in particular seems like another quiet shot across Microsoft’s bow.

When I was a kid, my mom used to call my Nintendo the “anti-social idiot box.” The widespread assumption back then was that video games, in any format, were a new and particularly efficient way to waste time and money while also becoming an obsessed shut-in.

Over the course of the subsequent decades, video games have grown into both a multi-billion-dollar industry and a much more socially acceptable hobby. While gaming does attract its share of anti-social obsessives, just like any other form of media, I’ve found it’s much more common for people to meet and bond over their mutual enjoyment of the hobby.

Whether it’s friends you meet through MMORPGs or fighting games, finding stories and characters that deeply resonate with you, or discussing your latest game in a shared space like Bluesky or a message board, video games often have a positive impact on the people who play them. That impact simply doesn’t get a fraction of the press of gaming’s various downsides.

That ability is the focus of a new paper from the University of Washington, “’I Would Not Be This Version of Myself Today’: Elaborating on the Effects of Eudaimonic Gaming Experiences.” The paper, by Nisha Devasia, Georgia Kenderova, Julie A. Kientz, Jin Ha Lee, and Michele Newman, was the focus of a presentation this month at the Annual Symposium on Computer-Human Interaction in Play (CHI-PLAY) in Pittsburgh.

For the paper, the authors surveyed 166 respondents about the “meaningful experiences” they’d had as a result of playing video games, such as rich storytelling, becoming interested in specific skill development, or the experience of watching a narrative shift based upon the player’s in-game actions.

According to the paper’s abstract, “While much of the research in digital games has emphasized hedonic experiences, such as flow, enjoyment, and positive affect, recent years have seen increased interest in eudaimonic gaming experiences, typically mixed-affect and associated with personal meaningfulness and growth.”

Of the 166 respondents, 78% reported that they’d had meaningful, life-changing experiences from their time playing video games, the researchers said in a UW News story about the paper.

“We highlighted three conclusions drawn from modeling the data,” Devasia told UW News. “The first is that playing games during stressful times was strongly correlated with positive outcomes for physical and mental health. For example, during COVID, people played games they felt strongly improved their mental health, such as Stardew Valley.”

Devasia also noted that other respondents had developed new interests, such as sports, due to video games they’d played, or gained insight into themselves or their identities from the journeys undertaken by video game protagonists.

“Playing as a character and seeing your choices change the course of events is pretty unique to games, compared with other narrative media like novels or movies,” Devasia said.

“As researchers, we develop games for learning, for instance, for teaching people about misinformation or AI, or promote digital civic engagement, because we want to foster meaningful experiences,” Lee added. “But a lot of the existing research just focuses on the short-term effects of games. This study really helps us understand what actually caused a game to make a difference in someone’s life.”

It sounds obvious at first glance if you’re someone who grew up around video games. It’s almost a given that there’s at least one game that made a serious mark on you somehow, especially if you live in a heavily nerd-coded space like the greater Seattle area.

Anecdotally, that strikes me as an underexplored part of the hobby. If anything, there’s a strange critical drive in the space to deliberately treat gaming as disposable pop culture, without any real meaning or lasting value. If you read any op-ed in the gaming press that discusses the cultural or political meaning of a video game, someone will inevitably show up in the comments to accuse the author of overthinking something that isn’t meant to matter. It’s “just a game.”

Even so, modern video games have just as much ability to resonate with their audience as any novel or film, and people who’ve grown up with them will take lessons away from that. It’s something we don’t discuss often enough in the field; we’ll talk at length about how video games are fun or socially acceptable now or a surprisingly big business, but their influence as culture is less discussed.

“People have a tendency to treat technology as a monolith, as if video games are either good or bad, but there’s so much more nuance,” Kientz told UW News. “The design matters. This study hopefully helps us untangle the positive elements. Certainly, there are bad elements — toxicity and addictiveness, for example. But we also see opportunities for growth and connection.”

For the last two years, Microsoft’s video game division has been working to meet financial targets that are well in excess of the typical industry standard, which has led to waves of layoffs, canceled projects, and a general perception that the company is scrambling.

These allegations come from a new report from Bloomberg journalists Jason Schreier and Dina Bass, who reported that Xbox has been told it’s expected to work toward a profit margin of 30% across the board.

As far as can be told from outside Microsoft, this is significantly above Xbox’s profit baseline. A typical quarterly report from Microsoft only discloses revenue, but as noted by TweakTown, Xbox head Phil Spencer testified in court in 2022 that “the Xbox business today runs at a single-digit profit margin.”

It’s worth noting that even the biggest game studios usually maintain a profit margin of roughly 20% under typical circumstances. As an example, Xbox subsidiary Activision Blizzard, which runs some of the most popular games-as-a-service in the world today, “only” had a profit margin of 22-to-25% two years ago before Microsoft’s acquisition completed.

Even Sony, Microsoft’s primary competitor in the console space and the makers of the PlayStation 5, reportedly only runs at a 9.5% profit margin. Through that lens, any video game company that’s honestly eyeing a consistent 30% is living in a dream world.

The new financial target reportedly came directly from Microsoft CFO Amy Hood in the fall of 2023, which marked the start of a series of big decisions and policy reversals at Xbox.

Since then, Microsoft has drawn fire for multiple waves of layoffs; reorganized several subsidiaries such as Halo Studios; raised the base MSRP of the Xbox Series X twice so far this year; made moves to phase out physical media; officially ported many of its hit first- and third-party games to PlayStation and Switch; and canceled multiple highly-anticipated game projects such as Rare’s Everwild, a reboot of Perfect Dark, and ZeniMax’s MMO code-named Project Blackbird.

Earlier this month, Microsoft hiked the price of its Xbox Game Pass subscription service, claiming it was part of a significant “upgrade package.” Less relevantly to consumers, it has also allegedly raised the price of Xbox development kits by $500, blaming unspecified “macroeconomic” factors.

Some of that, to be fair, is due to circumstances outside Xbox’s control such as the ongoing chaos over tariffs. This year has been a rough time to be a hardware manufacturer.

Xbox is also apparently locked into at least one more console generation, according to recent interviews with Microsoft’s Sarah Bond. The phrase that keeps coming up is “very premium, very high-end curated experience.” If the recently-released Xbox Ally is any indication, the next-gen Xbox will be something more like an expensive, user-friendly Windows PC than what we’d currently recognize as a game console.

For a while now, though, Xbox has come off like its left hand doesn’t know what the right is doing, which made little sense in the wake of reports that the division was both growing and pulling in increased revenue. If it’s being forced to contend with unrealistic expectations from higher up at Microsoft, however, that would explain the overall sense of disorganization.

This is one of the most infamous types of “creative accounting” in the video game industry: issue an inflated revenue forecast, then blame developers/titles when their games fail to reach those numbers. Square Enix notoriously came under fire for this in the 2010s with releases like the 2013 reboot of Tomb Raider. It was a solid success (3.4 million copies sold), but its publisher wanted a blockbuster, so it regarded the game as a failure. History repeats.

In theory, Xbox ought to be one of the leading voices in video games as a hobby and medium right now, but it’s being forced to burn much of its time and effort in an attempt to meet a profit goal that no company on Earth could expect to reach.

If you’re inclined to believe the rumor that’s been in circulation in Seattle this year, that Microsoft’s current leadership would like to shut down Xbox entirely so it can use those resources for more AI research, this is more data for your theory.

The team at Seattle-based game developer One More Game is finally sharing its first title with players, six years after the company initially started.

Shortly after landing a $22 million funding round in 2022 from investors including Lightspeed and Andreessen Horowitz, One More Game decided to scrap Spellcraft, the game it had been working on for over three years. The company completely shelved the hybrid real-time strategy fantasy game and started over from scratch.

“I am really proud of Spellcraft — the game was good,” said One More Game co-founder Jamie Stormbreaker. He said the company saw player interest shifting away from competitive games where you match up with strangers in random lobbies to games that can be played with friends coordinated via Discord, like Among Us and Lethal Company.

“We were pushing the boundaries of what the next hybrid real-time strategy could be, but ultimately we didn’t have confidence that the 1v1 PvP free-to-play business model fit our company values, so it was best for us to switch gears,” Stormbreaker said.

And boy did they ever switch gears. The studio’s new game SWAPMEAT is a goofy third-person squad-based cooperative shooter with humor inspired by 2000s Adult Swim shows like “Tim and Eric,” and “Aqua Teen Hunger Force.” It’s a different genre, graphical style, writing style, game engine, and player count from Spellcraft, but perhaps the biggest change is the shift from free-to-play to an upfront purchase.

“When you buy something from us, we want to respect your time and give you great value,” Stormbreaker explained. “We want to make something that’s going to be in your Steam library forever.”

SWAPMEAT wasn’t just a new style of game for the studio, but a whole new game mechanic where body parts with different abilities and skills are scavenged from defeated enemy units and swapped onto the player’s body, a concept the team referred to internally during development as “meat mixing” and is the source of game’s distinctly memorable name.

This past summer, Stormbreaker and his fully-remote, 13-person team brought SWAPMEAT to the Seattle gaming convention PAX West, where their booth was busy all weekend as players got their first look at the game. “PAX was absolutely excellent, an unbelievable show for us,” said Stormbreaker.

PAX West came at the tail end of a busy season for One More Game, during which it brought the game to a series of shows including PAX East in Boston and Gamescom in Cologne, Germany. At the shows the company would get the game in front of players, make tweaks to the game — often mid-show — and then get it right back in front of players again to see what other tweaks should be made.

“We follow something we call alpha-driven development,” Stormbreaker noted. “You get the game in front of people as soon as you possibly can. They’re going to roast the game, and I love it. We want the feedback, and by showing up regularly and engaging with players, we constantly make the game better.”

Thanks in large part to the insights the team gained from watching thousands of people play the game on the show floor at various gaming conventions this year, they’re gearing up to open SWAPMEAT for Steam Early Access next week.

One More Game co-founders Stormbreaker and Patrick Wyatt both have a deep history in the gaming industry. Wyatt had a 9-year role as a VP at Blizzard where he worked on Starcraft and Diablo games and later co-founded ArenaNet, the Seattle-area gaming studio responsible for the Guild Wars series. Stormbreaker was a developer at ArenaNet, Riot Games, and Undead Labs, a Seattle-area game studio purchased by Microsoft in 2018.

For Stormbreaker and Wyatt, bringing SWAPMEAT to PAX West wasn’t just a product showcase — it was a full-circle moment.

Nearly 20 years earlier, the two met for the first time on that same show floor, bonding over server tech at the ArenaNet booth. “I walked over to the ArenaNet booth to ask how they keep the servers online all the time,” Stormbreaker recalled of his first encounter with Wyatt.

That chance conversation sparked a partnership that would eventually create One More Game. This year, they returned to PAX not just as curious developers but as studio founders, showing off a game of their own.

On the eve of the system’s release, tech reviewers across the internet are sharing their thoughts on the new ROG Xbox Ally, Microsoft’s long-anticipated foray into the portable gaming market.

Announced back in June at the annual Xbox Showcase, the ROG Xbox Ally isn’t exactly what we all expected. It isn’t a handheld console like the Switch, but instead, is an Xbox-branded handheld PC made in collaboration with the Taiwanese computer company Asus. The white Ally retails for $599.99, while the significantly more powerful black Ally X costs $999.99.

The reviews that ran on Wednesday are a mixed bag, but there are three consistent points being raised. One is that the systems are apparently somewhat underbaked at launch, with significant barriers to setup and some early adopter quirks. Another is that the units are ergonomic and comfortable, with textured grips that mimic the current design of the Xbox Series X|S wireless controller.

The final note is a repeated emphasis that you are not getting a console experience with either edition of the Xbox Ally. At the end of the day, it’s a Windows 11 PC, complete with (currently nearly useless) Copilot functionality, and crucially, does not play Xbox console games. It only plays the PC versions thereof.

Here are some of the reviews:

• Eurogamer, Tom Orry: An impressive handheld PC wearing an Xbox mask
• Engadget, Sam Rutherford: An extra life for Xbox
• Windows Central, Rebecca Spear with Jez Corden: I tested the Xbox Ally X for dozens of hours, and it’s almost everything you want in a handheld — future updates could make it the full package
• Tom’s Hardware, Andrew E. Freedman: Getting a grip on Windows gaming
• Radio Times, Alex Raisbeck: I don’t really know who this is for
• The Verge, Sean Hollister: This is not an Xbox

The distinction between “gaming PC” and “console” is more significant than you might think, and it comes down to an issue of tinkering. The big benefit of a console over a PC for gaming is the “it just works” factor. While this gap has closed considerably in recent years, consoles’ comparative ease of use has been a consistent point in their favor for the casual gaming audience. If you want to play a console game, you launch it; the end. You don’t have to worry about whether or not it’ll work unless something has gone dramatically wrong.

The Xbox Ally, as a portable PC, requires more setup and finagling than that, which could be an issue. If what you like about console gaming is that jump-right-in immediacy, the Ally does not have that for you.

Granted, critics reported that their review units didn’t come with a final build of one of the Xbox Ally’s marquee features, the Xbox Full Screen Experience. This is meant to unify your entire PC collection into a single seamless dashboard, so all your various software libraries – Xbox, Steam, Epic, etc. – are all available at once.

Right now, however, the Experience doesn’t really work, which will have to be ironed out with day-one or post-launch software patches. The lower-powered, cheaper model of the Ally is also a distinctly poorer product, with reports that it occasionally refuses to charge and that it’s inherited the traditional Windows problem of constantly waking itself up from sleep mode for no obvious reason.

That’s the interesting thing about the Xbox Ally in the end. Microsoft has been insistent for the last year that an “Xbox” is not a discrete unit of hardware. Rather, it’s a particular software experience that can be run on anything from a tablet to a TV.

You can meaningfully argue, then, that the Xbox Ally isn’t actually an Xbox because it isn’t a console… and Microsoft would agree with you. It’s fuel for the rumors that the next generation of Xbox, which is supposedly coming in 2027, will be a particular software program running on an ultra-specialized PC.

That, in turn, would mean that Microsoft actually is planning to exit the console market, but in a bizarre way; it’ll stop making consoles, but will make something else that it’ll just call a console. It’s like walking backwards out of a party, while insisting that isn’t the same as leaving.

Amazon plans to relaunch its cloud gaming platform Luna later this year. The “all-new Luna” has been “redesigned and reimagined” with a focus on living room TVs, as an easy-to-use delivery system for a lineup of party games.

Luna will relaunch with a new feature called GameNight, which is a collection of more than 25 multiplayer party games. In addition to specially “optimized” takes on established titles like Angry Birds and Exploding Kittens, GameNight will launch with the Amazon-developed exclusive Courtroom Chaos: Starring Snoop Dogg.

Courtroom Chaos is described as a “human-built, AI-powered improv courtroom game” where players will have to “do whatever it takes to defend their testimonies before Judge Snoop Dogg.” It’s the first of a series of party games made in-house at Amazon, utilizing AI and the cloud, and only available via Luna.

“With advances in AI and cloud technology, we see opportunities to create entirely new kinds of games – experiences that were never possible before,” Jeff Gattis, general manager of Amazon Luna, wrote in a blog post.

Luna can be run on a Fire TV, smart TV, or tablet, while players drop into the current game by scanning QR codes with their smartphones. No specialized hardware is required, and the service will be included as part of an Amazon Prime subscription.

The overall goal, according to Amazon, is to “reinvent” gaming by placing a renewed emphasis on accessibility and fun, while swinging it away from expensive hardware and solo gameplay. The new Luna is intended to be easy to get into, inexpensive, and focused on family-friendly, social activities.

“Until now … playing on the big screen [living room TV] usually means expensive consoles, costly graphics cards, and complicated games that end up feeling more like a commitment than a quick escape,” Gattis wrote.

Gattis continued: “The industry hasn’t done enough to welcome the 100s of millions of people who want to experience the magic of playing games on the big screen but feel left out – those who don’t see themselves as ‘gamers,’ those who don’t want to spend a fortune on hardware, or those who just want something simple, social, and fun.”

In addition to GameNight, the new Luna will retain some of its previous focus. While they’ll require an actual Bluetooth controller, Prime subscribers will get access to a “diverse and growing” library of single-player video games, some of which include Indiana Jones and the Great Circle, Dave the Diver, Kingdom Come: Deliverance II, Dead Island 2,and Farming Simulator.

As with the previous version of Luna, these games can be played on a network-capable device, streaming their gameplay directly from Amazon’s cloud servers. Fans can also subscribe to Luna Premium for access to more and newer games, such as EA Sports FC 25 and Batman: Arkham Knight.

The revamp of Luna as a casual-friendly platform for newcomers and budget-conscious hobbyists is a callback to an old conversation in the video game industry, albeit one that’s largely fallen by the wayside in recent years. Nintendo has famously made inroads toward that sector with hardware like the Wii, while Microsoft has noted but not emphasized the benefits of projects like its Game Pass service as a cheap (before the Oct. 1 price hike, anyway), easy way to play all the latest games.

It’s a potential place for Amazon to make new inroads into the industry, which has stubbornly resisted many of its attempts to join in recent years. While Amazon has had some hits as a localizer, such as the translated MMO Throne and Liberty and the South Korean action-RPG Lost Ark, its original projects have either not yet materialized or landed with a thud.

By moving into both the cloud-services market, which has fallen out of prominence in the last couple of years, and the casual-friendly budget-gaming scene, it’s possible that Amazon might find some success by exploring a couple of underrepresented scenes.

Kevin Marcus has always had fun building and innovating with the enterprise startups he helped launch. That feeling is intact with his latest venture, especially since fun is what the company is about.

Marcus has gotten into video games with the launch of KATforge Studios, an indie studio he’s working on with his wife Annemarie Marcus and son Trevor Marcus.

“I’m one of those people that really struggles to do things I don’t like,” Marcus told GeekWire. “So every company has always been something that I enjoy doing or find fun in working on. Doing this is a different type of fun.”

Marcus is a Seattle-area startup veteran who co-founded internet search and directory services company InfoSpace back in 1996, and background check provider Intelius in 2003. In 2012 he helped launch Versium, a startup whose suite of tools helped marketers make sense of data. He stepped away in April after a 13-year run.

With KATforge, Marcus and his family aren’t just out to create puzzle games to rival popular offerings such as “Wordle” in what he considers an increasingly saturated market. They’re leveraging technology, including AI, to test ideas quickly and to create games that resonate with players in search of something new.

The studio’s debut title, “Lextris,” is a fast-paced word puzzle that looks a little like if “Tetris” and “Scrabble” were mashed up. Letters fall from the top of the screen in block-drop style, and players must quickly arrange them into words before the screen fills up. Points are scored for longer and more complex words.

Marcus appreciates the popularity of games being offered by non-traditional outlets such as The New York Times, or the experimentation that’s bringing daily games to platforms like LinkedIn. But he thinks an important piece of engagement is missing from their puzzles — community.

The goal with KATforge is to bring people together to solve things that they couldn’t necessarily do on their own. By targeting book clubs or retirement communities where people are already gathering together, Marcus sees an opportunity to extend the reach of his games. Team competition, for example, is a feature that could be coming to “Lextris.”

The ability to try different ideas and designs has been sped up a great deal by AI and the vibe coding that KATforge is employing for early testing. They used Anthropic’s Claude model to build the first version of “Lextris.”

“It was clunky,” Marcus said. “If you looked at the code it was 15,000 lines and it was terrible. You wouldn’t be able to maintain it. But it allowed us to test it, play with it, and put it in front of some people to say, ‘Hey, what do you think of this?'”

After collecting feedback they coded it all for real, with no AI. It’s a process they’ll repeat in the development of future games.

“The ability to rapidly prototype it and put it out and see what happens, that is something we could not have done before, because it would have taken just way too long,” Marcus said.

The actual testing and deploying of games isn’t the only area where Marcus sees the impact of AI. He thinks the rise of the technology and its impact on work is one of the reasons people will even have time to play his games.

If robots and agents are doing more of the work, people are going to have more free time. Maybe they’ll use that time to be outdoors and exercise. Maybe they’ll play more puzzle games and exercise their brains.

KATforge is self-funded and “Lextris” is free to play and there are no ads or in-game purchases built in yet. The next game that’s planned is a role playing game called “Gear Goblins.”