Ex-Microsoft employee says Bethesda studios' closure impacted by Game Pass & Activision

Despite being a surprise release, Hi-Fi Rush was a big success.

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Key notes

  • Microsoft closes Bethesda studios Arkane Austin, Tango Gameworks, and Alpha Dog
  • Closure attributed to challenges with Game Pass and Activision deal
  • An ex-Microsoft employee suggests revenue struggles and pressure for returns drove closures

It’s been a messy few days over at Microsoft’s gaming camp. The Redmond company closed several Bethesda studios after only a few years of owning them: Arkane Austin, Tango Gameworks, and Alpha Dog. 

But, why the closure? That’s the million-dollar question, especially as Tango’s success with the surprise release of Hi-Fi Rush is still fresh on everyone’s mind. The game, which arrived in next-gen Xbox Series X/S and PlayStation 5 consoles, was a commercial hit with over 3 million players just almost half a year since its original launch in January 2023.

An ex-Microsoft employee has now spoken up. Brad Hilderbrand, the EA veteran who worked for the Redmond company for 4 years, analyzed that the closure didn’t necessarily have anything to do with Bethesda, but with Game Pass and the Activision deal. 

The former Senior PR Manager said in a recent LinkedIn post that the indirect influence came because, Game Pass, once a boost for game exposure, faced revenue challenges due to subscription saturation and shifting player interest.

“This system was fine for a while when Game Pass was growing like gangbusters, but now it’s slowed way down and the amount of revenue it’s attributing to games isn’t keeping up with the budgets to make them,” he says.

Another winding problem is the Activision deal, on which Microsoft spent billions of dollars and a lot of time. Microsoft might arguably get greedy by buying studios left and right, so with these heavy investments, Xbox is now under pressure to deliver returns. It then leads to tough decisions that potentially affect smaller studios, even after massive releases like Starfield & Redfall.

“All those smaller studios making really interesting games are going to fall away, simply because as good as games like Hi-Fi Rush are, they’re never going to make enough money to make up that $70B hole that Xbox now has to dig itself out of,” he says.

Folks even expressed their discontent over Phil Spencer, Xbox’s boss, by nuclear-bombing his camp in Fallout 76. That’s another level of pettiness.