AI Being Re-Evaluated at Xbox? | 29/04/26
Like a new head of government, Xbox's Asha Sharma is seeking easy wins.
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Greetings all and welcome to this week’s edition of AI and Games. This week we’re covering some headlines, some new talks and case studies from us, and chat a little bit about the latest Xbox reset (or reset of the reset?) and what it might mean.
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Announcements
A couple of quick announcements coming your way.
New Case Study: Alien - Rogue Incursion
Live now on YouTube, and coming to the website tomorrow is our latest case study. To celebrate Alien Day - April 26th given the perfect organism is discovered on the planet LV426 - I dig into the pathfinding and encounter design systems in Servio’s Alien: Rogue Incursion - the first VR title based on the popular sci-fi franchise.
AI and Games Conference 2025 Talks
Plus your weekly dose of new talks going live on YouTube from the 2025 AI and Games Conference! Once again with thanks to our recording partners Xsolla!
From Cloud to Edge: Optimizing Small Language Models for Game Applications on AWS
Patrick Palmer & Andrei Muratov / Amazon Web Services
Patrick and Andrei showcase how developers can leverage AWS to prepare small language models that run directly on phones and desktop computers. Demonstrating practical approaches for fine-tuning open-source models for specific gaming needs, enhancing them through distillation techniques, and optimizing for edge performance.
Use Cases and Practical Methodologies for Reinforcement Learning for Learning at Agents at Scale
Huntting Buckley, Duncan Davis & Kyra Wulffert / Databricks
As games continue to build diverse and dynamic gaming experiences, there is constant pressure to be able to iterate quickly, adjust NPC behavior and create more and more dynamic content. The team from Databricks, including Huntting Buckley (Databricks Global Games Strategy Leader), Duncan Davis (Lead Solutions Architect for Games) and Kyra Wulffert (ML Specialist) dive deeper into these topics.
AI (and Games) in the News
A quick round up of some of the headlines from the past week or so. We have not one but two headlines related to AI consuming compute hardware again, so I’d recommend checking out last week’s overview on the subject if you fancy a primer!
The Steam Controller Won’t Be Delayed Due to AI [Kotaku]
In a move that isn’t all that unexpected, Valve are moving forward with releasing the Steam Controller next week after delaying their 2026 hardware line-up. The big reason? Well, there’s no RAM in the controllers…
I think that’s going to be my new reaction when I see the price of things: “What’s it made out of? RAM???”
Your CPUs Aren’t Safe from the AI Goldursh [Tom’s Hardware]
Another not entirely unexpected headline courtesy of Intel that having gouged the market of RAM, SSDs and GPUs, the AI industry is going to go after CPUs next. The reason for this is that while much of Machine Learning and Generative AI training is conducted on GPUs with high-bandwidth memory, the deployment of the trained models later on can transition towards CPUs - and notably CPUs with AI compute cores in them, that Intel now specialise in! A big reason for this is also the surge in interest (and promotion) of Agentic AI: systems where you glue multiple AI agents together to work on larger and more complex tasks.Blender Takes Money From Anthropic, Chaos Ensues [Blender]
A story that kicked up a lot of online furore just last night, 3D modelling company Blender announced a partnership with AI company Anthropic - largely known for the Claude LLM and Claude Code tools. In the announcement Blender declared Anthropic are signing up to a be a corporate patron of the Blender Development Fund. There was little to be said in the official announcement, but people were kick to point out Anthropic no doubt want to pump money into Blender in pursuit of their tools, their audience, and their market so they have a new industry to pilfer. Given Blender has largely build a positive reputation among game developers over the past decade as a champion of free and open-source 3D creation tools, this has unsurprisingly pissed off a large proportion of their userbase.
As of this morning, the press release has been updated to include the following: “This announcement is causing a lot of feedback. We are actively evaluating it. Reach out to Blender Foundation directly if you wish to share more feedback.”
Since they didn’t do the write thing and point out how to contact the Blender Foundation, you can do so at foundation (at) blender (dot) org
Does Xbox’s New Vision Align with Microsoft’s AI Ambition?
The story that certainly caught the most attention last week was the new Xbox head Asha Sharma’s message sent to Xbox employees. This memo sought to establish the philosophy that Sharma and president of game content Matt Booty will bring to their tenure as leaders of Xbox. The memo, entitled “We Are Xbox” was bound to be leaked within minutes of it being published - and true enough it popped up on the Verge not long after. Though it seems the Xbox team figured they should just publish it on the Xbox Wire and aim for some easy wins.
It’s a very safe announcement that lacks in any major commitments, but with enough platitudes and immediate changes to low-hanging fruit that seem designed to garner favour with the online masses. This includes:
Renaming Microsoft Gaming back to Xbox: A change of business stationary that ultimately means very little. After all, it’s not like people were lining up to buy the ‘Microsoft Gaming Series X’ were they? The PlayStation division seems quite happy to continue to be called Sony Interactive Entertainment.
Game Pass Pricing Changes: The Microsoft Game Pass Ultimate subscription has dropped from $29.99 a month to $22.99: that’s a drop from £22.99 to £16.99 for us over here paying with the King’s pounds. Now for £2 more a month than what you were paying six months ago, you now get the pleasure of the Game Pass library without the joys of day-one access to Call of Duty. After the rather lacklustre Black Ops VII it seems an extra £2 a month to avoid it is reasonable.
The rest of the piece is very much about transforming Xbox as they seek to re-establish what the publisher is under new leadership with some strategy areas focussed on new hardware (the upcoming Project Helix), expanding into China, focussing on live-service products (ugh), and ‘fixing the fundamentals’ to restore trust with Xbox players.
We Are Xbox - Again
Now this has certainly caught my attention because you might recall that back in January I had ‘The Death of Xbox’ as #9 on my 10 predictions for the year. To quote the issue from January 14th:
By the end of 2026 there will still be Xbox consoles on the shelves - assuming stores keep selling them. But unless efforts are made to improve the public image of Xbox and the value it is bringing to players as a platform, the console space they operate in will be largely a net loss, and the brand would be best served as a games publisher on PC, PlayStation and Nintendo.
I argued that Microsoft’s aggressive push to become an AI company that sells tools nobody wants to buy has proven to be a significant detriment to the handful of things it does right. Xbox players - myself included - have little to be happy about, as studios are shutdown, games are cancelled, and prices increase as Microsoft reportedly aimed for a 30% profit margin - a rather unrealistic target for a games publisher and platform holder.
As we’ll get into momentarily I’m incredibly cynical about all of this, but credit to Sharma and the rest of the leadership in showcasing there’s an effort to do something. As I said in January, something needed to be done, and this seems like a step forward in that regard. Sure, it reads like it was written in Copilot, but it speaks to a collective understanding of a malaise that sits across Xbox as a brand that needs to be addressed.
Sharma addresses this directly in one of the opening lines of the memo, stating that “players are frustrated” at the state of Xbox and the games industry as a whole. That the old model pushed by Phil Spencer and Sarah Bond was no longer working, so they need to move in a different direction.
Stop Me If You’ve Heard This Before
All that said, it’s interesting how you can repackage the same ideas again and again under a corporate reset. Sharma is treating this like taking on a position in government. I mean, she openly says that at the time of the memo she was 62 days into the job. Expect a big PR stunt in a months time when we hit the 100 day mark.
But then half of it is stuff Phil Spencer was pushing for: engaging with 3rd party developers (notably those in Asia), strengthening the portfolio of franchises, reinforcing the slate of titles coming to the platform, cloud play, Game Pass, supporting ongoing live-service games like Sea of Thieves, Elder Scrolls Online, Fallout 76 and Minecraft (yeah, Minecraft is a live-service game).
In fact right now the things that are going well for Xbox are largely down to a lot of initiatives that Spencer and his team fought for years to put in place. The Xbox line-up has been consistently strong over the past two years:
2024: Senua’s Saga, Avowed, Indiana Jones and the Great Circle, Ara: History Untold, Diablo IV: Vessel of Hatred
2025: Outer Worlds 2, Ninja Gaiden 4, DOOM: The Dark Ages, South of Midnight, Tony Hawk’s Pro Skater 3 + 4, Gears of War: Reloaded, Elder Scrolls IV: Oblivion Remastered.
Meanwhile 2026 is shaping up well with Kiln out now, Forza Horizon 6 next month, plus Halo: Campaign Evolved, Fable, Minecraft Dungeons II and Gears of War: E-Day planned for the rest of year. Though many projects have subsequently been cancelled given Spencer’s push to purchase Activision. He’s certainly made many of his own mistakes over the years.
Killing the ‘Everything is an Xbox’ PR push will help to consolidate the brand a little. But I find this press release interesting in that while I stifle a yawn it also reads like two separate stories published in the same post.
A Reset to Business As Usual?
So one of the lines that stuck out to me was as follows:
Along the way, we will reevaluate our approach to exclusivity, windowing, and AI, and share more as we learn and decide.
Now of course, yes, AI is mentioned here. But it’s just one part of a larger meta-narrative going on, and how that fits into the broader eco-system of Microsoft as a whole. After all the real emphasis of where Xbox is going can be seen just a few paragraphs earlier - emphasis mine:
Xbox will be built to be affordable, personal, and open. We will offer flexible pricing so it’s easy to get started and keep playing. The experience will adapt to you, letting you customize how you play, helping you find what you’ll love, and connecting you with the right people. And we will be open to all creators, from individuals to the largest studios, giving anyone the tools to reach a global audience and keep their games growing over time.
Our new north star will be daily active players.
Now when you take the latter in context of the former, the math doesn’t really add up. If we’re keen on maximising and stabilising daily active players, then exclusivity makes little sense - plus they’re still trying to justify that Activision Blizzard purchase after all. Sure, windows might shift, but then having delayed releases on non-Xbox platforms may prove more harmful than otherwise. In the past year Xbox’s titles have proven quite successful on PlayStation, but then Sony are returning to exclusivity given their PC ports don’t really sell that well - admittedly how much of that is down to the fact that by the time they hit the market, they’re often 2-3 years late? If you’re interested in maximising DAU, going back to hardcore console exclusivity is simply implausible.
Besides, I sincerely doubt the next Call of Duty will be removed from or released later to PlayStation. Not just because it’s the game’s largest market, but it runs risk of exacerbating the opposition against Game Pass that the FTC argued just a couple years prior.
Then of course everything about maximising experience, given players options, and opening up to creators very much plays into the entire AI playbook that Microsoft have been playing from. At present, we’ve yet to see much of what Microsoft hopes to bring to Xbox with AI. At best there’s been the Gaming Copilot announcement? Right what little dialogue there’s been about AI impacting Xbox has largely came from elsewhere in the company as they make a lot of noise about things like Microsoft Muse - with CEO Satya Nadella highlighting how little he understands video games and the work his own researchers do by proclaiming it was the future of game development (sigh, no…). Not to mention that of course their Xbox hardware is now significantly more expensive than it was at launch because the parent company is in amongst the data centre hardcore that’s causing prices to increase.
Right now it seems like the easy wins Sharma can achieve in AI is just to keep quiet for a while. But then it’s her bosses that are the bigger problem with player’s perceptions of how AI will affect Xbox right now. Though I doubt she can send the big boss-man a Teams message asking him to pipe down…
Pushing all of my tired cynicism aside, I do hope for the best. I want Xbox to succeed and the more competition we have in the sector the better off the industry is, and I hope Booty and Sharma can execute on their vision. Just don’t be surprised if we’re sitting here at the end of the year and nothing’s really changed.