The 404 Media Podcast

Episode: The Video Game Industry’s Existential Crisis (with Jason Schreier)

Date: November 17, 2025
Guests: Jason Schreier (Bloomberg journalist, author of Play Nice)

Episode Overview

In this illuminating episode, the 404 Media team (Emmanuel, Joseph, Sam) welcomes Jason Schreier, one of gaming's most respected investigative journalists, to unravel the seismic changes shaking the video game industry. They explore the implications of Microsoft's profit-driven shifts post-Activision-Blizzard acquisition, the fall of industry exclusivity, Electronic Arts' private equity buyout, and the long shadow of AI and consolidation. The conversation is a mix of industry-level business analysis and on-the-ground realities for game developers and players, with Schreier offering clear parallels to other creative industries.

Key Discussion Points & Insights

1. Microsoft, Xbox, and the Profit Mandate

• The 30% Profit Margin Target ([03:50]–[06:48])

  • Microsoft’s acquisition of Activision-Blizzard and internal shift to AI sparked pressure to deliver 30% profit margins from Xbox (well above previous single or low double-digit margins).
  • Schreier explains:

    “All of this was driven largely by this new target... which is hit 30% profit margins.” ([04:32], Schreier)

  • Strategies include cost-cutting (R&D, layoffs, axing experimental projects) and maximizing revenue, e.g., raising prices and shifting games to other platforms.

• Impact on Studios & Employees ([06:48]–[12:39])

  • Most rank-and-file employees weren’t aware of the margin mandate; information filtered to finance and higher management only.
  • The pressure manifests in pragmatic game development:

    “Ultimately, it just means cut costs, boost revenue. That's fundamentally the baseline of what this means.” ([10:54], Schreier)

  • Shift away from games as ecosystem drivers (no longer as many consoles sold), now focused on per-game profitability.

• Is Xbox on a PIP (Performance Improvement Plan)? ([11:19]–[19:49])

  • Emmanuel wonders if this is prelude to further cuts or divestment.
  • Schreier notes the 30% target isn’t unique for software, but complications arise with Game Pass supplanting individual game sales:

    “Game Pass... means they're not selling as much, because people can just subscribe to Game Pass to get them for much cheaper...” ([13:09], Schreier)

  • Once-experimental studios like Double Fine now face new mandates, risking the diversity of games.
  • Pressure leads to cancellation of new IPs and risk-taking projects—“shortsighted moves”:

    “When you are in a position where you have to think about... the next one to two years instead of the next five to ten years, then that leads you to make more short sighted decisions.” ([18:48], Schreier)

2. Innovation, R&D, and the Changing Face of Game Development

• Are We Seeing Less High-end “Blue Sky” Work? ([19:49]–[23:21])
  • Large-budget “research lab” style innovation is threatened by cost-cutting.
  • Schreier sees a tension: sometimes R&D runs inefficiently, but betting on innovation is where hits and breakthroughs stem from.
  • Corporate executives, especially from tech, struggle with game industry unpredictability:

    “I think some of the people who are at Microsoft... are just not used to the way the games are made in comparison to their more predictable software divisions.” ([22:06], Schreier)

3. Xbox’s Strategic Future: Game Pass & M&A

• Is Game Pass Still the Strategy? ([27:35]–[30:44])

  • Game Pass’s price hikes and plateaued subscriptions call sustainability into question.
  • Schreier speculates Microsoft may eventually stop releasing its biggest new games on Game Pass day-one:

    “That’s what I’m very curious to see... if they pivot in that direction.” ([29:06], Schreier)

• Acquisitions’ Mixed Results ([30:44]–[35:03])

  • Massive studio buyouts haven’t yet resulted in a deluge of major releases.
  • The cycle time for development is so long, strategy effectiveness is tough to judge:

    “…The biggest games are taking between five and seven years to develop... It's still way too soon to tell if [the Activision and Bethesda deals] were a good deal for them.” ([32:42], Schreier)

4. Exclusivity and the End of the Console “War” ([35:14]–[37:25])

• Xbox Games (Even Halo!) Going Multi-platform
  • Schreier sees Microsoft’s multi-platform shift (Halo coming to PlayStation) as clear capitulation:

    “Yeah, 100%. I mean I think they were forced to, like, it's just, they just lost that war.” ([35:40], Schreier)

  • The new Xbox console will likely be more PC-like, signaling the death of traditional hardware-driven exclusivity.

5. The Electronic Arts LBO: New Crisis, Old Playbook?

• EA’s Leveraged Buyout Explained ([37:25]–[41:45])

  • Schreier breaks down what a leveraged buyout is, why it’s risky, and what it signals:

    “You usually... are going to take out a loan from the bank... and then put that debt on the books of the company you just bought.” ([38:06], Schreier)

  • EA’s upcoming private equity ownership, led by Saudi Arabia’s wealth fund, means severe cost-cutting and likely layoffs—another sign of industry contraction.

• Industry-Wide Consequences

  • Both Microsoft's profit-first mandate and EA’s new debt load equate to more pressure and less room for risk.
  • Schreier warns of further layoffs and the end of transparency for EA as a private company:

    “It is almost certain that next year when this deal closes, EA will shed a lot of jobs and the carnage will continue in the games industry.” ([39:23], Schreier)

6. Industry Consolidation: Big Five Becomes Big One?

• How Widespread Consolidation Shrinks the Industry ([41:55]–[48:59])

  • EA’s deal signals stagnation: if they thought their stock would go higher, they’d wait to sell.
  • Fewer big companies means lost competition and transparency:

    “...Consolidation always leads to bad, bad things. And so, yeah... if you are someone trying to pursue a career... this is all pretty scary stuff.” ([44:13], Schreier)

  • The pyramid of power is crumbling—of the old giants, only Take-Two is left standing.

• Gaming Now: Book Publishing Parallels

  • Schreier argues gaming increasingly resembles book publishing: a handful of giants, plus a tsunami of indie/self-published content:

    “...The over saturation of video games is just so reminiscent of what has happened in the book world that it's hard not to draw the parallels there.” ([48:36], Schreier)

  • Big bets on blockbusters subsidize the rest; making a living as a creator is getting harder.

7. Innovation, Stagnation, and the Evolving Indie Scene

• Big Games: Stagnation vs. Innovation ([48:59]–[56:03])

  • Emmanuel reflects that truly ambitious, expensive games seem less and less feasible as risk tolerance decreases:

    “If people are not taking those huge bets... we're just gonna, we are gonna stagnate, right?” ([51:11], Emmanuel)

  • Schreier counters that innovation is booming among indies:

    “When I play the big budget games, I feel like this is so stagnant... When I play the indie games, I'm like, holy crap, this is blowing my mind.” ([51:11], Schreier)

  • Modern tools let small teams achieve impressive fidelity; major publishers still have value as a “bar for quality,” but have lost trust due to buggy launches.

• For Players: Best of Times. For Careers: Worst of Times

  • More cool, innovative games than ever—2025 cited as “one of the best years for games themselves of all time.”
  • But a sustainable, stable career in AAA gaming is harder than ever.

8. Artificial Intelligence: Hype vs. Usability ([56:03]–[63:02])

• Will Generative AI Solve Crunch or Make Life Harder?
  • Emmanuel wonders if AI could lighten game dev workload; Schreier shares his skepticism:

    “I have found in my own use that AI is just completely useless because it gets so much wrong all the time... If you're trying to make a video game... to use this generative AI that is just so flawed seems like it would cause a lot more problems than it fixes.” ([58:31], Schreier)

  • AI feels more like a hype-driven managerial fad than a transformative tool for developers.
  • Schreier remains open-minded, but so far sees little evidence of net benefit.

Notable Quotes & Memorable Moments

• “Fountain of scoops is why Bloomberg employs me.” ([01:42], Schreier)

• “When you are in a position where you have to think about... the next one to two years instead of the next five to ten years, then that leads you to make more short sighted decisions.” ([18:48], Schreier)

• “If you're trying to make a video game... to use this generative AI that is just so flawed seems like it would cause a lot more problems than it fixes.” ([58:31], Schreier)

• “When I play the big budget games, I feel like this is so stagnant... When I play the indie games, I'm like, holy crap, this is blowing my mind.” ([51:11], Schreier)

• “Consolidation always leads to bad, bad things... If you are someone trying to pursue a career at big companies in the games industry, this is all pretty scary stuff.” ([44:13], Schreier)

• “[On Game Pass releases:] ...what I'm very curious to see is if Xbox pivots on that strategy and is like, 'you know what, starting in 2027... we're actually not going to put Our Games Day 1 on Game Pass,' because we don't think that works anymore.” ([29:02], Schreier)

• “[About EA’s LBO:] ...This new privately owned EA is suddenly going to be responsible for paying the interest on that insane amount of debt which could come out to a billion dollars a year... which again, just like with Microsoft, means a whole lot of cost cutting.” ([39:11], Schreier)

Timestamps for Important Segments

• 00:32 – Jason Schreier joins, overview of his credentials.
• 03:50 – Microsoft's profit margin mandate and its knock-on effects.
• 06:48 – How employees are affected, decline of console as a strategy.
• 12:39 – Is Xbox entering a “PIP” phase? Ambitious targets, Game Pass complications.
• 19:49 – Innovation at risk; “research lab” style Blue Sky game dev under threat.
• 27:35 – Is Game Pass still the strategy? The risk of big launches on subscription.
• 30:44 – Acquisitions: why new releases aren’t flooding out.
• 35:14 – Xbox’s loss of exclusivity; “going third party.”
• 37:25 – Electronic Arts’ leveraged buyout, implications.
• 41:55 – EA’s deal as warning about industry growth.
• 45:45 – Schreier’s book publishing/games industry parallel.
• 48:59 – Stagnation at the top, innovation at the fringe, career instability.
• 56:03 – AI: from hope to hype, skepticism about productivity benefits.

Concluding Thoughts

The episode paints a clear portrait of an industry “at the end of an era”: enormous financial pressures, rapid consolidation, and the fallout of misaligned incentives are making game development riskier and less secure, especially at scale. Yet creatively, indie and smaller games are thriving, and for players, there's never been a better time to discover new titles. AI remains more of a managerial buzzword than a true workflow changer. For the corporations, survival means retreating to safe bets and cost control; for everyone else, it’s a time of daunting volatility and potential.

For more details and investigative reporting on these stories, subscribe to 404 Media at 404media.co.