Microsoft Shuts Down Xbox Physical Games Department

In a sign of the times, Microsoft has reportedly closed its department dedicated to producing physical game releases for Xbox.

This shift aligns with the industry’s accelerating transition towards digital distribution.

The End of an Era for Xbox Discs?

According to Windows Central, Microsoft’s recent round of layoffs included the shutdown of teams focused on bringing games to physical retail for Xbox.

While Xbox isn’t completely abandoning physical games, the move suggests they are no longer a priority.

Production could be outsourced, but Microsoft is clearly embracing digital distribution as the future.

Reading Between the Lines

Physical Xbox games are becoming a thing of the past.

Microsoft’s latest released Xbox Series S only supports digital games.

Additionally, Microsoft now prefers to use Game Pass for delivering new games, including Xbox exclusives which are now available on the subscription service from day one.

So. Physical releases are becoming less important.

Rumors indicate Microsoft’s next Xbox iteration code-named “Keystone” will also be digital-only like the Series S.

The end goal appears to be an all-digital ecosystem.

While physical media won’t disappear overnight, its downsizing at Xbox highlights the company’s belief that most gamers will eventually go fully digital.

The Community Remains Divided

However, many gamers still prefer physical games today.

Used game sales, collecting, and the ability to resell discs provide advantages.

Recently, Ubisoft faced backlash after stating players need to become “comfortable” going digital-only.

While Xbox caters more to digital, abandoning physical media completely risks alienating parts of its audience.

For now, Xbox remains committed to supporting physical media, even as digital takes center stage.

But the long-term trajectory points toward cloud gaming and subscription services.