Xbox CEO Asha Sharma announced 3,200 layoffs, roughly 20% of the division's staff, to be completed over the next 12 months. The cuts confirm what the numbers have been signaling for years: Game Pass, Microsoft's last credible strategy for Xbox, has failed. Ben Thompson's Wednesday Daily Update traces exactly how Microsoft arrived at this point, covering the internet economics that made bundling look attractive and the management decisions that made it fatal.
Two other pieces anchor this week's bundle. Thompson published a scripted monologue written from Mark Zuckerberg's perspective, framing Meta's AI investment cycle for a hypothetical 2026 earnings call. It doubles as a history of Meta's missteps and a forward-looking argument for why the company's current bets are structurally different. Separately, Asianometry's Jon Yu released a video on Toto, the Japanese toilet manufacturer, which turns out to be a non-obvious node in the AI hardware supply chain.
The Xbox piece is worth reading in full not for the conclusion but for Thompson's breakdown of sunk cost logic and transaction coordination as they apply to platform businesses. The Zuckerberg script is worth it for the framing device alone. Andrew Sharp and Thompson covered both on this week's Sharp Tech, alongside Meta's Muse-Spark release and a Q&A on token costs.
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