Xbox CEO Asha Sharma has told staff the platform holder "will not survive if we only rely on the past," according to a Windows Central report on a recent internal town hall. The message: Microsoft's gaming business needs new IP, not another lap around its existing franchises.

Sharma, who took over from Phil Spencer, was quoted telling employees that Xbox needs to "continue to create enduring new IP" and must "find new ways, and courage, to have invention on new IP that reach new sets of audiences." She paired the warning with a commercial ambition, saying Xbox is "backing [its] strongest franchises" and that she wants its "great games to become great global billion-dollar franchises."

The rhetoric lands on scorched ground. Before Sharma's appointment, Xbox cancelled three new IP projects last year: Rare's Everwild, ZeniMax Online Studios' Project Blackbird, and Ninja Theory's Project Mara. Last month, Xbox proposed closing Ninja Theory entirely as part of what it calls a business "reset" — a restructuring that has cost an estimated 3,200 jobs and seen five studios divested. Ninja Theory began laying off staff last week.

What did Sharma say about Xbox's financial state?

The town hall didn't trade entirely in warnings. Sharma told staff that "after an all-time low, [Xbox] has started to return to growth" and that the firm is "making the right decisions to reinvest in the business." No figures accompanied the growth claim, so it reads as positioning rather than disclosure — a CEO framing painful cuts as the cost of future invention.

The irony is hard to miss. The division asking for "courage" on new IP spent the past year cancelling exactly that, while its growth engines — Call of Duty, Minecraft, the Fallout transmedia machine — are all inherited properties. Courage, it turns out, is cheaper than a greenlit prototype.

What is Xbox Labs?

Yesterday, Xbox announced Xbox Labs, a new internal team to test emerging ideas and "new technology." It will tackle "the possibilities in making great games easier to access, giving old games new life and allowing more players to become creators and co-creators." The team draws on "game makers, engineers, and scientists" already inside the Xbox organisation.

Notably, Xbox recruited no new staff for it. Like Xbox XP, announced last week, Xbox Labs centralises existing initiatives rather than launching a fresh endeavour. An Xbox spokesperson told GamesIndustry.biz the team has no explicit directive to use AI or other technologies, and would deploy them only when beneficial or necessary.

That caveat matters. Access, game preservation and "co-creation" are precisely the workloads the industry currently routes through AI tooling, and Xbox's parent has been aggressive there. The official line leaves the door open without signing anything.

Where does Xbox XP fit?

Xbox XP, the other new unit, handles transmedia brand extensions — think the Fallout TV series and the Minecraft theme park rather than a new engine or store. Kayleen Walters leads it. She is currently president of Minecraft developer Mojang Studios, previously oversaw franchise development at Microsoft, and served as vice president of franchise marketing and integrated planning at Lucasfilm.

Her résumé tells the story. Both new units, in their launch configurations, monetise and extend what Xbox already owns. The billion-dollar franchise goal and the survival warning sit in the same town hall, and the structural investments so far favour the former.

What changes for studios and teams?

For Xbox's remaining developers, the message is double-edged. Leadership is nominally asking for invention on new IP while its recent record shows Everwild, Project Blackbird and Project Mara cancelled and Ninja Theory — the studio behind Hellblade — proposed for closure. Teams pitching original concepts now know both that the CEO wants them and that the reset that killed the last batch is still ongoing, with Ninja Theory layoffs starting just last week.

For partners and licence holders, Xbox XP consolidates transmedia deals under one president with Lucasfilm pedigree, which should speed decisions on extensions of Minecraft, Fallout and stablemates.

The number to watch: whether Xbox greenlights and ships a genuinely new franchise under Sharma — or whether the next town hall updates the "all-time low" line with harder figures.