From around July, rumors began to swirl that Gears of War: E-Day had cost upwards of half a billion dollars, raising questions about the state of AAA game development.
I can confirm at my end that Microsoft’s financial auditors have attributed upwards of $500 million to The Coalition between Gears of War 5 and Gears of War: E-Day. But through multiple sources, I have a clearer picture of how that money has been spread and allocated over the past 6-7 years, and why there are even some internal disagreements over how exactly attribution should be distributed.
The Coalition has cost Microsoft “$500 million~” but is that the full story?
The reports of Gears of War: E-Day costing upwards of half a billion emerged first via Tom Henderson of Insider Gaming, and were later corroborated by Kotaku’s Ethan Gach, with an extra $100 million on top.
I pushed back against the claims on my own show with preliminary information I’d received over the summer that The Coalition’s budgeting situation is more complex than simply “Gears of War: E-Day cost half a billion dollars.”
Multiple sources familiar with, but unauthorized to speak with us on, Microsoft’s plans helped us flesh out a picture of why The Coalition has been hit with a $500 million price tag, and why, ultimately, debates over “how” the money has been allocated are ultimately academic.
Indeed, I am told by a variety of trusted sources that The Coalition has been contributing to a variety of other Xbox flagship titles that use Unreal Engine, including games like Avowed and State of Decay. Former senior Xbox staffer Derek Reese elaborated further recently on BlueSky, noting that The Coalition is “on the hook” for Microsoft’s bespoke tools and pipelines for Unreal Engine.
So much of that cost is The Coalition being on the hook for the Microsoft branch of Unreal and one of the flagship titles.
I should know, I tried to get leadership to support a plan to have other studios adopt it and write off the support costs.
Same problem with Turn10 and ForzaTech.— @derekree.se (@derekree.se.bsky.social) 2026-11-02T09:20:12.402Z
However, the situation goes a bit further than tooling and collaborative work on first-party Xbox games.
The Coalition also spent a great deal of time working with Epic Games on the “Matrix Awakens” Unreal Engine demonstration, as well as the Alpha Point demo, both of which were intended to showcase the potential of UE5 on next-gen consoles and PCs. The tools and techniques developed for these demonstrations were later deployed across a range of other first and third-party products Windows Central understands, during the period between 2020 and 2021.
Rod Fergusson formally left The Coalition in early 2020, and during the transition, it put the studio into a bit of a dormant state for a period, while Microsoft figured out how best to move the studio forward. The pandemic was also in full swing, creating chaos for game development pipelines that were designed for office work rather than remote work.
During this time, The Coalition worked for over a year and a half on a prototype project for Xbox that Windows Central understands was ultimately canceled. The Coalition also worked on Avowed, Hellblade 2, Clockwork Revolution, State of Decay 3, Grounded and Grounded 2, and has even contributed to the upcoming StarCraft reboot. Eventually Mike Crump was solidified as the new studio head, and E-Day development began in earnest.
Gears of War: E-Day hasn’t been a huge success story against what Microsoft auditors and spreadsheets deem to be The Coalition’s budget today. It runs afoul of a common theme surrounding Xbox in the post-pandemic period with an unclear accounting structure for contributions towards other projects.
I’ve previously heard from studio heads at Xbox, both past and present, who didn’t have clarity over how their team’s contributions to Xbox Game Pass fed back into their costing structure and how it affected investment from the Microsoft mothership.
Either way, it’s true that game dev in North America has become incredibly costly … and times are hard for many consumers
Either way, even if The Coalition didn’t spend $500 million specifically on E-Day over the past half-decade — it’s a lot of money to invest without a specific structure in place to explain why some of these costs were worthwhile to Microsoft auditors. A common theme in industry discussions revolves around the month-over-month cost of AAA game development in North America, vs. the willingness to spend on the part of core gamers therein. Competition from free-to-play titles, the sheer volume of content, and even non-gaming hobbies are thought to have reduced the opportunity.
Microsoft CEO Satya Nadella previously said Xbox had to become “sustainable” over the summer, while also stating that it will “always” invest in gaming as a company. Nadella lamented that video platforms like YouTube were doing a better job at monetizing Xbox than Microsoft itself. He’s not exactly wrong, but I’d argue that’s on Microsoft’s lack of innovation at the top level, and tendency to cut and run rather than work through building up new businesses. The Xbox business is heavily constrained right now due to the component rout that Microsoft itself has had a hand in engineering. It doesn’t bode well for the upcoming Xbox Helix, widely expected to be the most expensive retail video game console ever.
I argued in a piece in the summer that Microsoft’s Xbox studios shouldn’t be forced to bear the pain of previous decisions or market situations that are no longer viable … alas, in our economic system it’s naïve to expect corporations to behave this way.
RELATED: Xbox gamers shouldn’t be on the hook for Gears of War: E-Day’s retail success
I can’t help but feel like the “$500 million” figure being shared around internally is being used to justify potential cuts, layoffs, or worse, a studio closure targeting The Coalition. Perhaps to “soften the blowback”, should Microsoft target the studio. For what it’s worth, I’ve not heard that Xbox is planning to close The Coalition. But Microsoft has already laid off thousands at Xbox, and has signaled plans to continue.
It’s hardly a good look if Microsoft’s first true, full Xbox exclusive in years results in mass layoffs at one of its core pillar studios. Gears of War has a TV show and a movie on the docket, and Gears of War: E-Day reviewed incredibly well. It’s also true that Gears: E-Day is squashed beneath Call of Duty: MW4, GTA 6, WoW: Forever, and a variety of other major games that launched between August and now.
There’s only so much $$$ to go around for one thing, and for many, even less free time to hit all these games.
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