Track Record of Flops
Why PlayStation walked away from PHYSINT, what happened to the Kojima–Sony partnership, and why Xbox may be betting on Kojima at exactly the right moment.
On the night of September 10, 2026, the game industry saw a sight you don't stumble on every day: word that Hideo Kojima's next game, PHYSINT, wasn't a PlayStation project no more. Kojima himself, Kojima Productions, PlayStation, and Xbox all lit up social media at damn near the same time, and the whole picture flipped overnight.
On the surface, the announcements read calm enough. Kojima said PlayStation Studios came knocking in mid-June with no warning, pulling their support, and after three months of shopping for a new partner, he shook hands with Xbox again. PlayStation confirmed the split too, calling it "a difficult decision after careful consideration," without spelling out why.
Both sides tacked on the same line — thirty years of partnership, still solid — making clear this wasn't personal.
But the inside story, as multiple outlets have reported citing sources close to the matter, reads a good bit drier. Cost overruns, doubts about profitability, and cold feet about sinking hundreds of millions into a game that wouldn't stay a permanent hardware exclusive — that's what got named as the backdrop.
Death Stranding and its sequel hadn't hit PlayStation's sales targets, and PHYSINT had already blown past a few milestones and its budget besides, years out from release.
There's an interesting people factor too — most of the PlayStation executives who welcomed Kojima with open arms right after he left Konami have moved on from the company these past few years. New folks calling the shots don't carry the same weight of old trust.
Thirty Years of History, and a Hidden Thread
Kojima and PlayStation go back to the late '90s, when Metal Gear Solid launched as a PlayStation 1 exclusive. The real turning point came in late 2015. After a falling-out with Konami, Kojima started Kojima Productions the very next day, and Sony announced a long-term partnership almost simultaneously.
Death Stranding launched in 2019 as a PS4 exclusive before expanding to PC and beyond. But the intellectual property born of that collaboration was handed fully from Sony to Kojima Productions on November 7, 2024 — the very same day the original game launched on Xbox Series X|S.
Announced around the fifth anniversary, it was taken at the time as just a sign of growing independence. Looking back, it reads different.
Sony was the partner that funded the technology and polish, but never held onto ownership of what got made. That's likely why Kojima Productions could jump to another platform as fast as it did once PHYSINT fell through — that kind of flexibility comes standard when an independent studio owns its own IP.
From Sony's side, they poured in a mountain of technology and capital without ever locking down exclusive rights to the result, so it's a fair bet structural regret played into this call too.
A Double-Edged Sword
Worth sitting with the strengths and weaknesses of the studio itself here. Its biggest asset, hands down, is the "Hideo Kojima" brand — the global fanbase built since the Metal Gear Solid days, the pull to cast stars like Norman Reedus or Ma Dong-seok, and a directorial style blending cinema and gameplay no other studio quite matches.
Death Stranding, a game hard to pin to any genre, landed commercially at all largely on that brand power. And unlike the Konami years, the early setup let Kojima keep full creative freedom while borrowing a major publisher's capital and infrastructure — often cited as a model for what an independent studio could look like.
That strength cuts both ways, though.
First, every project runs on Kojima's own rhythm and perfectionism, structurally risking longer cycles and ballooning budgets — PHYSINT was already facing delay and overspend concerns years before release.
Second, there's little cushion when results fall short of expectations. The Death Stranding series, while critically solid, never hit the mass-market numbers Sony was banking on, by multiple accounts.
Third, leaning this heavily on a partner's money and technology means every time that backer changes, the studio has to rebuild its engine and infrastructure from scratch.
Indeed, the studio's lost access to the Decima engine, and film talks running through Sony Pictures and Columbia Pictures went cold. They kept the IP, but had to hand back the infrastructure propping it up.
Kojima Productions, in the end, seems fated to keep walking a tightrope between creative freedom and business stability.
Death Stranding 2: A Warning Sign?
So how does the studio's latest, Death Stranding 2: On the Beach, hold up as a gauge of that dilemma?
It landed in the high 80s to low 90s on Metacritic, among 2025's best-reviewed titles and a solid jump over the original's 82. Steam user reviews came in close to "Overwhelmingly Positive," and top Japanese magazines scored it near-perfect.
But there's a real split inside those numbers.
Some praised how it smoothed out the original's movement-and-logistics gameplay and sharpened the action and quality-of-life. Others took issue with exactly that smoothness — arguing that easing off the isolation and pressure of the original watered down Kojima's own strengths, with steady grumbling about the still-lengthy cutscenes and repetitive delivery loop.
IGN France went further, panning it for draining the tension out of the journey by lowering the difficulty.
So you've got Kojima taking criticism to heart and polishing for a wider crowd, while giving up some of the original's sharp edge in the process.
Sales-wise, nearly 20 million players across the series ain't nothing, but there's a clear gap between that and a mega-franchise — which raises the chance that Sony's and Kojima Productions' expectations were mismatched from the start.
After Concord — Sony's Losing Streak
It's hard to write off the PHYSINT pullout as a one-off, given how much project-cleaning Sony's done these past two or three years.
The signature event was Concord, the live-service shooter launched in August 2024 that never cracked triple digits in peak Steam concurrents and got pulled just two weeks in, with losses estimated at $300 million or more. Developer Firewalk Studios shut down soon after.
The bad news kept coming. Naughty Dog's Last of Us multiplayer spinoff, reportedly well along in development, got scrapped entirely over quality concerns.
Bluepoint's God of War-based live-service project and an unannounced Bend Studio project both fell through.
Bluepoint — known for the Demon's Souls and Shadow of the Colossus remakes — shut down completely earlier this year, and Dark Outlaw Games, built specifically to develop new first-party IP, closed without ever announcing a title.
On top of that, 2021's Destruction AllStars is slated to shut its servers within 2026, and Foamstars quietly exited within a year amid backlash over its monetization.
Sony's original goal of shipping a dozen-plus live-service titles by 2025 shrank to less than half that, by most industry accounts.
Sure, there's an exception — Helldivers 2 moved over 12 million copies. But taken as a whole, failures outnumbered wins by a wide margin, and the fallout reached leadership too.
The executive who championed the live-service push lost internal credibility, and the co-CEO structure that followed folded after just a year.
It's a fair bet Sony couldn't keep bankrolling something shaped like PHYSINT — expensive, slow, uncertain. Whatever exception Kojima used to get, that's over now.
Upheaval at Xbox
Xbox was going through its own upheaval during this same stretch.
In February 2026, Phil Spencer — 38 years at Microsoft, running Xbox since 2013 — stepped down. He agreed to stay on in an advisory role through summer for the handoff, but it was effectively the end of an era.
More striking was that Sarah Bond, his closest lieutenant and long-presumed successor, left the company outright.
Her "Xbox Everywhere" strategy — giving up console exclusivity to widen the net across PC, cloud, and subscriptions — grew the user base, but left the company second-guessing whether there was still a reason to buy the console at all, and it was effectively judged a failure.
Her replacement was Asha Sharma, president of Microsoft's Core AI division, who came up through Instacart as COO and Meta as VP — with zero prior gaming experience, drawing early cynicism as "a CEO who doesn't know games."
Her moves since have been surprisingly practical, though. In her first hundred days she pushed out more updates than the entire prior year, and reversed an eight-month Game Pass subscriber slide through price cuts — slashing Game Pass Ultimate by roughly 30%, with new sign-ups and retention both improving, the company says.
Most symbolic of all: locking down Gears of War: E-Day as a pure exclusive. What Bond's regime had effectively given up on — console exclusivity — Sharma's regime is trying to make central again.
Against that backdrop, landing PHYSINT is a pretty symbolic get.
Beyond the buzz of the Metal Gear Solid creator building a new spy-action IP, it's a shot at bundling this with the already-in-progress horror game OD to lock down a multi-year partnership with Kojima Productions.
Throw OD's film and TV rights on top, and Xbox isn't just picking up one game — it's going after an IP ecosystem stretching across console, PC, cloud, and film.
Practically speaking, Xbox's policy of day-and-date PC releases for its own titles gives Kojima Productions a much better deal now that Sony's pulled back on simultaneous PC releases for single-player games.
Still, with hardware sales stuck in double-digit decline and two leadership changes in recent memory, whether Xbox has the will to see this bet through to the end is still an open question.
The game's actual reveal and release are a long way off, so it's too early to call.
Where Opinion Sits, and What's Left
Reaction to all this doesn't boil down to "Sony screwed up."
Plenty of outlets have lumped this in with a string of self-inflicted wounds Sony's racked up lately — this news landed not long after gamers were already sore about Sony winding down physical disc production, prompting a fair share of cynical takes about the company cutting into its own brand yet again.
Others who follow Sony's finances and live-service track record read it more coolly, as a decision made with numbers rather than feelings.
Communities have landed on both "Xbox saved Kojima in the end" and "at least the two sides parted ways with mutual respect."
Sony backed Kojima with technology and capital but never ended up owning what came of it, and after years of failures, has less appetite left to carry an uncertain big project to the finish line.
Xbox is chasing this for the opposite reason.
Two companies working through two very different crises, each in their own way, and a creator named Kojima just happened to land at the crossroads.
The developer who's stayed closest to PlayStation since the Metal Gear Solid days is now chasing his old dream again, under a rival flag.
Nobody knows yet what PHYSINT will actually turn out to be.
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