Gaming has seen a run of unusual but striking experiments lately: Halo running in a web browser, skateboarding inside Call of Duty. Behind much of this wave is AI-assisted modding, and Microsoft has now made it official that it intends to be part of it rather than watch from the sidelines.

The company has set up a new unit called Xbox Labs, aimed at capitalizing on the rise of the modding community and turning ideas into shipped products.

What will Xbox Labs do?

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According to Xbox CEO Asha Sharma, Xbox Labs is a small team made up of game makers, engineers and scientists. Its core mission is to transform emerging technologies into real products that both players and developers can actually use.

Sharma said the work will proceed transparently, and that success will be measured by whether more people play and create content.

Long-held assumptions are being shaken

Recent experiments have included running Windows PC versions on Apple devices, or porting games into browsers using WebAssembly and WebGPU. Today, WebGPU's global browser support has reached the 90% level.

For Sharma, these developments upend long-standing assumptions about the coupling of software and hardware, the line between production and play, and how games get discovered.

AI agents enter the picture

Mod developers have managed to run classic titles from Microsoft's Xbox backward compatibility program on modern hardware, without commercial model restrictions. Sharma pointed to the success of AI agents at writing, running and testing code, suggesting the same dynamics could extend to games.

Meanwhile, players spend more than 72 billion hours a year on Xbox games — roughly five times the time spent writing code worldwide.

Microsoft says it intends to share the tools and learnings from Xbox Labs with all developers in the industry. But the company's legal stance is still unclear if modders decompile and distribute copyright-protected games without permission. Microsoft did not respond to requests for comment on unauthorized IP use.