The choice shows Microsoft opting to step back from a portion of the game software market where it has failed to gain dominance, although the company remains focused on game development, console hardware and a cloud service for playing games that run on remote servers. It also plans to release a new version of the Xbox video game console later this year.
The move comes less than four years after it acquired Beam, the game streaming start-up that Microsoft rebranded to Mixer in 2017. The Beam acquisition followed Amazon's 2014 acquisition of Twitch, which has remained dominant.
With people staying home to reduce spread of the coronavirus in recent months, Twitch users spent more time watching people play games, but the increase was not as pronounced for Mixer, despite being smaller, according to a an analysis of data from privately held Stream Hatchet by the Streamlabs, a company whose software helps people run their videos on Twitch and other services.
"Ultimately, the success of Partners and streamers on Mixer is dependent on our ability to scale the service for them as quickly and broadly as possible," Phil Spencer, the Microsoft executive vice president in charge of the company's gaming efforts, wrote in a blog post on Monday. "It became clear that the time needed to grow our own livestreaming community to scale was out of measure with the vision and experiences we want to deliver to gamers now, so we've decided to close the operations side of Mixer and help the community transition to a new platform."
Microsoft sought to grow the Mixer user base by signing deals with major creators, including Tyler "Ninja" Blevins, to come over to the service. Matt Salsamendi, a co-founder of Beam, announced his departure from Microsoft in October 2019.
The Mixer service will remain available through July 22, and after that the homepage will redirect to the Facebook website fb.gg. The ability to stream to Mixer from the Xbox One will go away, although gamers will be able to keep streaming to Twitch.
Facebook has been expanding its efforts in gaming in recent years as it looks to find new markets outside of online advertising. It acquired virtual reality headset maker Oculus for $2 billion in 2014, and began selling the Oculus Quest and Oculus Rift S VR headsets in May of this year.
In November 2016, Facebook announced Instant Games, consisting of light games for the Facebook and Messenger apps that are built on the HTML5 software stack. The company launched Facebook Gaming, its Twitch rival, in 2018, making it possible for users to livestream their gameplay to others on the social network. The company claims that over 700 million users engage with gaming content in some fashion each month.
Facebook and Microsoft see opportunities to work together more, including around the cloud streaming service xCloud, which is in preview.
"Imagine a scenario where people can instantly move from watching a Facebook Gaming creator's livestream to jumping in and playing the game with their closest friends, all in one click," Vivek Sharma, head of Facebook Gaming, wrote in a blog post. "Project xCloud can help change the way people discover games by expanding our Playable Ads format, enabling Xbox games on your mobile device. While scrolling News Feed, people could try out awesome games from Xbox Game Pass immediately, further blurring the line between discovery and play."
Similarly, Spencer wrote that Microsoft is keen to introduce the ability to let people click to play from Facebook Gaming and Instagram.
-- CNBC's Salvador Rodriguez contributed to this report.