Microsoft is reported to have invited other agencies to pitch for the work, although a formal review has not yet been called.
It is understood to be considering expanding Xbox's below-the-line roster, because of difficulties in working across different territories and media.
Microsoft refused to comment on the news. A spokewoman for Xbox said: "There is no comment at the moment. Xbox has not announced anything to do with agency relationships."
Agency Republic was appointed in January 2002 to handle the games console's direct marketing and customer retention activity. It is reported to have decided not to repitch following cultural and strategic differences between client and agency.
The agency's first task for Xbox was to build a customer database gathered from reply cards sent out with Xbox games.
At the end of last year, the agency developed a 拢2.5m CRM campaign designed to find out more about the habits, interests and preferences of Xbox gamers.
This included the relaunch of Xbox's website to include more areas of interest, allowing Microsoft to learn more about visitors.
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