A recent report has shed featherlight on events at Microsoft that allegedly forced Xbox studios to provide a 30% profit margin – much higher than the industry average.
This was reported by Jason Schreier from Bloomberg that Microsoft’s 30% profit margin target has led to massive layoffs in its gaming division, project cancellations, controversial price increases, and a push for cross-platform.
Xbox cuts were profound. Thousands of workers lost their jobs in several rounds of layoffs. Games like Rare’s Everwild and The Initiative’s Perfect Dark reboot were canceled after years of development. ZeniMax Online Studios’ Project Blackbird has been canceled, leading to mass layoffs. The initiative was also closed. Last year, Microsoft shut down Redfall developer Arkane Austin and Hi-Fi developer Tango Gameworks.
Meanwhile, Microsoft has raised the price of Xbox Series X and S consoles and the price of Xbox Game Pass Ultimate to $29.99 per month – a recent move that has sparked huge controversy. Microsoft tried to jump to $80 for video games, but ultimately returned to $70 when fans rejected the idea of paying $10 more for Obsidian’s The Outer Worlds 2. Most expect Microsoft to jump to $80 at some point next year.
Bloomberg said the average profit margin in the video game industry is 17-22%. Over the last six years, Xbox has achieved 10-20%. To put that 30% target into better context, Sony’s PlayStation division achieved a 16% profit margin in the first quarter of FY25. Bloomberg said that Microsoft CFO Amy Hood has enforced the recent target in fall 2023 – due to Microsoft’s acquisition of Call of Duty maker Activision Blizzard for 69 billions of dollars.
Currently the result is according to Bloombergthat games that are economical to produce or have a greater likelihood of making a lot of money may be prioritized over riskier projects. Meanwhile, Xbox’s “shaky” hardware division could face a “significant rethink.”
IGN reported on the latest comments from Xbox president Sarah Bond, who stated that the next-gen Xbox console will be a “premium experience, curated at the highest level.” Bond also called the idea of exclusive games “outdated.” Today, Xbox Game Studios is one of the most prolific and successful publishers on PlayStation.
Microsoft issued a statement to Bloomberg suggesting that Xbox’s target profit margin is not the same across projects.
“We look at the company as a whole, balancing creativity, innovation and sustainability across a diverse portfolio of offerings. As with any creative company, sometimes this means making difficult decisions and stopping working on things that, for various reasons, no longer work, and shifting resources towards projects that are more aligned with our direction and priorities.”
Wesley is the news director at IGN. Find him on Twitter at @wyp100. Wesley can be reached at wesley_yinpoole@ign.com or confidentially at wyp100@proton.me.
