Tech
Xbox at a crossroads: 25 years later, Microsoft is done playing around
Microsoft is initiating a major strategic reset for its Xbox division to curb costs and boost profitability.
Key takeaways
- Xbox's heavy spending and shrinking revenue cannot continue.
- Thousands of layoffs are expected across Microsoft as soon as next week, with Xbox likely to be among the hardest hit.
- Microsoft has spent years subsidizing Xbox rather than profiting from it, and that era is over.
- A hardware component crisis has left Microsoft unable to make as many consoles as players want.
- Microsoft has weighed making Xbox a standalone subsidiary, a joint venture, or a spin-off.
Microsoft is initiating a major strategic reset for its Xbox division to curb costs and boost profitability. Xbox CEO Asha Sharma, who took over in February, stated in an internal memo that the division's heavy spending and shrinking revenue cannot continue. Despite spending over $20 billion over five years, Xbox's core revenue has fallen by nearly $500 million, leaving it with a thin 3% profit margin. Thousands of layoffs are expected across Microsoft as soon as next week, with Xbox likely to be heavily impacted. To address these issues, Xbox is raising console prices, closing or selling studios like Ninja Theory, focusing on its biggest franchises, and releasing games on rival platforms.
In their words
“Going forward, this cannot continue”
“No one can accuse Microsoft of not having invested for the last 25 years. And now we have to turn this into a sustainable business.”
By the numbers
- 3%
- Xbox division profit margin by Microsoft's internal measures
- $20B
- Amount spent by Xbox division over five years
- -$500M
- Fall in Xbox core annual revenue over five years
- $69B
- Price Microsoft paid to acquire Activision Blizzard in 2023
- $16.8B
- Microsoft gaming revenue for nine months through March
How it unfolded
- Xbox console is launched
- Xbox Live is launched
- Xbox 360 red ring of death crisis occurs
- Game Pass subscription service is launched
- Microsoft acquires Bethesda for $7.5 billion
- Microsoft acquires Activision Blizzard for $69 billion
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Common questions
- What happened with Xbox?
- Xbox's heavy spending and shrinking revenue cannot continue.
- Where can I read the original report?
- Read the full report at geekwire.
