The message I'm about to convey to you is probably not surprising, but it's worth making sure you have a pillow ready to scream on once you've digested it. Microsoft, which has more cash than the company could ever need or know what to do with, has reportedly spent the last two years trying to get Xbox to deliver profits that are well above the industry average. Tell me everything layoffs, cancellationsAnd shutters.
Bloomberg reported this increase in profit, which they cite because company executives have set a common goal of 30% profit, or “accountability margin” as they are called in Microsoft's corporate jargon. Not every single game or project is expected to reach the 30% mark, but many Xbox developers have been informed of this goal, the report said.
The 30% target reportedly took effect in the fall of 2023, as Microsoft CFO Amy Hood's team took on a more prominent role and Xbox moved away from a past that Bloomberg sources said wasn't as doggedly driven by financial performance as everyone else.
To put target margins into context, Bloomberg turns to analyst firm S&P Global Market Intelligence, which estimates the average profit margin in the gaming industry in recent years to be between 17% and 22%. Xbox profits over the past six years have reportedly been somewhere between the 10% and 20% marks. According to S&P analyst Neil Barbour, achieving 30% or more “usually marks a publisher that really gets things done.”
Along with the move we've already seen from Xbox towards cross-platform releases, which aim to maximize the game's profits rather than using it as a tool to lure players onto an Xbox console or Game Pass, the report cites sources pointing to a growing risk aversion towards games that Microsoft greenlights as a likely consequence in the future. Essentially, unless it is massive and has clear potential for profit, it may not be realized. Meanwhile, on the hardware side, the division may be facing a “significant rethink.”
It's a state of affairs that you could pretty easily guess just by reading the tea leaves of the corporation's moves over the last year or so, but damn if it isn't depressing when the unnecessarily greedy motivation behind it all is reported in black and white.
