Microsoft has set a goal for its gaming division to achieve a sales profitability level of 30%
This explains many of the strange decisions made by Xbox's top management.
Bloomberg journalists Jason Schreier and Dina Bass discovered that Microsoft's leadership has been placing significant pressure on its gaming division — Xbox — in recent years. Through conversations with insiders, the journalists learned that:
- for the past two years, Microsoft has been demanding that the gaming business reach a profitability of 30%;
- in response, dozens of studios have been forced to cancel the development of numerous projects, increase subscription and device prices, and lay off thousands of employees;
- in 2022, Microsoft's gaming business had a profitability level of 12%;
- the industry average profitability ranges between 17% and 22%;
- experts at Bloomberg call the set goal achievable for the gaming business only in years of record sales;
- previously, Xbox was not given any financial targets; the key task for its studios was to create the best possible games;
- talks about financial metrics began in the fall of 2023, initiated by Microsoft CFO Amy Hood, whose team started playing a larger role in Xbox's affairs;
- Hood's intervention forced Phil Spencer, head of the gaming division, to change the development strategy;
- not all projects are expected to achieve the 30% profitability target;
- a unique challenge in reaching such figures may be Microsoft's requirement for its teams to release their titles on the first day of sales in Xbox Game Pass.