Profitability has dropped to 3% — Xbox management has confirmed issues with content, infrastructure, and consoles
The head of XBOX, Asha Sharma, and the content director, Matt Booty, published a letter to the employees. They didn't comment on the rumors about impending layoffs in the division but acknowledged that XBOX is indeed going through tough times.
Clockwork Revolution
Specifically, the executives reported that:
- over the past five years, XBOX has spent more than $20 billion on investments in content, platform, and consoles, excluding the purchase of Activision Blizzard for $68.7 billion. However, this has not led to revenue growth. Its annual revenue fell by $500 million;
- in the current fiscal year, XBOX's accountability margins have already fallen to 3%;
- a significant issue for XBOX has been the crisis in the hardware component market. According to the company, due to incorrect decisions in recent years, it has been hit harder than many others. It can no longer produce as many consoles as gamers want, and now it has to change its business model;
- XBOX previously expanded its network of studios aggressively for a steady stream of subscription games, cloud gaming service, and other platforms, but eventually, the division was overloaded with work. Now, XBOX is trying to find a balance between its exclusives, games from third-party studios, new projects, and already well-known major franchises;
- as of today, XBOX's platform infrastructure has become too complex—it includes "hundreds" of dependencies that hinder quick action. The division wants to restructure its stack and doesn’t rule out engaging in mergers and acquisitions to achieve this.
"For some of you, these facts may be an unexpected and even unpleasant revelation. But we won't succeed by hiding the uncomfortable truth, nor will we succeed by continuing to act in the old ways while expecting different results," Sharma and Booty told XBOX employees.