Just 100 days ago, when new Microsoft Gaming CEO Asha Sharma replaced longtime executive Phil Spencer, she said she would “work to understand what happens.” [Xbox] Work and protect it.” Now, Sharma and Xbox Studios head Matt Booty have revealed a number of No A brutal self-assessment requires a wholesale “Xbox reset” for the Xbox brand to work.
The message sent to Xbox employees and shared publicly via Xbox Wire last night paints a grim picture for practically every aspect of the Xbox division. That part of Microsoft is currently only seeing a “3 percent accountability margin” (read: profit margin), which is down year over year and well below both the games industry average and the lofty 30 percent margin that Microsoft is reportedly demanding across the board.
It’s a weak performance, he writes, stemming from being “overextended” by moves like its $69 billion acquisition of Activision. This mega-merger came on top of $20 billion spent on other acquisitions, platform investments and hardware subsidies over the past five years, executives wrote. But despite spending spree, Microsoft’s total gaming revenue is Below About $500 million more than five years ago.
While Microsoft has invested heavily in acquisitions and platform spending, Sharma and Booty also acknowledge that Xbox has “not adequately funded” the company’s “industry-defining franchises”. This is somewhat obvious to anyone paying attention to the steady stream of studio-level layoffs and game cancellations coming out of Redmond, Washington in recent years. And the company acknowledges that a “reliable pipeline of first and third-party exclusives” is “critical to our success,” a notable shift from the multi-platform strategy it embraced with enthusiasm a few years ago.
hardware is hard
On the hardware side, Microsoft is facing the same increases in storage and RAM pricing as the rest of the industry. But Microsoft executives also say they “believe we have been impacted more than many of our peers because of the choices we’ve made over the last half decade,” a vague but worrying statement about Microsoft’s specific console supply chain issues.
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