Xbox CEO Says Current Margins 'Cannot Continue' (engadget.com) 48
Xbox CEO Asha Sharma and Chief Content Officer Matt Booty told staff that Xbox's current economics "cannot continue," citing more than $20 billion in spending over five years, declining revenue outside Activision Blizzard King, console supply constraints tied to RAMaggedon, and an overextended studio portfolio. The memo stops short of announcing layoffs, but a Bloomberg report says substantial Xbox cuts are expected after Microsoft's fiscal year ends on June 30. Engadget reports: The takeaways are pretty grim. For starters, the simple math of Xbox's revenue isn't adding up to success. "Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time," the execs state. "Going forward, this cannot continue." They also acknowledge the impact of RAMaggedon: "We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix." (Helix, in this case, is Project Helix, the codename for Xbox's new console.)
Then there's the kicker, a renewed admission that Xbox still can't support the many studios it acquired in the late 2010s in an effort to grow its first-party game ambitions. "We have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content," the pair said, noting elsewhere that with so many good games, not to mention the plethora of other forms of entertainment available, "Going forward, our competition is attention."
Then there's the kicker, a renewed admission that Xbox still can't support the many studios it acquired in the late 2010s in an effort to grow its first-party game ambitions. "We have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content," the pair said, noting elsewhere that with so many good games, not to mention the plethora of other forms of entertainment available, "Going forward, our competition is attention."
Translation (Score:5, Funny)
We need to funnel more money into our AI, games be damned.
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Microsoft is literately sitting on the "Sierra" IP, from the 80's/90's and there are plenty of people who would love to see remakes or sequels of those games. Likewise Blizzard's IP (Warcraft I/II/III) and Starcraft (I / II) with a return to how those games worked originally, and sequels to those games.
The problem is Microsoft, and many other companies want everything to be a live service, but the average person HATES live services. They either want:
a) a game that they buy once and own forever, single playe
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Yep, games are in the rear view. RAMageddon has severely stunted gaming hardware purchasing. They'll be looking at that and saying no one will be buying games along with that latest blingy games machine. That's a big chunk sales gone.
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I'm not sure where you're getting that from. I know her background, but she also killed several AI initiatives related to XBox as soon as she was put in charge of it. "Only Nixon could go to China." And she has made several other good calls recently, too. I'm not sure if she'll be able to pull Microsoft out of the mess they've made, either because they've dug too deep a hole already or because they fail to listen to her, but so far, it sounds to me like she's *trying* to do sensible stuff, finally.
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We need to funnel more money into our AI, games be damned.
The Games and Entertainment division has always been a loss for Microsoft. Long before AI came along it was supported by the more profitable divisions (OS and Applications). It's the same story over at Sony with the Playstation losing money and being funded by more profitable things.
It's just after 25 years of making a loss, the M$ management aren't seeing any benefit from it.
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Just give up on the console war (Score:1)
Microsoft just has to accept defeat on console hardware, they are the odd man out between Sony and Nintendo. The old model of exclusive hardware sold by exclusive software cannot sustain 3 companies anymore. Particularly when they're trying to fight a 2-front war with Steam on the other side.
Just lean into the studios you have and release games everywhere you can. Microsoft has also been good at peripherals so also lean into that for other platforms.
Re: Just give up on the console war (Score:3)
Re: Just give up on the console war (Score:5, Insightful)
Maybe but to me that's the exact fight they are losing.
They don't have the confluence of exclusive IP combined with unique hardware of Nintendo.
They will always lose the hardware market share and brand recognition of Playstation.
They won't be able to build the user loyalty and market feature set of Steam.
Content is exactly what they do have; studios and game properties that all customers of those platforms want.
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It literally could never sustain 3 companies. Xbox would have been shut down long ago if Microsoft hadn't had other revenue sources to divert. Possibly the only reason Sony managed to bump Sega off the stack was because they also had plenty of other revenue streams.
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That's very true looking at the history, once Song came in Sega was the 3rd man out and Sony was able to capitalize on the flop that was the Saturn.
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Can you at least make an internally consistent post? White people made California the shithole that it is today.
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Can you at least make an internally consistent post?
No, he cannot. His brain broke during Covid. Check his posting history.
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Plus, most Indians were gone from California by 1900. It makes no sense!
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Windows 8 could at least be mostly unshittified and actually came with some substantial improvements over Windows 7, like the desktop duplication API.
Windows 11 offers zero improvements over Windows 10 and makes things a lot worse in a lot of categories. It's way worse than 8.
stop buying studios (Score:2)
And curtail margin expectations. MS has to decide once and for all whether they want to be in the entertainment industry. If they're net positive on revenue vs expenses then they can coast for awhile until the industry clears up it's problem of excess product and (in some cases) dwindling revenue.
you don't understand how MSFT works (Score:4, Interesting)
The company-wide margin is a very important metric for investors and the stock price generally. When Amy Hood says to Asha, "you need to increase your margins" that means either you increase your business unit's margins by whatever means necessary, or you're out on the street looking for a new job.
There were three big problems at MSFT - first that they wildly overpaid for Activision, they paid $95 per share (peak was $104* from Covid) at a time when it was worth barely half that. There are companies that when acquired unlock more value (say a small company acquired by Oracle, now Oracle's sales team can sell it -- or it can be bundled into a bigger product) but Activision was not such a company -- there was nothing MSFT could do that would generate more revenue or have less cost than Activision alone. If anything, the politics at Microsoft were inevitably going to drag down Activision's performance. (I am really understating this last point but I don't want to get bogged down here.)
Two, Gamepass. When Gamepass first came out, the third party publishers freaked because they predicted it would suck all the oxygen out of the room. Like, a gamer might have $100 a year to spend on games, and if it all gets spent on Gamepass then it's not being spent on third-party games. That in turn means that Xbox is less appealing for publishers and for casual gamers -- if you're the kind of gamer who only plays one game like Animal Crossing, you don't want to spend $100 a year on a Gamepass subscription and/or you probably want a game that now isn't being made on Xbox, now Xbox isn't the platform for you. I can tell you that MSFT was excited that Activision would turbocharge the Gamepass offering, because the Gamepass subscriptions had stalled below expectations -- but common sense would tell you that there was no way this was going to work from a revenue standpoint. I.e., you can't increase overall revenue by putting Call of Duty on Gamepass.
Third, the Series S. The Series S is far less capable than the Series X, and is the least powerful console in the market (after Switch 1), but it sells a lot more units than the Series X. Having to target the Series S makes the Xbox unappealing as a platform to target, on top of the fact that, as mentioned above, gamers won't buy many copies of the game because all their money is going to Gamepass already. That's coming off of the Xbox One which MSFT wildly mismarketed as a set-top box so MSFT was already starting from behind in the PS5/XSX generation.
* Yes yes I'm handwaving over debt but Activision didn't have a lot of debt.
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I understand how they work, and I think it's stupid. Unrealistic margin expectations are causing more harm than good.
Microsoft can't sustain two platforms (Score:2)
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Re:Microsoft can't sustain two platforms (Score:5, Interesting)
Members of the PC Master Race concur.
Consoles seem unsustainable at this point and speaking of points, there doesn't seem to be one for continued console development or ownership.
Yeah, you got a $900 box that can't open a spreadsheet, run GIMP or Blender or multitask, and it can't be modded much, but on the upside it'll play COD at almost the speed of a decent gaming PC.
Re:Microsoft can't sustain two platforms (Score:4, Interesting)
Yeah, you got a $900 box that can't open a spreadsheet, run GIMP or Blender or multitask, and it can't be modded much, but on the upside it'll play COD at almost the speed of a decent gaming PC.
And the gaming industry created this problem, by not allowing you to do something useful with your console once it's no longer useful as a console, by locking it down and never providing an unlock. Thousands of us hacked our Xboxes and used them as media centers, then Microsoft made this infeasible going forwards. Sony did the same with the PS3 and "Other OS." Nintendo has just always been locked down AF, but we used to have some freedom with some of the game boys... so much for that.
I have zero reason to buy a console because it has zero value after it's been a console for me.
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Consoles seem unsustainable at this point, there doesn't seem to be one for continued console development or ownership.
Sony's gaming division is currently making record profits. The Switch 2 has outsold the Switch for every consecutive month since release (and the Switch was Nintendo's best ever selling console).
Microsoft shitting the bed is not a reflection on console gaming, and I say that begrudgingly as a card carrying member of the PC master race.
you got a $900 box that can't open a spreadsheet, run GIMP or Blender or multitask
You say this as if these are things that people want to do. What the hell is a GIMP, and how does it compare to highlighting a part of a photo on my phone and asking Gemini AI
It’s ONE fucking platform. (Score:2)
Yeah, you got a $900 box that can't open a spreadsheet, run GIMP or Blender or multitask, and it can't be modded much, but on the upside it'll play COD at almost the speed of a decent gaming PC.
And the company that brought Windows OS to the American desktop, can change that. With a single license change.
Greed and ignorance prevented Microsoft from realizing a few billion dollars of losses ago that an Xbox IS a fucking gaming machine. AND a fucking Windows-based computer that is prevented from running a spreadsheet by corporate choice.
Maybe if the CFO could have opened a fucking spreadsheet in between gaming sessions..
Problems of Microsoft's Own Making? (Score:3)
More unanticipated consequences of AI? Microsoft doesn't know what to do about the memory pricing crisis Microsoft is causing [msn.com]
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Why not just ask their AI how to fix everything!
Translation Time (Score:2)
TRANSLATION" "We done fucked up and now we don't know what to do"
Embrace Extend Extinguish (Score:1)
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my only question (Score:2)
Does XBOX pay Azure market rate for cloud services? If so, maybe they should shop around. The economics of streaming games is never going to make sense at market rate cloud costs.
They're on a hell of their own making (Score:2)
Every bad decision is coming now to say hello. You could maybe excuse them about the current hardware pricing situation if it wasn't because they are the damn Microsoft, one of the greatest contributors to it. And well, XBox CEO comes from AI grounds, so...
Question (Score:2)
When the Xbox CEO calls the Xbox CCO to meet... does she refer to it as a "Booty call"?
Wave Goodby (Score:2)
Good bye X-Box. You are going the way of the M$ phone. You're only reason to exist was to push Sony and Nintendo to keep innovating, which they have done nicely. But with this gap, who's to step up. Revive the Apple Pippin? (Joke, joke, stop with the pitchforks)
XBOX has been a less functional PC for Years (Score:2)
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When you make people angry... (Score:1)
When you make your core demographic angry to appease a small and virtually non-existent minority, you lose money and fail. Who know!?
Coming soon (Score:2)
X box console in the cloud for a low monthly subscription. Just connect your controllers to your PC and go!
Halo (Score:1)
The Xboxes have been sold at a loss from the start (Score:2)
Make some good games (Score:2)