Just 100 days ago, when the new CEO of Microsoft Gaming, Asha Sharma replaced long-serving executive Phil SpencerHe said he would work to “understand what makes (Xbox) tick and protect it.” Now, Sharma and Xbox Studios boss Matt Booty have laid out the many things that are No working for the Xbox brand in a brutal self-assessment that they say requires a full “Xbox reset.”
The message sent to Xbox employees and shared publicly via Xbox Wire last night painted a bleak picture for virtually every facet of the Xbox division. That part of Microsoft currently only sees a “3 percent liability margin” (read: profit margin), down year over year and well below both. the gaming industry average and the high 30 percent margins that Microsoft is reportedly looking for in all areas.
It’s poor performance, they write, born of being “overstretched” by movements like the acquisition of Activision for $69 billion. That megamerger came on top of $20 billion spent on other acquisitions, platform investments and hardware subsidies over the past five years, the executives write. But despite the excessive spending, Microsoft’s overall revenue from games is below almost half a billion dollars compared to five years ago.
While Microsoft has overinvested in acquisitions and platform spending, Sharma and Booty also admit that Xbox “has not adequately funded” the company’s “industry-defining franchises.” This has been evident to anyone paying attention to the constant flow of layoffs at the studio level and game cancellations leaving Redmond, Washington, in recent years. And the company recognizes that a “reliable channel of first-party and third-party exclusives” is “critical to our success,” a notable change from the cross platform strategy he continued enthusiastically just a couple of years ago.
Hardware is difficult
On the hardware side, Microsoft faces the same increase in storage and RAM prices as the rest of the industry. But Microsoft executives also say that they “believe we’ve been hit harder than many of our peers because of the decisions we’ve made over the past half-decade,” a vague but troubling statement about problems specific to Microsoft’s console supply chain.
