- Xbox has reportedly been tasked by Microsoft with delivering a 30% profit margin
- If true, it could explain recent studio closures and price hikes across hardware
- Bloomberg notes that targets for an average profit margin are typically around 17-22%
We may now know the reason behind Xbox Studios’ rampant layoffs, game cancellations, and price hikes for its hardware and subscription models—and it’s all about hitting a profit margin target from Microsoft.
A new Bloomberg report claims that Microsoft has tasked Xbox with delivering a target profit margin of 30%, which is significantly higher than the industry average, which Bloomberg notes is typically between 17-22%, according to data from S&P Global Marketing Intelligence.
If true, it might go some way to explaining the string of controversial decisions the Xbox division has made over the past few years. That includes a significant price hike on Xbox Series X and Series S consoles in the US, as well as its restructuring and price increases for the Xbox Game Pass subscription service.
Internally, Xbox Game Studios has seen numerous job cuts and high-profile studio closures. It includes the complete closure of the Initiative, which led to the cancellation of Perfect darkness. At the same time, Xbox canceled Rare’s Everwild, which had reportedly been in development for close to a decade alongside an unannounced online project from Zenimax Studios.
It could also explain Xbox’s decision to largely ditch platform exclusivity. Play as Forza Horizon 5, Indiana Jones and the Great Circlehi-fi rush, and sea of thieves, have all made the jump to other platforms, including PlayStation 5, Nintendo Switch and Nintendo Switch 2.
Bloomberg notes that one result of this is that software that is generally cheaper to make or expected to turn a profit may be prioritized over riskier projects. Xbox’s latest release of Ninja Gaiden 4 could be an example of this.
However, that thinking may conflict with Xbox’s strategy for the next console generation. Xbox president Sarah Bond recently stated that the brand’s next flagship hardware will be a “very premium, very high-end curated experience,” something the average consumer likely won’t have much of an appetite for amid various affordability crises across the globe.
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