Microsoft Gaming Faces Pressure to Dramatically increase Profitability, Sparking Internal Shifts
REDMOND, WA – Microsoft’s gaming division is undergoing important changes driven by a push to substantially increase profit margins, according to recently surfaced documents and industry reports. The effort, spearheaded by Microsoft CFO Amy Hood, aims for a 30% profit margin on Xbox projects – a target exceeding typical industry standards.
Industry estimates from S&P Global Market Intelligence place the average profit margin for video games between 17% and 22%. In the first nine months of fiscal 2022, Microsoft’s gaming division reported a 12% profit margin, indicating Hood’s goal represents more than a doubling of current profitability.
Previously,developers working with Microsoft reportedly focused on game quality without specific profit targets. Though,Xbox teams are now expected to work towards the 30% margin,though not every project is required to meet it.This shift is anticipated to prioritize smaller games and titles with potential for rapid revenue generation. A restructuring of the Xbox hardware department is also reportedly under consideration.
The changes have sparked internal debate and external scrutiny. While Microsoft Gaming CEO Phil Spencer is often seen as the public face of the division, some industry observers credit him with preserving Xbox despite recent challenges.
“Everyone owes Phil an apology. The guy is probably the only reason we still have Xbox, even in its sorry state,” stated Adam Hales of Windows Central.
Though, others view Spencer as a ”yes-man” influenced by hood and Microsoft CEO Satya Nadella, with some gamers blaming their decisions and focus on AI for negatively impacting the Xbox brand. The internal dynamics have led to questions about who is ultimately responsible for the direction of the Xbox division.
These developments come amid recent price increases for Game Pass and widespread layoffs within the gaming industry.
