LogInThe decision allegedly led to job cuts and project cancellations.
Xbox
Microsoft reportedly expected Xbox to deliver 30% profit margins, which significantly exceeded the average industry figures. Instead, it led to the contrary outcome.
According to a recent Jason Schreier's Bloomberg report, the decision to achieve such figures was taken in the fall of 2023. However, according to the report, it regrettably led to the opposite results, such as job cuts at Xbox, studio closures, and canceled projects.
Earlier, Microsoft's gaming division faced massive layoffs affecting several development studios; its first-person shooter, The Perfect Dark reboot, was canceled, following the closure of the game's developer, The Initiative. Last May, four studios, including Arkane Austin and Tango Gameworks, were shut down. More recently, Xbox introduced a 50% price hike for Game Pass.
As stated by the report, the average profit margin in the gaming industry ranges from 17% to 22%, according to estimates from S&P Global Market Intelligence, while Xbox has reported margins between 10% and 20% over the past six years. Neil Barbour, a S&P Global analyst, says: "A 30% or better margin is usually reserved for a publisher that is really nailing it." Thus, the 30% profit margin expected by the tech giant appears to be a hard-to-achieve figure above the industry standard, which probably contributed to fluctuations in the company's recent activity, as the report suggests.
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