Microsoft reportedly pushing Xbox towards higher-than-average profit margins

Explaining recent cost cuts, price hikes, and other decisions.
Microsoft

It’s been pretty obvious that Microsoft has been keeping Xbox on a tighter leash ever since the costly acquisition of Activision Blizzard, wanting to see a return on this large investment. Since the acquisition, Xbox has shut down several of its development studios, canceled games, fired hundreds of people, and raised the prices for its hardware and subscriptions. 

A new Bloomberg report has now confirmed that Microsoft upped the pressure on its gaming division following the closure of the deal, demanding Xbox to hit profit margins around 30% — an unusually high number for the video game industry, especially in the current climate.

In FY 2022, Bloomberg reported, Xbox had a profit margin of just about 12%. One can see, then, why the leadership team around Phil Spencer and Sarah Bond had to opt for immense cost cuts and price hikes to hit their targets.

Giving up on platform exclusivity is another recent decision that can be connected to the new financial targets, even if marketing has been emphasizing how consumer-friendly this move is.

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