Key Highlights:
- Microsoft had levied a 30% profit target on Xbox, as per a report.
- This resulted in Xbox canceling projects, closing down entire game studios, and other unfortunate decisions.
- Xbox might just turn into the next SEGA.
Xbox hasn’t been doing too well lately, and has in turn earned the public’s distrust and ire, especially after a series of bizarre decisions. These included increasing Game Pass prices across the board, (over 50% in some cases!) and laying off hundreds of employees and even game studios in the process.
Now, a recent report seemingly points to what went wrong, and Microsoft’s greed, targeting higher than expected profit margins, is what might have caused the decay of the Xbox brand.
Microsoft Has Been Pushing Xbox to Keep a 30% Profit Margin
As per a recent report from Bloomberg (authored by Jason Schreier and Dina Bass), Microsoft has been pushing for rather asinine numbers on their Xbox gaming division as of late.
The number in question is an ‘across the board’ goal of 30% (also mentioned as accountability margins), a very, very steep number – more so when we take into account its competitors (such as Sony and Nintendo).
The industry average, targeted profit margins lie between 17 to 22 percent, which is a lot smaller than the 30% enforced by Microsoft. This bafflingly high number is perhaps what led to the current predicament for Xbox, where they are on the losing ground against PlayStation.
For reference, a 30% or higher profit margin is usually kept for studios that can actually deliver on their promises, or have quite the exceptional product in place.
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Sadly, this is not the case for a majority of games, and Microsoft’s decisions are quite puzzling here, to say the least. They’re shooting themselves in the foot.
Xbox responded to Microsoft’s demands by canceling a multitude of projects and removing thousands of workers from their roles. This was also followed by the quite controversial decision to increase Game Pass prices, which was met with universal discontent.
Given Xbox’s decision to sway away from platform exclusivity, and of their equally baffling decision to market the next-gen Xbox as a premium device (which means that it will most certainly cost more than the PS6), instills fear for the value of the Xbox brand.
This Might Be the End of Xbox as We Know It
Xbox is heading to its doom here, being brought to it by Microsoft. Microsoft’s target is simply unsustainable, and despite their best efforts, Xbox is shaping up to be a sinking ship.
There wasn’t much of a reason to invest in the Xbox brand lately, and current circumstances have made it worse. Xbox has been in a freefall following the Xbox 360 era, during which they were at their best, crushing every competitor – including Sony/PlayStation.
Things took a turn for the worse with the start of the Xbox One generation, and while Xbox Series X/S solved a good chunk of these issues, it also brought with it its own set of unique quirks that made people shift to the PlayStation even more.
Combine this with the generally failed attempts of Xbox to resurrect its forgotten franchises, and the lack of any real system sellers and you have a surefire recipe for disaster. Xbox has been slipping, and its recent actions have dug it a deeper hole.
Xbox is going the SEGA route, and will likely deprecate itself into being a game publisher, with a very niche focus on certain groups of gaming hardware. While this isn’t the ‘end of Xbox’ in the traditional sense, it most certainly remains a death of the towering titan the brand used to be.
