Xbox has made decisions with pricing its products and services that, let’s just say raises eyebrows. For the former, prices of the Xbox Series X and S have gone up where they are available. Then for the latter, there’s the Xbox Game Pass and its PC equivalent going through the same. While anyone would’ve guessed that these choices were a result of pressure from up top – Microsoft – a recent report sort of confirms the suspicions.
This comes via Bloomberg, which reports that executives at Microsoft set a goal of 30% profit margins across the board. Or to use the company’s euphemistic term, “accountability margins”, the report’s sources say. More specifically, it was implemented in the autumn of 2023 by Microsoft Chief Financial Officer Amy Hood. The report also ties this to the raised prices, as well as layoffs affecting Xbox in recent times.
It’s also a target that’s usually only reserved for “a publisher that is really nailing it”, according to Neil Barbour, an S&P Global analyst. The report cites the financial analytics company’s estimate that the video games industry has earned profit margins of between 17% and 22% in recent years. And for Xbox specifically, it’s been between 10% and 20% in the past six years. Insiders also claim they were previously told to focus on making the best games possible, without worrying about margins.
Other repercussions of these targets Microsoft has put on Xbox include the cancellation of games deemed to be riskier bets. Notable examples include Everwild and the Perfect Dark remake, despite them being in development for over seven years. Instead, priority has been shifted to cheaper projects, or those deemed more likely to generate lots of revenue. The silver lining though is that it has caused Xbox to start publishing its games on rival hardware.
(Source: Bloomberg)
