It’s no secret the Xbox brand is in trouble as it juggles in-house problems and is collaterally impacted by Microsoft’s generative-AI aspirations and relationship with Israel’s military forces, but the latest report from Bloomberg’s Jason Schreier and Dina Bass goes deeper into the financial pressure the gaming division has been put under.
“The average profit margin in the video-game industry in recent years has ranged between 17% and 22%, according to estimates from S&P Global Market Intelligence,” the hot report establishes before revealing Microsoft is asking for 30% profit margins from its gaming division, which has been cutting jobs and entire projects left and right in a desperate attempt to “optimize” operations.
“A 30% or better margin is usually reserved for a publisher that is really nailing it,” Neil Barbour, a S&P Global analyst, says. For those keeping track, the last time Xbox was leading the pack in the console wars would be the seventh generation, where the company led the charge with the Xbox 360 and followed up with a strong lineup of great multiplayer-oriented exclusives. Meanwhile, Sony was lagging due to PS3’s development-related struggles before picking up the pace. As for Nintendo, the Japanese giant was in its shaky Wii era, which led to the company finding success in an entirely different arena.
“In the past, game makers at Xbox weren’t asked to hit specific numerical targets, said the people, and were largely told to focus on making the best games possible without worrying too much about finances,” the article goes on to explain. That sure sounds a lot like the cycle many online publications have been facing since the early 2020s shopping spree many media giants went on!
Unsurprisingly, more changes are also expected on the hardware front, with “significant rethinking” happening around Xbox consoles’ future despite Xbox president Sarah Bond’s recent “everything is fine” comments. “Microsoft no longer reveals Xbox hardware sales, but analysts estimate that the PlayStation 5 has sold more than twice as many units as the Xbox Series X.”
An upside to this entire mess is Xbox shifting to a model that actively seeks to port formerly exclusive game series to other platforms (a strategy that’s worked out fine so far for games like Forza Horizon 5 and Sea of Thieves on PS5), yet blood continues to drip down at Xbox Game Studios as the publisher is now focusing on “games that are either cheap to make or deemed more likely to generate significant revenue.” It sounds like long-in-development projects like Everwild, Project Blackbird, and Perfect Dark didn’t fit the description.
Later this week, Xbox will try to drum up interest in Halo again with a new release according to Bloomberg. While Infinite launched to generally positive reviews in 2021, the multiplayer live-service side of the game started off slow and has only been clinging to life since then despite 343 Industries’ best iterative efforts. We’re now expecting a UE5-powered remake of the original Halo, with the actual future of the series still up in the air.
We also have to assume a lot is riding on Gears of War: E-Day, Fable, and The Elder Scrolls VI, all huge projects from big studios that have consistently tasted success. Unfortunately, we don’t even have a tentative release window for those yet, so they might be too little too late after a middling generation.
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