Microsoft is completely dismantling its Xbox division in July. For the fourth consecutive month, massive layoffs are imminent because management has lost control of costs.
Anyone who thinks everything is going great after the latest showcase is ignoring the figures from Redmond. The developers, and ultimately the players, are now paying the price for years of mismanagement.
Microsoft's $20 billion blunder
The new XboxMicrosoft CEO Asha Sharma lays her cards bare. Over the past five years, Microsoft has poured more than $20 billion into content, platforms, and hardware subsidies, not even counting Activision Blizzard. The result is a warning.
Annual revenue fell by half a billion dollars during the same period. According to an internal email to employees, Xbox is now operating with a profit margin of a meager three percent. For a tech giant like Microsoft, that's practically a death sentence. Sharma himself writes: "This cannot continue like this." For years, management bought up studios to feed Game Pass with content. Now the house of cards is collapsing because the subscriptions don't even come close to covering the costs.
Studios are dying for the wrong subscription strategy
Xbox simply overreached. Management bloated studios without a clear plan, trying to pursue multiple strategies simultaneously: subscription models, streaming, and its own hardware. Sharma says according to Bloomberg They openly admit that Xbox completely lost its way while the market changed. The consequences are brutal.
Last year, 9000 people were laid off, and high-profile projects like the Perfect Dark reboot and Rare's Everwild were scrapped. Now, Microsoft is further slashing its marketing and operating budgets. When development teams no longer receive funding for production, game quality will plummet. The direct consequences will be inferior netcode, unfinished releases, and the removal of features.
The big brands are starving by the long arm
Microsoft owns world-renowned brands but isn't leveraging them. Sharma explains internally that Xbox hasn't adequately funded its own blockbuster franchises to compete and win in the market. This is a resounding slap in the face for the previous leadership under Phil Spencer.
Instead of nurturing its crown jewels, Microsoft poured money into sheer volume for Game Pass. Quality requires budget and time, and Microsoft is now cutting both. Anyone hoping that Xbox exclusives will soon surpass the PlayStation 5 will be disappointed. The teams are forced to manage scarcity instead of delivering masterpieces.
Microsoft is pulling the plug. The announced cutbacks in July prove that the aggressive expansion strategy of the Xbox division has failed spectacularly, and Asha Sharma is now engaged in necessary damage control for shareholders, not for the community.
The days when Xbox could throw money around without limits are over. In plain terms: less risk with new IPs, more focus on safe sequels, and potentially weaker technology due to budget cuts. Xbox is shrinking itself to be more profitable, but in doing so, it's losing its soul.
Consoles are garbage anyway and have no future. The PC will always prevail.
I don't care; I'd buy the system that benefits me the most personally, so not one where I don't have time for this sort of thing. But things are really getting heated here, like in kindergarten.
Max Franke because they have nothing else, that seems to be their entire life 😅
Max Franke: It's the same the other way around, I don't understand the bashing from both sides.
Max Franke says that financially, Microsoft could even buy Sony. It's the biggest and richest software company in the world. I think MS is even bigger than Google. Sony would always lose a price war with Microsoft. Anyway, I'm incredibly happy that the new CEO, Ashra Sharma, is focusing more on exclusive titles again, and that the PlayStation isn't getting Gears of War this time. Gears of War E-Day is on October 6th. Only Xbox and PC 🔥🔥
How can that be? Xbox is definitely better than Sony these days. I've had Game Pass for years.
First it's Gears on Xbox and PS5, then it's back to Xbox only, and with Halo you even have to download data because not everything is on the disc. Shame on you, Microsoft! 🤮🤮🤮
Benjamin Sa: It's not as bad as you hope. 😂✌️
I find the comments section absolutely fascinating. PlayStation and Xbox fanboys are tearing each other apart and insulting each other in a way I only remember from the past, like back in the schoolyard. The only difference is that we're dealing with grown men here…
Sony and Microsoft are large corporations. 1. They are so well positioned that they absolutely do not need protection.
2. Large corporations have a strong tendency to make mistakes. We'll continue to read stupid things from Microsoft and Sony, and consequently, vague statements that say a lot but don't really say much, and that's something that can and should be criticized. It's also perfectly acceptable to criticize your preferred platform. On the contrary, pointing out its flaws can actually make your favorite console even better, which isn't such a bad outcome after all.
Instead, we as a community downplay the misconduct of our own bubble and say, "Yes, but what about the others?" So what? Both sides can mess up at the same time, both can be criticized simultaneously, and above all, it doesn't invalidate your purchase decision if this console is criticized, because they always will be.
Ultimately, such multi-billion dollar corporations will only be as customer-friendly as they need to be in order to get your money.
So, love each other. Some people prefer spaghetti, some pizza, both are fine. If you prefer Xbox, play Xbox; if you prefer PlayStation, play PlayStation. Grow up.
Marco Pepé Felger, at least someone who hasn't already gambled their brains away. I completely agree with you. It doesn't matter which console you play on; I think it's the games that bring us together anyway. This console war left me confused back then. All those exclusive titles were basically just copied from each other. Same gameplay, different packaging. And when people always say, "Yeah, but Sony sells way more..." Sure, PlayStation has been around for a few years longer. That's how it established itself in the market. But anyway, enjoy your games with your loved ones and stop making life difficult for people, for goodness' sake.
Marco Pepé Felger, I think that every time xD but still, the kiddie arguing gets worse every day xD I just want to play games, but somehow people today prefer to argue about which console is better xD
Xbox is absolutely amazing right now. Playstation is just disappointing me.
Daniel, that's none of your business, what do you dream about at night? You're just like our current politicians, completely out of touch with reality 😀😂
Tommy Ba, then you simply have no clue or you don't own both consoles. Xbox is currently wiping the floor with Playstation.
Daniel, that's none of your business, you're really out of touch with reality 😂 Do you have a fake profile? What kind of friends are on your list? You don't even understand 😂
Tommy Ba, so you don't have an Xbox?
Daniel: That's none of your business. Of course I collect all consoles 😀
Tommy Ba Then you can see how Xbox is rocking right now.
With what, if I may ask?
Sony trying to make Microsoft look bad 🥱 First sweep under the rug themselves 💩 Bankrupt company
Mathias Wiedenroth: I'm glad they're finally showing how awesome this generation was. Sony has become a complete joke. But hey, there are still 5-6 indie games coming to PS+ 😂
Brutal
Unblocker, I completely agree with you 👍🏻
Microsoft, yes. Sony isn't bankrupt. Unlike the others, they're making plenty of money.
Manuel Holtheuer: Xbox makes enough money with its 200 million Xbox Pass users. That's roughly 2 billion per month. How much does Sony make with 120 million users? Exactly. 👍
But it's also currently making significant losses.