Since taking over as CEO of Xbox, Asha Sharma has made some popular decisions such as reducing Game Pass subscriptions, bringing back Xbox exclusives and setting a new direction for Microsoft's console. A few days after announcing a slew of new games at the Xbox Showcase, she has now announced some bad news that employees need to hear.
Sharma issued a memo calling Xbox a broken division, burdened by failed investments and a confused strategy. She insisted that this situation cannot continue, giving the impression that layoffs will be done in the near future.
The situation at Xbox is quite bad with a fiscal profit margin of only 3% this year, which is very low for a division the size of Xbox. This is despite Xbox spending $20 billion on studios over 5 years, not including the $69 billion purchase of Activision Blizzard King,
Despite spending heavily, annual revenue has fallen by almost $500 million over 5 years. Profits will continue to decline when taking into account the increased costs of producing consoles due to the RAM crisis.
The Xbox studio system is also considered too large with too many studios with insufficient funding to compete. The platform infrastructure is also too complex and unprepared for future competition. So a reset will be done on Xbox to fix all these issues.
What is happening on Xbox is not unique to Microsoft. It is an industry-wide problem where high development costs, long lead times for games, and the cost of living are causing gamers to cut back on buying new video games. Sony and Ubisoft, which have been experiencing declining revenues, have closed several studios and laid off workers.
