With Xbox’s various woes this year, one suggestion that has floated around is that the company’s owner, Microsoft, and its desire to see results from its costly Activision and ZeniMax/Bethesda acquisitions are what is driving many of the decisions there.
Now, a new Bloomberg report appears to add credence to that claim. The outlet claims Microsoft is asking its Xbox gaming division to produce profit margins well above the industry average.
They say that in Fall 2023, Microsoft set an across-the-board goal of 30% ‘accountability margins’ – a term Microsoft reportedly uses rather than profit margins.
That’s far higher than the average profit margin in the video-game industry, which has hovered around 17-22% in recent years. Xbox had a 12% profit margin for the first nine months of the company’s 2022 fiscal year.
30% is seen as the kind of margin only a “publisher that is really nailing it” in a boom year can achieve. The change has reportedly significantly impacted strategies under Microsoft gaming chief Phil Spencer, as the division has been forced to cut costs and boost profits.
This apparently is what has led to some of the choices Xbox has made in the past two years including the cancellation of a number of costly projects (“Perfect Dark,” “Everwild”), the closure of certain developers, a significant raising of prices for both consoles and Game Pass, the attempted push for $80 games, the end of exclusivity, and the slashing of thousands of jobs.
It’s added that games that are either cheap to make or deemed more likely to generate significant revenue windfalls will take priority over riskier bets.
The article adds that the shift to Day One games on Game Pass has not only hurt Xbox game sales, but has also changed the nature of the games being made. They say Xbox offers developers a ‘member-weighted value’ credit, which is calculated on multiple factors. One of those is time spent playing a game, resulting in these credits strongly favouring online multiplayer titles over single-player ones.
Microsoft issued Bloomberg a statement which suggests its Xbox profit margin target isn’t the same across every project.
