- The make around 5 billion in revenue per quarter
- The problem according to them is profit margin - around 150-160 million
So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous).
Some points -
- They are huge business even now - 5 billion per quarter revenue is no joke
- They did not have to buy all those studios
- They looked at Netflix, and wanted the sweet monthly subscription cash stream
- Then they did not have to give away popular games day one on Game Pass
- And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.
- Once again, short term vision, crazy decisions, bad spending spree and a constant need to "make numbers go up" and who has to pay for all this?
150M at 5B revenue is not great: that's 3% margin!
The bigger issue is that console manufacturer revenue is highly cyclical. This is hard to see in e.g. Xbox and Sony since they are both part of a larger conglomerate, but really obvious for nintendo.
You generally have a cycle of
- "Launch": high marketing costs, low/negative HW margins
- "Mid-cycle": lowering manufacturing costs, large game sales, high margin DLCs
- "end-of-cycle": falling HW sales, fewer exclusives (-> preparation for next gen), fewer consumers (-> waiting for next gen). Here you usually have maximum profits since you don't subsidize HW and marketing is minimal (platforms are already locked in)
Generally you have to establish a big userbase during the mid-cycle such that you can levarage it during the late-cycle to be able to afford next-gen. Xbox has the big issue that their mid-cycle was catastrophic, which means they now don't have the console base to get into the next generation:
If they have 3% margin _right now_ in the end-of-cycle where marketing and development costs are at their lowest, this does not bode well for the overall health of the business.
That was true historically but is no longer the case. Even last gen manufacturing costs didn't go down as much as they used to. This current gen they actually increased multiple times.
>> 150M at 5B revenue is not great: that's 3% margin!
and yet everybody - including Microsoft - is in a big rush to sell us AI services, which could look an awful lot like a historical utility business. 3% will be a dream return in that scenario!
Considered as a raw percentage in a vacuum, sure, I guess, but we're talking about...
- A company which has undertaken a concerted, long-term effort to consolidate the industry under its umbrella (something they themselves call out as a problem in this post), reducing consumer choice
- A company which has captured a significant chunk of the console market. They're one of the big three (alongside Sony and Nintendo), and have been since the early 2000s, arguably, for crying out loud.
At a certain size (typically as measured by market capture) the expectation for growth needs to be reality checked. This is still $150M of pure gravy every single year. Sure, this is going to a corporation, but that's more money than most people could possibly dream of earning in ten lifetimes.
Every year. For a company that's already putting money towards opex in the form of developing new games and new content for existing ones, for a ridiculously broad portfolio.
To be clear: it is Microsoft's and Xbox's prerogative to pursue more profit, but I reserve the right to call this out as absurd under the circumstances.
If you want to make the argument that Xbox has suffered from a lack of focus in the past decade (... or even longer), or that there's been mismanagement (I would say since around the time 343 got created), then those are fair arguments, though I don't think those are justifications, on their own, for cutting thousands in headcount.
Allowing this org to balloon to fourteen levels of management on any vertical is a joke. Allowing the absorption of so much of the game dev industry and still being unhappy with $150M in annual profit after being such an active participant in the oligolpolization of console gaming is just a bit unserious.
> This is still $150M of pure gravy every single year. Sure, this is going to a corporation, but that's more money than most people could possibly dream of earning in ten lifetimes.
That actually seems... tiny? Xbox is nearly 17,000 employees. That's like $8k in profit per employee. That's worse than big box retailers and like 1/100th of what is common in big tech and (to the letter's point) far worse than their biggest competitor.
Like sure at least you can say they aren't losing money, but Nadella can't be looking at that after just spending 75 billion on Activision Blizzard and be happy with it as the status quo.
EDIT: BTW these numbers you quoted from OP are quarterly, not annual
I agree that at some point you do, but again I think the fact that Sony Playstation is doing this with larger annual revenue, less studios, AND better margins is an indicator that it isn't the problem here.
> This is still $150M of pure gravy every single year.
The issue is rate of return. They are evidently spending $4.85bn on Xbox per year. The US federal interest rate is 3.5% so if you just put that money in US bonds you would get about $175M per year of much purer simpler gravy.
Russ: "Anyway, next thing you know, we IPO, stock triples in a day and AOL gobbles us up. All of a sudden, I'm 22 years young and I'm worth 1.2 billion. Now a couple decades later, I'm worth 1.4. You do the math."
Richard: "Okay. Well, that's a gain of $200 million over 20 years. Um, 16.66 repeating. That's less than 1% return. Inflation is, like, 1.7. I think CDs are 2%. So that's less than a CD."
But the revenue is coming out of the same org. That $5bn revenue only exists because of the $4.85bn expense. That money doesn't exist to put into bonds unless it's coming out of the games org. They can only make their margin percent look better by making their absolute margin $150mm worse.
You’re saying that they should take the money people pay to buy Xboxes and put it in T-bills instead of delivering Xboxes? What happens when people ask where the Xbox they ordered is?
> This is still $150M of pure gravy every single year
You're neglecting to consider that any time they acquire a studio or have a flop or two -- poof goes that $150M and probably more. It's not a risk-free venture. Entertainment is all about hits, and misses hurt.
Would you put up $5K to win $150 on a hypothetical roulette wheel that hits 90% of the time? The math's not perfect obviously but Xbox is a somewhat similar situation. Microsoft is putting up nearly $5B a year to make $150M. They'd be better off stuffing the $5B into bonds or something. There is a point where the returns aren't high enough to justify the expenses when risk is taken into consideration.
With due fairness, these are two different sets of leaders and two different strategies.
A lot of the strategy you outlined -- buying all these studios, replicating netflix, giving away day one games, raising game pass -- was a strategy put in place by Phil Spencer. Phil pushed for this investment with the promise it would pay off later for MS. He's talked publicly about having to convince Nadella to put up ungodly amounts of cash for these investments and about how the bar for expected return was very very high. It seems like it clearly hasn't worked out to Microsoft's expectations or they've lost patience for waiting, and Phil has now "retired to spend more time with his family" (i.e. been fired).
Now Asha is here and presumably has a mandate to fix this and get back the profit margins that were expected from xbox. Sarah Bond, the xbox president, has resigned, and with this letter it seems the previous Xbox COO is out too. There is clearly a huge shift in Xbox leadership happening and it shouldn't be surprising that Asha -- who is known as a business-driven executive and not a 'gamer' -- is going to be reverting a lot of previous strategy decisions.
My 2c is that Phil's strategy made sense on paper, but I don't think they were able to manage this many studios in practice: nearly all the studios they bought have failed to produce the number of games expected on time or on budget. It also turned out that overly cheap gamepass would cannibalize their business and overly expensive gamepass turned away subscribers. I think the netflix model isn't something you can speedrun and execution of it turned out to be very hard and expensive. Maybe it would've worked out with more time but it seems Nadella didn't think so anymore.
Acquiring a game studio only makes sense if you see a way to make it grow either by providing capital or better management. E.g. Activision acquired Treyarch in 2001 for $20M, which was probably 4-5x of its annual profit at the time. Seeing that very few people played (or even heard of) Die By The Sword or Draconus you could imagine that there was still a room to grow so there was a good chance you break even on your investment even sooner than 5 years and start making profit for yourself. Treyarch, who did not need to do the sports games contracts anymore and could hire more people, proceeded to making Spiderman and, later, CoD. I believe Spiderman alone made way more than $20M spent in the acquisition.
Buying Activision for 20x of its annual profit, on the other hand, makes zero sense. ABK was not lacking capital, had the same MBA management Microsoft has and did not have much room to grow, Blizzard alone had 5K employees. Their IPs had long time since plateaued or had been in decline already. What was Microsoft plan to increase profit? Switch everyone to Teams? Put more people to work on CoD and release 2-3 CoDs per year, hoping they all will sell as well as the annual CoD? The more realistic path to return of the investment could come from increasing Xbox's share of the market by making their newly acquired IPs Xbox exclusive. But they did not do even that.
I never understood the esteem Phil Spencer was held in, seemingly both by fans and industry insiders. I never understood Phil’s strategy.
Buy a plethora of studios. Pay an order of magnitude over the odds for the big ones - just to be sure you get them! ‘Rescue’ smaller ones of questionable financial value - as part of Xbox they’d somehow be successful enough to justify the price paid. Heavily manage the studio heads - but, uh, also give them total creative freedom - and allow them to make niche games. Sell hardware at a loss - but also make the games available on all platforms. Don’t allow any software that takes advantage of your most powerful hardware, because it also has to run on the other, less powerful console you are also selling. Also, the future is streaming! But, uh, maybe not!
Not just the strategy, but almost every aspect of the ‘strategy’, was incoherent - as current management is very close to outright saying.
IIRC Xbox had been criticized for quite a while at that point for having very few exclusive/first-party games worth buying an Xbox for. I always assumed this move was to try and fix that problem.
To be fair to Phil Spencer, this was the strategy across the industry right after COVID. Remember the shopping spree Embracer Group went on between 2020 and 2022? I think we were in an e-sports & live service bubble that has now popped.
Phil and the likes were too hands-off on these studios post-acquisition. They got too complacent enjoying steady paychecks over years of delays while working on their niche games that only highlight their artistic vision over generally fun gameplay. That's where they failed. The Activision/Blizzard acquisition and GamePass fumble were just a nail on the coffin
Yes, I agree. I empathize with Phil in spirit on it. He's a real gamer and tried to create a space for the developers to do their own thing and create what they want. But it doesn't seem to have been great business.
It was a risky bet that became even higher risk when MSFT spent ~$80 billion dollars rolling up game studios near the peak of the historic COVID gaming bubble. They bet it would greatly increase Game Pass sub growth. Instead, Game Pass sub growth slowed down. At the time I thought it was a reasonable plan - but not at the prices MSFT was paying for content. Then the DRAM drought killed hardware sales to gamers forcing the issue.
I certainly enjoyed gaming their rewards system for years on a series S. $300 for the box, maybe spent $40 over roughly 4 years for gamepass. It was nice while it lasted!
Xbox around 2021 had around a 12% profit margin and the gaming industry as a whole was around 17-22% . In 2023 the target for the division was put to 30% . We see this new restructuring because the target was put this high. Microsoft really wanted Game Pass to be a steam competitor which is pretty much what everyone in the industry tries to do and fails. The push for Game Pass prices to be higher was to get the 30% margin and that didn't work out. They aren't operating at a loss they are operating at a goal and they failed the goal. From other child comments many studios they bought probably were below average. We can see this restructuring basically is that they failed the target, the old guard went out as the new guard came in.
Being a Steam competitor involves making a store that's actually good. All the other major stores/platforms don't really seem to give a shit, to be frank. Steam has like 20x their feature set, and the gap appears to be still growing.
If anything, it should be easier to make cool new features when you own the hardware side of the platform experience too, but no, it's Steam that has stuff like remote play together, not PSN or Xbox.
I don't know if I care about the features, what I do care about is the games and a lean-back experience which is not sweaty. I play games to escape the drudgery of software development and the last thing I want to do is mess with an .INI file.
I love the Steam Deck because it feels like a consumer electronics device: it has the reliability of Linux but not the sweat. The Steam Deck is the only device I've seen that works 100% perfectly with Airpods, for instance, including Apple devices.
I was at Best Buy the other day and saw an ASUS device that looked pretty cool until I picked it up and saw a Windows desktop with fonts not scaled appropriately for the size of the device. Like, wazzup? Steam Big Picture turns my big Windows machine at home into a game console and does the same for my Mac Mini. How is it you can have the back of frickin' Microsoft and not be able to do the same?
Not to say that Steam isn't packed with features that are valuable to many gamers, but just having a great selection of games that "just work" and knowing I can enjoy my investment on the devices I have now and devices I get in the future is worth a lot.
I think it's one of those things where people only care about a small percentage of the features, but which small percentage varies.
For example, I used the example of remote play together, which is very neat and a lot of people love it, but I personally don't use it.
On the other hand, I make extensive use of Steam's gifting feature, including its ability to handle multiple gifts to multiple people in a single transaction, and to schedule exactly when those gifts will land. And this is something that the other major stores don't seem to support at all, a big advantage for Steam for me, but I'm sure there's many people who don't care at all about gifting.
> Steam Big Picture turns my big Windows machine at home into a game console and does the same for my Mac Mini.
Well it turned mine into a 2000s linux/wine debugfest flashback when I wanted to play GTA IV: Ballad of Gay Tony... Also don't get me started on having to keep the poweroff button pushed on the xbox controller for mouse emulation for games not having controller support in the menus. It is far from the polished experience you had, but possibly I just held it wrong.
Microsoft is focused on AI and enterprise sales. I don't think they're institutionally capable of making a good end-user experience. You might just as well ask why SAP makes bad UIs - it's because the executives just don't really care.
Play anywhere is a killer feature for me (that's a game license that works on multiple platforms). Before steam deck came out it meant I could swap between PC and TV seamlessly. Should've been on every game they sold.
>Microsoft really wanted Game Pass to be a steam competitor which is pretty much what everyone in the industry tries to do and fails.
Gamepass is quite literally the most anti-steam strategy ever. It's a massive loss leading (or rather, low margin leading) service relying on a pseudo-rental service to provide value. Steam got to where it is by keeping all its costs lean and developing a service around taking a cut from premium digital goods.
>From other child comments many studios they bought probably were below average.
In revenue, maybe. That's the fault of Microsoft in two fronts. One for purchasing game studios who always operated at low margins, and two for directing them to focus on quality over budget. Double Fine and Ninja Theory aren't studios you buy with an expectation of 30% ROI in 6 years (ignoring the pandemic in the middle of that). Let alone when you explicitly tell them not to worry about finances.
On an artistic level, Hellblade was an insutry darling and about as close as you can get to an "oscar-bait" of a game. It's something you buy for prestige. Double Fine is a very seasoned indie studio who delivered several cult classics. You buy that for a brand that gives you variety from the current "online FPS juggernaut". Those strategies changed dramatically over the decade.
I wrote a while ago about how companies seem to have gotten the idea into their head that subscriptions are unconditionally good, rather than a contingent good based on the exact circumstances of the subscription: https://jerf.org/iri/post/2023/streampocalypse-and-first-pri...
Gamepass as a subscription to make sure you always have something to play, that has a lot of old games or indie games and other games that have no commercial value makes sense to me. The back catalog for any of the current consoles is plenty deep with games that have lost their ability to move units independently but still have a lot of value and can also give that perception of value. Such a plan is picking up pennies, but it's a lot of pennies.
I've never understood putting your new releases out on gamepass and bragging about that as your primary value proposition. Many new games are, say, 20-30 hour experiences, assuming you play them from start to finish once. One does not need to spend too much time with "this % of other players got this achievement" to see how many players tend to drop off of a game even that long. So if you put your new game that you would have sold for $60-80 dollars to me directly and it translates to three weeks of engagement on your $15-ish/month (depending on level) subscription, it's hard to see how that is an economic win. Put that game on Gamepass in a year or two, sure, that can make sense, but on release? And that not as a mistake, but a deliberate strategy? I can not fathom the mindset that leads to that.
As a deal for customers it seems to have been pretty good but I've never understood how Microsoft expected to make money on that plan. The streaming-video proposition of making a high-budget release to keep your subscribers makes quite a bit more sense, you could never have counted on getting $70 out of a customer for those anyhow, and even that economic proposition I think has proved more complicated than the streaming companies expected. The Gamepass model has just seemed insane.
I expect it to move to more like what I described at the beginning. As a way to turn a lot of old and hard-to-monetize content into a subscription stream it's brilliant. As a way of releasing new AAA titles it's crazy. Movie studios played with that model and I don't think they liked it at all.
The logic of day 1 releases, at least how it seemed to me, was that a % of those people who get gamepass just to play the game for cheaper would stick around. That’s potentially worth way more than 1x $60 (now $70-$80) sale. That didn’t happen I guess
It’s funny how a strategy like this would work on me, but I am a busy adult who doesn’t really game.
Compare that to my nephews who have a lot of time for gaming, but they’re always fighting to scrounge up the money for another month of Nintendo online or Xbox online and go without it for at least half the year
I _think_ the thinking is that not everyone is going to buy more than a couple full priced new releases per year (in general). $80 or whatever is just too much for most people to drop on a game they "might" like. On the other hand, most people would have few reservations being perpetually subscribed to a service that lets them play every new game "for free" (so long as they keep rolling in on a monthly basis). Theoretically, the subscription money would exceed what they'd normally collect from the average person buying the usual 2 or 3 full priced games per year.
Where I think it breaks down is quite a number of gamers are hopelessly addicted to playing all the latest games, all day every day. MS is surely losing money when those guys substitute buying physical games for a subscription.
> - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million
> So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous).
How is that profit margin distributed though? King (Candy Crush etc) and Mojang (Minecraft) are specifically called out as money-makers, it's possible that they're carrying the majority of profits while everything else is a dud:
> We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested.
As an example, Double Fine (one of the studios being chopped) has released 2 games since 2021, Keeper (191 peak player count on steam) and Kiln (163 peak players); these would be flops even for a normal indie game, for a studio getting Microsoft salaries those are enormous flops.
On the margins, that's crazy thin for the size of the org... One bad quarter could turn from a few million in profits to hundreds of millions in losses. It's too close, and there's no way to build/store funds for any kind of storm at that level.
Now, I think the vast majority of the pain is more than self-inflicted... I think actual business, marketing and focus need to start taking priority over idealistic political PoV. Let the games target their natural audiences and have the broadest appeal... at a certain point, trying to gain 1% of audience means alienating 25% or more.
If you're a grocery chain you know exactly how much an item costs and exactly how much you sell it for. You also simply order more or less stock of the item depending on how it's selling.
If you're a video game company, you invest millions of dollars in a project up front, for years, and you don't know until after release whether you:
- Make back all the money you spent plus a healthy profit on top.
- Just break even, but you lost the opportunity cost of all the other things that money could have been spent on with better utility.
- Your game flops and you wasted all the money you spent developing it.
It's also highly uneven. Extremely likely that King (Candy Crush) and Mojang (Minecraft) are making a ton of money, and everything else is a money pit where you pour in millions of dollars and you don't even make your money back.
food demand is pretty inelastic their margins are low but they're fairly consistent. modern games can have budgets of a few hundred million dollars with absolutely no guarantee of sales. at those margins 1 failed triple ai have could wipe out several years of profits.
Keeper needs an optimization pass so badly. Once I finished the first zone the framerate dropped to the floor on my Steam Deck. Presumably it runs okay on the current XBox, but it sure feels like Double Fine's attention has moved on and will never return.
Absolutely drop-dead gorgeous but I don't think I am going to ever finish it until I get a Deck 3/4 in like 5-7 years.
>Double Fine (one of the studios being chopped) has released 2 games since 2021, Keeper (191 peak player count on steam) and Kiln (163 peak players); these would be flops even for a normal indie game, for a studio getting Microsoft salaries those are enormous flops.
Hard to really say. Kiln and Keeper can easily be made up for by the sales of Psychonauts 2. I'm sure an indie Double Fine would not have been able to make those kinds of games.
This takes me back to Pertinent, another small game from a reputable studio, had its main writer saying that "this kind of game would not be possible without Gamepass". Which I 100% believe. Microsoft definitely didn't buy Double Fine trying to make the next Fortnite, but that arthouse strategy clearly isn't a factor these days.
Game Pass was never a sustainable business model. People liked it because when a new game came out, they could buy a month of game pass for like $15, play through the game in a couple weeks, and cancel. It was a really good deal because Microsoft has spent the past decade+ trying to recover from their terrible fumble of the Xbox One launch, so they were subsidizing gamers to come back to their platform.
With the money being spent on AAA titles these days, they are not going to make any money without increasing the price of Game Pass majorly. The big price bump they quickly backtracked on was an attempt to make Game Pass somewhere closer to being profitable.
Traditionally if you're going to play through a game in a couple weeks and then not own it anymore, that means you sell it and someone else buys it for their own couple weeks, and the company should be happy if they make $15 per person in the chain.
Also this is part of why I'm really worried about how weak the concept of game ownership is getting.
See also how anyone buying GTA6 near launch will be unable to resell it.
The writing's been on the wall about physical games going away for quite some time now.
You can tell the PS5 was designed to be a digital-first system by the disc drive slapped on the side like a tumour hanging off the otherwise symmetrical body.
I don't mind physical copies dropping in importance, and all else equal I even like the move to digital, but we desperately need to fix ownership of digital copies and stop having loopholes around "it's just a license".
Yea, I'd love to hear specifics. OP is all over this thread vaguely insinuating about "political content" but notably hasn't yet pointed out any specific examples that are objectionable.
None of those examples are political. They might be things you don't like, which is fine, but that doesn't make them politics. What makes the attractiveness of a 3D game character "politics"? What makes a useless gay side quest politics, but a similar useless straight side quest not-politics?
Having a realistic amount of LGBTQ people/interactions in a big story shouldn't qualify as "political". Removing it for certain markets is much more political, and they should not do that, but I get the impression that isn't the outcome you want.
Edit: Also the average level in the real world is a lot more than 1%. 1% is like just the trans portion.
Just so I understand your objection, they are woke because in the game one of their studios made, the woman in the game wasn't attractive enough for you?
The top Reddit comment there pretty much sums this whole discussion up. I can't believe I dragged myself into this. It's just Gamergate again and again. I should have known.
It's by design. The outrage merchants post day in and out to signal allegiance to this bizarre cult.
People also don't respect how WILDLY influential GamerGate as been. There's good arguments to be made that Trump and his shitty White House would never have come to pass if not for moot re-enabling political discussions on 4chan at the behest of some combo of Epstein and Bannon, explicitly to stoke reactionary rage at anything "gay" in games.
Like don't get me wrong it's deeply stupid and perhaps respect is the wrong word, but it's crazy how much those old events are shaping current culture war nonsense.
Those metrics are hugely misleading because they account for current fiscal year revenue and margins.
For Xbox being what it is today, which is mostly about the subscription and not the hardware console or the exclusives, you have to compound their acquisition frenzy of 2018-2020 or so, which totals about 75 billion+.
They didn't want the developers nor the catalog. What Microsoft wanted is to change the economics and dynamics of the entire games industry, to make it Netflix-like (play what's in the catalog today, pay monthly even if you don't play anything) vs. what Steam offers (purchase once, own "forever", even if it's de-listed).
But that didn't play out. Optimistic estimates put total revenue for Xbox since then in the 20B ballpark. At a ~5% margin (as other commenters have pointed out) the profit is about 1B dollars.
It means that after almost a decade, the entirety of Xbox is in the red for about 74 billion dollars, which is 74 billion away from breaking even.
Steam still dominates PC gaming. Xbox consoles can't be more irrelevant today.
This isn't about over-hiring or AI. It was a bet at the executive level that went horribly wrong. They can still do things like selling IPs at a bargain to compensate, but still. Horribly wrong.
Note: Microsoft doesn't publish hard factual data so the numbers above are somewhat speculative (e.g. "analysts data")
It seems really odd to have a Netflix consumption model for games. Generally people want to play a few favourite games for a long time and get very skilled at them. You just don't need to churn through content like movies.
> Then they did not have to give away popular games day one on Game Pass
A company that sells consoles complaining about not having enough games after 25 years in business and acquiring most popular game studios is hilarious.
They keep cutting game studios, killing games and then set ambitious profit margins. At some point you have to question, do the people in charge understand their own business at all?
They just gutted bungee and basically killed Destiny 2, not because the game won’t sell, but because it won’t generate the profits they unrealistically set.
While Bungie had historically been tied to Xbox / Microsoft during the Halo era, Bungie spun out to be its own company in 2007, and then was bought by Sony in 2022. It was Sony, not Microsoft, driving the most recent layoffs at Bungie.
It seems like a simple fact is often overlooked: you can't just throw money at art and expect it to be good, no matter the form. Netflix tried it and ended up with a lot of weak stuff, Microsoft did the same with similar results. Most games these days are just copies or rehashes of others, not original, full of clichés or old-fashioned mechanics. Acquired studios tried to mash up different ideas, hoping it would stick, often with really bad results, like Redfall. It's like the E.T. game disaster, but forty years later and spanned across the whole company. Hardware is great, GamePass is great, but Microsoft can't produce games.
Completely agree. Their problem is that corporate wants more money to funnel back into AI and it is really inconvenient that Xbox provides only a couple billion dollars per month whereas Office and Cloud provide many more billions. What a complete joke.
It comes across to me as a really honest letter. At least they are talking about spinning out studios instead of shutting them down, I think that plays better than previous announcements. (e.g. make a hit game like Hi-Fi Rush and get shut down!)
> - Then they did not have to give away popular games day one on Game Pass
> - And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.
I saw this coming from day one. The instant they did Netflix for Games, it was going to gut their margins. And then the inevitable pullback, either holding new games for months or raising the price, was going to kill the value proposition.
They said "This will make us a mint" and celebrated the victory years too early.
I wonder how are they taking in 5 billion per quarter when their latest console barely outsold the first Xbox. I doubt it was making a bit less than 5 billion per quarter with quotes like "Ultimately, Microsoft lost an accumulative total of $4 billion from the Xbox, only managing to turn a profit at the end of 2004." on wikipedia.
So how are two consoles with roughly the same sales numbers so far apart in revenue?
> And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.
Myself and 2 of my friends stopped our subscriptions the day that happened and never went back. I know it’s anecdotal but I’m happy to see others did the same.
I agree with the mess part. I also feel like a reset is necessary and they are messing it up more right from the start. Fourteen layers of management? That's insane. But 3200 layoffs is a hell of a lot more than middle management cruft. Asha certainly has her hands full over there and the honeymoon period - if there even was one - is definitely over.
You also missed the part where they positioned themselves as the value offering. That's gonna be hard to beat whilst still achieving "return to growth".
That's a 3% margin which is unsustainable. It's less return than you can get from buying treasuries, which means that if they don't improve it they will go out of business.
Well this is the new Xbox boss, Aska Sharma trying to course correct her own actions after pushing out Phil Spencer (and team). Phil had a deep understanding of the game world about profit margins and how the Xbox is essentially a stake in keeping Microsoft in the minds of consumers, a place in the home. Aska has a shallow understanding and sees only the financials and wanted to increase profits. Now she is burning it all down to try and “reset” and replace people with LLMs to increase profit margins. I imagine she will be pushed out herself end of year or next Spring (2027) once her naïve plan back fires.
A part of me wants to be generous in interpreting that and say, OK, maybe it's the first time she's playing games semi-seriously in order to understand the capital G Gamer. Surely she's played games before, like say, the Sims, Bejeweled, Mario Kart, or picked up a Nintendo DS or Switch in her lifetime. Heck, even Wii Sports should count here in some capacity. Most people have played games casually in their lifetime by this point.
The other part of me though says that, no, it is in fact pretty possible that she hasn't played any video games of note, other than Wii Sports that one time. And even if she has played games casually, is it really too much to ask to have the person leading the Xbox brand be someone who can press the X button on their controller and not be confused by that?
It's a publicly listed company. They needed someone without the emotional attachment to 'Gaming', but with business nous, to make the decisions needed to meet her mandate, which is to ultimately increase shareholder value.
A 'Gamer' would have found that more difficult to do.
There's this little concept of "cultural sensitivity". Given the size of the King thing it would even be fair to have somebody who had a serious Candy Crush habit.
At least they didn't create a fake profile for her the way Elon Musk made one.
I think the "glass cliff" is going to claim another victim.
Asha came from the AI division of Microsoft, she didn’t pop out of nowhere. She is strongly tied to the Microsoft LLM plays.
IMO Phil was very clearly pushed out by “AI will cut costs talk”. No one makes huge investments into acquiring companies and then suddenly retires (after running the division successfully for decades) and none of his underlings were promoted into the role, they all left when he did.
I think Phil was pushed out by the complete failure of his strategic vision when confronted with reality. He had a vision of growth and prestige, and money would follow. I loved his vision in its grandiose and lofty goals, but he completely failed to capture any of the "how to make it happen". It stays a fantasy.
She’s been in her position for less than 6 months. All of the problems were under Phil, so I don’t understand what you mean by course correcting her own actions
Don’t know why this is being downvoted because it’s absolutely on the money. She’s a very green exec that is doing the classic “change everything to make it look like I’m doing something” while also not really achieving anything.
The rebrand to ‘XBOX’ is a good example of how they’re already out of ideas
Spencer's strategy for Xbox was very 2010 coded: rely on the billion/trillion dollar company to undercut the competition and gather market share and leverage. Classic embrace, extend, extinguish. That's why they bought a bunch of arthouse studios who don't immediately make money, invested hard in a subscription service that was wildly unprofitable (a strategy that even TV services couldn't make profitable, mind you), and focus on moving software more than hardware.
That strategy shifted dramatically between rising interest rates, a cooling consumer market, business uncertainties, and companies simply wanted to throw any excess fat into the AI rat race. So those art house studios were removed, Gamepass needs to enshittify pre-maturely,production needs to slow from a variety of offerings to the usual safe and sure releases. And of course, the biggest expense needs to be trimmed down on: because no one is stopping them from doing it in the US.
The number will still go up, but in different ways. They aren't doing this because they are in the red, they are doing it because they want all the money instead of a lot of it.
It was pretty rich seeing armchair video game industry analysts act like the new CEO was gonna usher in a new age for Microsoft's gaming division because she got to announce the updated logo and some games that would have obviously been in development long before she became CEO.
Microsoft is never going to figure out gaming. It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.
To me it's mostly unfortunate that this has left PlayStation with no direct competition because they've noticed and leaned into the not-giving-a-shit attitude after they had such a great console generation with the PS4. It's kinda crazy that we're already almost due for a new console generation and there's very little appetite for new consoles after this generation where it feels like it barely got started. And between graphics almost certainly at the point of diminishing returns, and hardware prices like they are right now, I can't imagine there's a market to sell something more capable than current gen consoles. The industry is in a very strange state.
To me, the graphics abilities have been there for a decade... what we need are better games and gameplay. More fun games without gotcha, pay to win, loot box efforts. Too much effort is going for dazzling graphics at the expense of overall gameplay. How many people are still playing CoD, WoW and so many other games from over a decade ago? How many refreshes of Final Fantasy have we seen?
The graphics can only carry you so far. There's indy adventure games with SNES level graphics that have millions of daily users.
> Too much effort is going for dazzling graphics at the expense of overall gameplay.
Yes, 100%. I love good graphics, but game play is the most important thing. If you don't have good gameplay the graphics mean nothing. A game with great game play and great graphics is something to behold.
I recently finished Split Fiction and they really nailed it. I hope studios take notice!
Split Fiction is fantastic. My wife, about 0% gamer when rounded down, is still talking about it months later. I had a blast too - the game manages to be extremely fun and a decent challenge for both gamers and non-gamers alike. We'll be replaying it, but swapping characters next time.
When we played it, we had just finished It Takes Two, which was also great, but Split Fiction immediately dethroned it. I can't wait to see what Hazelight comes up with next.
This has been a recurring theme since the dawn of video games: Everyone talks about graphics (devs and gamers), but ultimately the good and beloved games are the ones with great gameplay.
This is where Nintendo is at. It’s hilarious how much fun me and my kids are having playing games like Animal Crossing, Super Smash Bros, Mario Party, Pokemon Pokopia, and the surprise smash hit has been Tomodachi Life: Living the Dream. My kids make all the neighbors and have them get married and laugh about it and it’s just such a goofy concept. The graphics are good enough that you no longer notice there’s graphics, just the art.
Switch 2 is a fantastic console with an astonishingly fun first party library, and Nintendo just over there doing their own thing like they’ve always done.
Nintendo are basically the only people who held out against in game spending, for which I salute them.
I spent a few years in and around the industry and there was so much insanity around the need for in game monetization that it just made things much worse.
And because the game studios didn't care about it, none of the money stuff worked, making executives even more upset.
All to catch some vision of F2P money which is an entirely different business that these companies couldn't possibly support.
It's very sad for the industry overall (this particular decision is MS killing stuff off because the margins aren't good enough to funnel more cash into GPU gods).
Nintendp dabbled briefly with it. But they know their audience and very much did not want to risk any PR hit by associating too closely with the typical gacha/lootbox model. They saw the Roblox/Fortnite smoke long before most of the industry and turned off very quickly.
But there's one specific statistic to why Nintendo can keep doing what it does in a way no one else can: 98% retention rate. You get into Nintendo and you basically never leave. Even for Japan, that's well above the 70% retention rate you'd expect. Keeping that kind of institutional knowledge for an entire career makes them really good at what they do, and the unfortunate decades of Japan's economy meant they were less tempted by amassing huge loans or risks on experimental stuff.
Maybe they didn't become trillionaires, but it means they amassed a huge war chest and can weather storms that US companies are currently in the middle of.
There's a lot I don't like about Nintendo, but the one thing I admire about them is they understand that fancy cinematic graphics aren't what make a great game.
Absolutely... They've been able to make a lot of games just fun even if the graphics aren't stellar. To this day, I wish they'd have released a Wii Sports Golf as a separate title with several courses.
There's a bit of Mad Libs in there as well, you can for example add your own conversation topics or draw your own food items or pets which the characters will then talk to each other about.
Also dazzling graphics has been mostly visual instead of experiential, that is, with the advances in GPU capabilities, we do get beautiful effects, but the intractability with the said infra is seems to be stagnant (and in some cases regressed)
The way things interact in the game world peaked around mid 2000s, just in time when CPUs started to not follow moors law.
As of now, interactive environments are still almost as good as half life 2 from 2004. Gaming is all about the feel of it, which also includes the visual component.
I think graphics peaked ~2015. But interaction still leaves a lot to be desired; we still have slipping and characters who can't walk stairs in AAA games to this day. Making characters more physically grounded and present seems like the obvious thing to improve to me.
This is something audiences are clearly desperate for today. I think it's obvious when looking at the huge success of Helldivers, Bodycam, Ready Or Not, Arc Raiders, (none of which are particularly innovative) players appreciate high quality, tactile and grounded world interaction.
Counterpoint is Roblox, which had one of the most innovative game engines ever. It could multiplayer simulate thousands of blocks of destructible terrain in 2006.
This feature was mostly ignored by the playerbase because developers found it easier to create static setups and focus on iterating on other parts of their gameplay.
I’ve been saying this for 20 years. I care much less if the game is visually stunning than if the core game is fun. It could be a paintball themed FPS for all I care as long as the core mechanics are fun and the story is engaging, I care very little. Also, good graphics don’t have to be hardware intensive—not everything needs to seem photorealistic.
That's the thing -- for a while they had figured out gaming. The xbox and 360 were solid consoles with lots of great internal and external games. Halo was incredible.
Then the company did the thing that Amazon did, Blizzard is doing, and all the big tech companies do -- they thought their big war chest meant they should make bigger games. Budgets ballooned, game timelines extended. Now they are stuck with games and studios with 10 year dev cycles trying to create the biggest, the most incredible, the most expensive games.
There's SO many devs out there making incredible games for fractions of the cost. It's a shame Microsoft (and others) keep thinking that reaching for bigger means better outcomes. No one wants "the game only Microsoft can make", everyone wants another great Zelda. Or Gears of War. Or Satisfactory. Or Mina the Hollower. Or UFO 50. Or Animal Well.
Hell, people want a game about shelving 3000 books in an Arcane library. Let games be smaller, more exploratory, more creative experiences. Let your studios get weird with it. Let them explore spaces and take risks. Stop sinking tens of billions into games. Start sinking tens of millions into them.
I think another big issue they have is their insistence that most (ideally all?) of the people working on their games should be temporary employees. When your most valuable studios get out of the business of providing secure and sustainable employment, you lose the ability to build institutional expertise. When you treat your creatives like a commodity, you'll get generic assets and writing regardless of budget. When you focus on everything but the games themselves, it shouldn't come as a surprise that your big franchises degenerate into undifferentiated revenuemaxxing slop and unique new projects that might get people excited die on the vine.
Overall I think western AAA game development is dead. The executive class killed it with their greed and incompetence, and as long as these huge corporations are allowed to keep buying smaller studios/publishers and shutting them down a few years later, nothing is going to change.
> Microsoft is never going to figure out gaming. It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.
Gaming is like cuisine. Can it be art? Sure. But most people will never visit a Michelin starred restaurant in their whole lives. They go to McDonald's and their local equivalent. Mainstream games have been like McDonald's for a long time. It's not about being a thought provoking artistic expression. It's about engineering a predictable entertainment experience that the average Joe can enjoy while being half checked out after a day of work the same way he enjoys a Budweiser or a Big Mac.
Of course, no critic will ever be caught praising McDonald's for its culinary artistry. But it doesn't matter. People will keep spending money on it, and the business continues. Same deal for gaming.
I feel they kind of did in the Xbox 360 era. Maybe it was just down to luck because Sony dropped the ball in the early years of the PS3 and Microsoft got the jump on them a bit.
The 360 was amazing looking back on it, Xbox Live, trying out innovative ideas like 1vs100, attracting lots of publishers to the platform for games, Xbox Summer of Arcade.
I was a big OG Xbox fan but even then I knew deep down it was never going to catch up to Sony with the PS2. Then the 360 came out and it was brilliant.
Sadly they threw it all away with the Xbox One and while recovered some credibility somewhat with the Series X, it's definitely not the same as those golden years of the 360.
Maybe the 360 was an aberration in Microsoft's history and the years since then have just been a regression
Microsoft is not an engineering company any more. Just look at their products. They placed ads in the start menu and file explorer. Azure is one of the worst clouds when it comes to features and reliability.
Microsoft is a dying company, and they are trying not to end up like IBM, but their fate is inevitable.
The pandemic and scalpers really destroyed peoples apetite for the "new thing" when this generation came out, and with that boost missing studios saw little point in going exclusive perpetuating the vicious cycle, it's just in the past few years that there's really been exclusives for this generation that didn't also support older consoles.
And even then, already the PS4/XbOne generation added stratification making it more "PC-like" with the XbOne-X having heftier hardware (not to mention it being PC-like compared to PS1/PS2/PS3/Xbox360), that then continued with the Xbox-series-X and Xbox-series-S.
Consoles aren't specialized hardware for "magic experiences" and everyone knows this, it's just another "device" that happens to be connected to a TV with a controller where people are gatekeeping software availability.
Microsoft also didn't do themselves any favor with that naming scheme. In the current generation (I think?), you have:
- Xbox X
- Xbox S
- Xbox Series X
- Xbox Series S
Compared to:
- PlayStation 5
- PlayStation 5 Pro
or:
- Nintendo Switch
- Nintendo Switch OLED
- Nintendo Switch Lite
Anyone who's literate in English (and knows that OLED means "nicer screen") can immediately rank the PlayStations and Switches into "good, better, best". But with the Xbox, how is anyone supposed to know which one is which? Is the Series version better or worse? Is it a whole new generation, with whatever backwards-compatability implications that a new generation brings? I need a chart and I probably still won't be able to tell you if you ask me in a month.
Slight correction. Last generation was the Xbox One (already a confusing name because some people thought that was referring to the original first Xbox)
A few years into the generation they updated the Xbox One, putting it into a smaller form factor called the Xbox One S, and at the same time released a spec bump model called the Xbox One X. I don't believe any of these are still available for purchase.
The new generation has the smaller/lower-powered Xbox Series S, and the higher-specced Xbox Series X. Leaving the overall generation with seemingly no name, other than "Xbox Series" I guess?
But yes, the names are terrible because S and X both refer to consoles from last gen and current gen.
This is absolutely correct, I game on Xbox pretty much every day or every other day, I have been with Xbox since 360 or whatever the first one was called. I am still constantly confused by the naming. There also was another revision to the top of the line Xbox series X and the Xbox series X digital edition. I can’t imagine someone looking at the naming scheme pre-release and saying yes, let’s go with that.
> And between graphics almost certainly at the point of diminishing returns, and hardware prices like they are right now, I can't imagine there's a market to sell something more capable than current gen consoles.
I haven't bought a console since the Xbox360 and Wii. But I have a friend who still games pretty heavily and is low income. He can not afford the latest PS5 and is still on a PS4. We were talking the other day and he said "I love consoles because they are simpler and cheaper than a PC but now I can't afford either. The graphics aren't getting much better so what am I paying for? What happened to $400-$500 consoles? Remember when consoles were 200-300?" Of course those last few prices were 90/00's but I agree, the cost of a new console is quite insane for not much gain.
Two years ago, you could get an XBOX/Switch for 300, or a PS/Steam Deck for 400. Granted, the PS and XBOX were digital only. But now the cheapest XBOX is 500, the Switch 2 will soon also be 500, the PS5 starts at 600, and the Steam Deck is 789. Things have been going up slowly, but the last year has been absolutely killer.
$200 in 1985 (NES launch price/date), adjusted for inflation is just shy of $600 in 2026. RAM and GPU prices are really hurting the consoles right now, but compared to inflation benchmarks up until about 2020 they were considerably below inflation.
I read that when they designed the Xbox Series S and X they knew it was going to be difficult to lower prices down the road because wafer costs were increasing every year. Which is why they launched with 2 models from the get go, one cheaper than the other. And even so they were losing between 100 and 200 dollars per console.
Now things are even worse with the RAM and SSD components crisis. The Series S has now the price of the Series X when it launched.
I'm in software and I do alright, but I'm still on a PS4 too. Just can't justify the upgrade when there's still so many great old games available. Maybe when the next Horizon Zero Dawn comes out, I'll be forced to upgrade, but I'm taking my time about it.
More capable than current gen consoles is going to be local AI. Calling it now. It won't be as much about graphics as it is about selling some notion of human like NPCs and smarter enemies and some other use case they can sell to the masses.
>It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.
truth. far too many MBAs in that company. "Let's monetize Solitaire!!!!" Only an idiot would even come up with that idea, never mind follow through on it.
When she was announced it was broadly assumed that she was being brought in to kill the division.
But then she did some minor, pandering actions and suddenly everyone was "oh boy! A new era of xbox!" Only it was all a ruse to ensure people didn't jump ship too quickly and make the bleeding too heavy. They want people to keep pumping money into a platform heading to the graveyard.
At some point, the games industry decided it wanted to be interactive Hollywood, and the consequences are entirely predictable. Meanwhile, Nintendo just quietly shipped 3.8 million units of Tomodachi Life in two weeks, and 4 million of Pokopia in five. They're making actual games. Sony's obsession with prestige cinematic bloat, like Xbox, has also put them in a slow-motion death spiral that's going to become painfully obvious in a few years.
My kids begged for me to buy Tomodachi Life and Pokemon Pokopia and they’ve been absolute smash hits in the house. Pokemon got me hooked for a month or two until I mostly beat it, and the kids play Tomodachi Life every day and have funny little stories to tell. So many modern games just aren’t fun, it doesn’t matter what the graphics look like if the game is boring.
To some extent - but you can't get away with Hollywood Accounting Practices in the same way.
Also one must consider the likes of Hideo Kojima who can sell ~7 million copies of a new IP that is effectively a cinematic Walking Simulator as an Auteur acrimoniously splitting from the traditional studio system.
Clair Obscur: Expedition 33 also shipped over 5.4 million copies as a AA, in what is also arguably an interactive cinematic on-rails RPG.
Nah, expedition has enough of a game in it. Parry mechanic is pretty addictive, and gameplay is kinda fun. Exploration, too, is strictly gaming aspect, not cinematic.
God of war is plainly movie on rails compared to E33
> acrimoniously splitting from the traditional studio system.
Yeah, he split from the traditional studio system to create... his own traditional studio system.
Kojima is precisely what happens when you stop thinking of games as actual an interactive entertainment format and start thinking of it as a "cinematic experience" instead.
Death Stranding is only a game by the narrowest of margins. What it is is a movie with Kojima's Spotify 'favourites' list as the soundtrack that so happens to have one interactive element or two thrown in there for good measure.
It's pretty telling that all he's done after splitting away from Konami and surrounding himself with his own sycophantic group of developers is Death Stranding. Kojima is the direct result and pretty much the face of a lot that is wrong with the games industry right now.
> Death Stranding is only a game by the narrowest of margins
I strongly disagree. I'd say that Death Stranding has an incredible open world "sandbox", rivaling the ones of GTA. I can spend dozens of hours there without worrying about the campaign - it's not a Hollywood movie.
> Kojima is precisely what happens when you stop thinking of games as actual an interactive entertainment format and start thinking of it as a "cinematic experience" instead.
And for Western devs, we have Rockstar doing that. RDR2 is a wonderful movie, but a pretty poor game. Unfortunately, they forgot what medium they were working with.
Nintendo also shipped Metroid Prime 4, with massive delays and unsatisfied customers, following the same "interactive Hollywood" philosophy which disappointed Metroid fans.
Same thing goes for Star Fox, a remake of a remake of a remake, with poor visual and dialogue choices.
And meanwhile, the same silent push for digital-only, forced upgrades and the like...
> Nintendo also shipped Metroid Prime 4, with massive delays and unsatisfied customers, following the same "interactive Hollywood" philosophy which disappointed Metroid fans.
I'm not convinced that Metroid at least really is a great data point for "Nintendo is ruining things in-house". From Wikipedia[1]:
> Nintendo announced Metroid Prime 4 with a teaser trailer during the Nintendo Direct presentation at E3 2017, and announced that Retro Studios, who developed the previous main Prime games, would not be involved.[15][16] In February 2018, Eurogamer reported that Prime 4 was being developed by Bandai Namco Studios in Japan and Singapore.
> In January 2019, the Nintendo EPD manager Shinya Takahashi announced that development had restarted under Retro with Tanabe remaining as producer. Takahashi said the previous studio had not met Nintendo's standards and that the decision to restart was not taken lightly.[21] Shortly after, Nintendo reevaluated Prime 4 after noticing changing attitudes towards open-world games, but maintained the direction as the development was already taking longer than planned. The team ignored new developments in action and shooting games to prioritize the adventure elements.
There's a perspective where this is almost the exact opposite of the problem being discussed about Microsoft. They chose to let it get developed externally, suffered delays, and by the time they moved it back in-house, the ecosystem had moved from under them. They probably could have chosen to rethink everything and delay it further, but they also arguably could have avoided having to make that call by keeping it in-house and letting the studio who made the previous entries work on it from the start and landing it in time that the original vision still fit what people wanted.
My point wasn't about Nintendo ruining things in-house rather than them following the exact same trends than Sony & Microsoft, only a few years late.
MP4 is what OP was talking about, an "interactive Hollywood" experience that betrays previous Metroids, adds discutable open-world design cues, and locks features behind $30 figures.
Metroid is a secondary or tertiary IP, and the Metroid Prime subseries has always had more smoke online than its sale figures would ever suggest, with only the original on Gamecube selling north of 2 million, and it was a pack-in title.
Metroid has always been a very (very) small series in the grand scheme of Nintendo. If they screw up the next Zelda or Mario they might be in trouble. But they also seem to have actual magicians work on those games.
Prime 4 was a fine game, except for the MacKenzie character who would never shut the hell up. It was like having a redditor in your ear for 10 hours. Absolutely insufferable. If they would have just removed him and worked on the desert hub world a bit more, it probably would have been 2025's game of the year.
This isn't the first time Nintendo has outsourced a disappointing Metroid game, if Other M is any indication. Remains to be seen if this is part of a larger trend for that company.
Star Fox (SNES), Star Fox 2 (SNES mini), Star Fox 64, Star Fox 64 3D, Star Fox Zero and Star Fox (Switch 2), while having minor gameplay differences, are all retellings of the same in-game story (the eponymous Lylat Wars).
Moreover, Star Fox was kind of... programmed by teenagers. Miyamoto is credited as both the producer and designer, but both Cuthbert and Goddard were 18 or 19, and Wombell (artist and designer) was maybe in his mid-20s.
Star Fox's development is an incredibly wild story where British teenagers argued what the SNES could do with bespoke hardware, and they ended up being shipped out to produce it because Nintendo felt they couldn't ever do it themselves. It all started with Argonaut's demo of what would eventually be released in Japan as "X". Entirely software-based 3D, on the original Game Boy.
There's actually a very humble quote by Miyamoto where he learned that someone can't just get better as a function of age and experience, after he clearly realized that these teenagers could produce something no one else in Nintendo ever had a hope of. Perhaps it's why the franchise has done so little -- Nintendo's just not in a remotely similar headspace the Argonaut lads were.
Between 1 and 2 was the 3DS remake which added levels and cleaned up the story some. The Switch Starfox includes those parts, too, from what I've heard.
I’ll concede that Metroid Prime 4 has been sitting on my shelf.
But Star Fox? Phenomenal. Such a fun game. Luckily I have the pro controller so I could map A to the back paddle or else my poor old tendons couldn’t handle the rapid fire shooting required at the high levels, but I’ve had an absolute BLAST playing the remake.
What I mean by "interactive Hollywood" is a game with a $200M+ budget that relies entirely on high-fidelity graphics and cinematic stories to differentiate itself, while offering almost zero new gameplay innovation.
Neither of your examples fit that description. Metroid Prime 4 wasn't chasing Hollywood cinematic design; it was a highly targeted attempt by producer Kensuke Tanabe to make a tight, isolated first-person exploration formula resonate (especially in Japan where it has consistently failed). Its goals are mechanical, not cinematic. Meanwhile, Star Fox is a classic arcade rail-shooter remake with modernized cutscenes, not a prestige movie-game. Early sales data shows it's actually working well, too, having just debuted at #1 on the physical charts in Japan and nearly doubling Star Fox Zero's launch week in the UK.
Ultimately, Nintendo operates like a Consumer Packaged Goods company. They treat their library of IPs like a diversified product portfolio rather than betting the farm on individual interactive movies. They use massive, high-margin, mechanics-first games like Tomodachi Life and Pokopia to generate enormous cash reserves. They then use those profits to subsidize legacy IPs like Metroid or Star Fox to keep core fans happy and feed their broader brand ecosystem. Because Nintendo spreads its risk across a wide spectrum of lower-budget games, they can easily absorb a minor product flop. Sony's interactive Hollywood model sinks $300M into a single basket, meaning one bad miss can completely wreck a studio.
Although Nintendo is still following the path of "gaming enshittification" with lesser budgets; and I would argue that Star Fox mostly sells because there's barely anything to play on that 500$ thing...
I find it really sad that the GameCube and N64 were where they were the most innovative and also happens to be where they floundered the most in sales.
That is encouraging, but my stock portfolio paints a different picture. Nintendo is unfortunately doing terribly this year. I still believe in their core mission, even if some of their litigiousness and anti consumer practices have put me off
Nintendo is also a Japanese company and japanese stocks aren't doing great due to their economy and the weak yen. Also, stock price does not correlate with good games or a healthy business.
Basing an art form on your stock portfolio is a good half of everything wrong with the industry.
And it's not surprising Nintendo isn't doing well in this clown market. They are taking a hit because they resisted pressures from shareholders who wanted them to raise prices on its new system. Nintendo eventually gave in, but with a much smaller price increase and a delayed effect from announcement to implementation (~4 months forewarning). And on top of all that they are not hyping AI to the moon.
And I haven't even gotten to the overall economic climate of Japan yet. Nintendo's stock falls would happen regardless of if they followed the above.
These are good, pro-consumer moves. It shows that more companies need to think past next quarter and resist the whims of people who don't have your company's long term interests in mind. You're the expert here, not them.
This is incredibly sad for a lot of my friends who are finding themselves out of work despite delivering well received products.
But at the same time I appreciate the candor of Asha saying that the corporate management are to blame and letting studios go back to being independent where possible.
Phil Spencer really messed up. Everyone in the industry knew Microsoft were making bad calls trying to dig themselves a hole with gamepass and simultaneously digging a hole with their acquisition spree. I’m glad that Asha is laying this bare even though it sucks to be brought in as the hatchet person.
This is an example of the glass cliff and I’m hoping she can help right the ship. I think they need to split to a wholly owned subsidiary rather than be in Microsoft proper, and I expect that to be announced at the Q1 investor meetings.
Phil really dug their hole deep. Microsoft themselves encouraged it. It’s been a decade of sheer incompetence at the highest level so I’m hoping they can right this without taking out half the industry in their wake.
I don’t think Phil had any other options while existing under Satya and a relentless push to services revenue. If Windows can’t make a case for itself without moving heavily to services (advertising and pushing 365, primarily), how could Xbox?
I’m not really sure how the C-suite is escaping blame here.
Anyone who's been paying attention to Halo for the past 15 years knew there was bad management the entire time. (Halo used to be the game that everyone wanted to have and to be; now it's an also-ran due to self-sabotage.) The first step is admitting you have a problem, so good job there, keep following through.
I disagree, it wasn’t Phil that dug a hole but Asha who pushed Phil out with no plan. Why is Asha finally revealing her plan years later if she was such a good fit? She came in trying to automate away peoples jobs with AI for the last year or so and that is obviously failing. It wasn’t Phil that invested the entire company’s well being on stochastic parrots.
She has done everything but focus on delivering games (product).
Just looking at Sharma’s history, she rejoined MS in 2024. Xbox was struggling long before that, so I don’t see how anyone can blame Sharma for the past 10 years…
Xbox has been profitable almost continuously since a few years into the Xbox 360. It's fascinating how "profitable but low margins" equates to "struggling" to so many.
It’s potentially a gross misallocation of capital.
Right now, the 5 and 10 year US treasury rates are 4.2% and 4.47%. The 30 year is 4.99%.
A business with a return on invested capital less than that is in fact operating at a loss. Unless there is reason to believe the situation will change in the near-to-mid future, such a business would literally be better off liquidating everything and just investing in treasuries.
You would need access to internal data to figure out their ROIC, but a 3% margin is not promising.
If you shut down the things that bring in $5 billion revenue, you no longer have $5 billion revenue, you have a gamble that some other industry can ramp up to that quickly. $5 billion has never been "quick money". (Inflation would have to get a whole lot worse for that to happen and that point the company has too many other problems.) That's "Opportunity Cost" among other bits of what used to be past corporate wisdom that companies have seemed to have forgotten.
>It's fascinating how "profitable but low margins" equates to "struggling" to so many.
If one bank pays 4.25% on your savings and the other pays 3.25%, which one are you going to chose to put your money in all else being equal? Why is the 3.25% one not a good choice despite you still making money?
People inherently understand business, they use the same principles in their daily life, but they just get confused on making the connections.
A bank offering 3.25% isn't "struggling" either. Real struggling for a bank looks like bank runs and depression.
But you are talking the "consumer perspective". Right now the median interest on consumer savings accounts is less than 1%. [1] Someone getting 3.25% from their bank isn't "struggling" compared to their luckier neighbor that found a 4.25%. They are probably closer to the top 10% or top 1% and have a larger savings deposit and/or high credit/sustainably low debt. Most Americans can just envy that, not qualify for it.
There are opportunity costs in moving your money from a stable bank that you have an existing relationship and shopping it around to get that perfect 4.25% highest margin that you can find. Transfers are usually free for consumers, but a bank may give you a lower APR on your credit cards and a cheaper checking account if you keep your accounts all in the same place with that bank. Trying to move all of that at once for a similar deal at the 4.25% bank can risk hard credit checks and account closure notices that consequently drop your credit rating, including possibly enough to make the bank at 4.25% question your stability and change their mind on the deal.
I think consumers actually today have a better idea of the risks of these kinds of "small improvement" things than large companies. Wall Street is a much worse "Credit Rating Bureau" than the three (truly terrible) consumer Bureaus. Businesses have grown so large they no longer understand Opportunity Cost at any real level. If you shut down the things that bring in $5 billion revenue, you no longer have $5 billion revenue, you have a gamble that some other industry can ramp up to that quickly. $5 billion has never been "quick money". (Inflation would have to get a whole lot worse for that to happen and that point the company has too many other problems.)
So you would chose the 3.25% bank or the 4.25% bank? Because it's a fictional illustrative example of "people always prefer more money", not a case study on banking lol
Microsoft's ownership wants to put their money into the 4.25% bank, not the 3.25% one. Don't lose your mind overthinking it.
you think you have some amazing analogy but it's utterly nonsensical. where is microsoft putting this money that is going to earn it more? are they low on cash on hand? why are they not investing every dollar they have on these magical free returns that just need more cash?
Right? It seems intuitive that markets can eventually saturate, and that there's a floor for how low you can get costs, so growth can't be infinite. Maybe you could make an argument that you want to grow in scale with inflation so that your profit doesn't eventually become meaningless, but you don't need to "reset" your multi-billion dollar revenue business to achieve that; you can get that by just bumping prices in line with inflation every few years.
Ratio of consoles sold Xbox vs PS5 was 1:3 before that, after that it fell in the 1:10 territories (december 2025)
Using Phil as a scapegoat and Sharma as the savior is disingenuous.. and is honestly pretty consistent with how i view Microslop: opportunists, tasteless, and visionless executives, shareholders and fanboys
The fall of Xbox started before the launch of thier current gen:
- HW: they announced 2 SKUs, with polar opposite performance profiles
- SW: their system sellers got delayed to couple years
The reset needs to happen at the highest executive order, not at the lowest, workers implement whatever project was greenlit
People chose PS5/Switch over Xbox (it now sells 3x less than Switch 1, wich is a previous gen console), people see through the lies of the media
I need to be clear that I’m not presenting Sharma as a saviour. Honestly, I don’t know if her decisions are correct or if Xbox can even be saved at this point.
You said it yourself, Xbox was being outsold 3:1 by PS5 which is still shocking numbers given the investment, and the fact that PS5 was having trouble selling units at the same rate as they’d been selling PS4s.
You can blame her for the last 10 years because she's CEO _now_. That's what you do. You blame the head of the organization for the organization's problems.
Because it’s their job to fix it. If they don’t, the axe falls again.
Humans often think in terms of deontological ethics. Corporations operate in terms of consequentialist ethics, and the only consequence that matters is that the numbers go up.
No, I’m not. I’m explicitly differentiating between those two perspectives and which corporations care about. “Blame” doesn’t exist in most corporate vocabularies.
I don't think a long time executive leaves, and the expected successor (Sarah Bond) refuses to suceed because of some intimate backstabbing behind the scnes. Especially not by an executive who was previously running the AI division during an AI gold rush.
Occam's razor: Spencer and Bond jumped off a sinking ship, Asha wasn't doing enough in AI. Push her to be the fall gal for the sinking ship and put in whoever will milk AI more in her place. Win-win. Asha will be gone in a few years with her job done and a cushy parachute, and Xbox will be a shadow of its former self. But that's not a failure; that's the goal.
By making big arguments to C-suite that were invested in the company’s direction. Same thing that happens in meetings where some dumbass says something like “we could build a cookie banner ourselves or pay Y company $12k/yr to run our cookie banner”. C-suite is full of these types of people that just make baseless arguments. Most management is not knowledgeable in their domain.
It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio
Yes, but only because the bar is so low. "We can't commodotize innovation" is not an especially subtle insight, and pretty much everyone other than executives at companies like this understand it without having to spend billions to try it out.
They say that only after they buy up like half of the IP in the entire gaming industry without a plan and it doesn't end up being a fast enough money printer. Activisions back catalog is the result of hundreds of acquisitions and IP purchases.
It also means they must have started with the assumption that they were the best home for every type of studio, which, when you say it out loud, sounds very stupid.
Second, how can a studio be "independent" anymore when owned by MS? Doesn't make sense. It's all just corpo speak for "we fucked up but we're still getting paid to fire you".
also board and man. that approved all acq. got lots of 8-9 figure bonuses in total, so they say that after all TOC and years. They will never say these acq. made our man. teams and some board members great ROI and personal wealth, lmao. Corp. games are sometimes flat for corp and amazing for the groups that decide them.
But they've already spent the money. They spent about 70 billion on activision blizzard. That was and still is an outrageous amount of money that will take fever to break even let alone turn a profit.
Call of Duty absolutely prints money, fwiw. King are weird because they basically have been doing the same game in different skins for like 15 years now.
Just because they already spent the money yesterday, it does not follow that the best decision today is to just carry on as if was still the correct decision. Yes they cannot get that 70B back, but if they have to choose between:
1. a long dragged out distraction over decades trying to make it work
2. a painful but quick 40B write down and the ability to refocus the company on better projects tomorrow
.. then they are, quite rightly imo, going to pick #2. In fact I would assume this going to be the next announcment.
They can't afford to buy every other successful studio, which means that their anticompetitive moat has to be competitive. Otherwise, they could have made the whole thing profitable the usual Microsoft (monopolist) way.
Reading this made me remember why I stopped playing my Xbox One: never-ending updates. I never played it very frequently so I disabled the sleep mode so it wouldn’t just stay on in my media cabinet heating my house. But of course that meant any time I spontaneously felt like using it there were 10 minutes of updates to download, so I would get annoyed and just do something else. Oh it can also play movies? Sorry movie night is ruined thanks to 30 minutes of downloading and installing updates. Eventually I just never turned it on again because all it did was download and install updates.
It really just killed all my interest in it because I couldn’t just turn it on and play a game unless I let it stay on all the time wasting energy and downloading constant updates in the background.
> Reading this made me remember why I stopped playing my Xbox One: never-ending updates.
My experience with Steam is very similar (I don't have it run on startup because I like my PC to do other things from playing games).
Online updates really have ruined gaming for a lot of people.
Just like vinyl, humans seem to prefer a physical "thing" they pick up - put in the machine - and instantly have access to the "thing". It's simple, predictable, fixable (generally) and swapable. The digital revolution is not what we had hoped for...
I've been replaying a lot of Gamecube (emulated) games recently and its kindof shocking just how quick you can get into the game.
From hitting run Run to first Player Input is seconds in most cases. No console bootup, no system updates, no game patches, no agreeing to game EULA version 5.129912342, no denying the game access to online content on every third screen, etc.
I'm sure its loading slightly faster emulated, but 90% of it is just not having the junk that has accumulated over the last 20 years.
I've had the same experience with my PS5. It wouldn't even let me play 007 First Light a few weeks ago because it needed to update the system. Starting to wonder if I should/could just keep it offline to stop it from updating incessantly.
Same boat as you. It's wild that I can turn on the xbox, wait 20-30min for mandatory updates, then need to re-sign in or occasionally reset my wireless mac address due to some bug, then re-sign into my Xbox account even if I am fine playing offline but of course I forgot my password so now I'm on my phone doing 2FA to remember which email I used to reset the password.
Then I will need to update the game I want to play (somehow FIFA 23 still requires updates?), then re-sign in to EA whose password of course I also forgot so now I'm on my phone resetting my password for EA.
Now it's been 45minutes and I'm frustrated and realize I could have loaded up Steam or Switch and been playing this whole time. Not to mention that once the Xbox itself is working it will be running slower than the Nintendo Switch I own which is only about 2yr newer than it. just a bad system!
I legit got my old PlayStation 2 back up and running so I wouldn't deal with this. (sorry been needing to vent all this lmao)
> We will deliver success through a flatter organization that is built around makers (individual contributors focused on building), player-coaches (leaders who remain deeply involved in the work while developing their teams), and directly responsible individuals (DRIs) who own key decisions and outcomes.
This is the new trendy management style - a few executive owners and then everyone else are expendable ICs, with almost no movement opportunity upwards. Only those on the Peter Thiel list or the equivilent among your private equity owners will be considered for key executive positions.
You must not have ever worked for a company owned by one. The statement is not what I’ve heard, it’s what I’ve experienced, and it matches the experience of others in my large developer network.
It’s great for concentrating ownership and mass applying ruthless management tactics at scale, and for using IP as leverage to hollow out a company.
Give me a break. How many times has an IC complained about all the management layers to get something done? You can't have it both ways -- plenty of upward mobility, but no layers to the org.
Paying people less and replacing them with AI is the literal explicit strategy; I get that this was supposed to be a cynical comment but it's basically just factual.
Sounds like an awful model for making a game if I understand the model correctly . Forget tight-knit, multidisplinary teams. Everyone's just a special cog to switch in and out from project to project, and laid off when we need a little bit better of an earnings call. Add in micromanagers and directors who need to have their fingers and every project (instead of focusing on the individual needs of a team and game), and you truly embrace the Microslop.
The only benefit is, long-term, hopefulyy, the people ejected from this model can often end up forming their own indie teams and creating their own games.
Indie games are at an incredible place right now (I am aware it's crazy cut-throat, though). It would be nice to see what quality comes out in response to this disaster.
"I deal with the goddamn customers so the engineers don't have to. I have people skills, can't you understand that?? What the hell is wrong with you people!?"
Game Pass has caused a lot of direct sales losses to game developers in favor of Microsoft trying to find a Netflix-like cash cow for itself. The numbers never added up, but it is not a surprise everyone nodded and went along with it. I wonder what the career repercussions would be for speaking up - but it doesn’t matter because they are getting fired anyway.
I was always very skeptical of the $300 million figure. It sounded like the same math that the movie industry used for pirating. If I was subscribed to Game Pass I might have downloaded CoD to see what it's about. That doesn't mean I would have paid full price for it.
> Last year, Bloomberg reported that Microsoft estimated it had lost $300 million in direct sales of Call of Duty games due to the title’s inclusion in Game Pass, according to an anonymous employee.
Yeah, that's a bullshit number. It's like when people provide piracy counts as lost direct sales, a lot of people will download something for free, those same people won't always pay full price if they can't download it for free.
I downloaded a TON of games from Game Pass, played <1hr, and uninstalled. Without GP I would have just never bought the game.
Gamepass devalued games in my opinion. If you “train” your user base to get used to not buy games they will. It also did not help they were almost giving Gamepass away for nothing. You could chain multiple offers and get like 3 years or more of the best tier for the price of less than 2 games.
They never had the user base to sustain so many studios making AAA games under a subscription model.
> We will deliver success through a flatter organization that is built around makers (individual contributors focused on building), player-coaches (leaders who remain deeply involved in the work while developing their teams), and directly responsible individuals (DRIs) who own key decisions and outcomes.
xbox-specific issues aside, this proposes an interesting view of the future of work.
I also notice the growing trend to have EM carry individual contributor duties, I thought it was mostly a consequence of using coding agents but perhaps it's not: the EM figure as we know might just be a consequence of the golden zirp times (do you remember the endless technical EM vs non-technical EM debates?)
As someone who works in big tech with a partner at a similar big tech company _but with player coaches, DRIs, etc_ it is basically the same thing except messier.
Your manager who used to just focus on motivating and unblocking their people? Now they have to ship code too since they’re a player coaches! You’re a DRI who needs management to get your project unblocked? Too bad your player coach who has to ship code now also has 20 direct reports because the hierarchy was flattened so you can’t get time with them until next week and are blocked until at least then.
It is the hot new trend from the “thought leaders” who have all consistently copied each other’s bad ideas for the past 10 years.
I think some of these game studios got so content with Microsoft constantly paying that they forgot to make games that would actually sell.
South of Midnight took 7 years to make and cost $100 million to make... yet sold hardly any copies and I'm not even sure who they were trying to make it for.
Meanwhile you have studios like Sandfall and Warhorse pumping out games on a fraction of the budget that ship millions (and imho, make better games).
Compulsion Games was also a strange acquisition / team to decide to put $100M + 7 years of trust into. They had two games by that point, neither with amazing reviews.
At least from what I saw the game had a huge amount of hype leading up to its launch and the thing that kept people from buying it was just playing enough of it on Game Pass. For some players it was too short and everything they wanted to accomplish was easily done with Game Pass shortly after its launch. For other players like me we bounced off of its tone while playing it. The stop motion animated intro felt like a bait and switch going into its game play, and I had a bunch of uncomfortable feelings about cultural appropriation from a Montreal studio trying to capture a "deep South bayou" aesthetic and failing at some of the subtleties, from what I saw.
> I think some of these game studios got so content with Microsoft constantly paying that they forgot to make games that would actually sell.
I mean, if you're assuming that Microsoft had a fully hands-off approach to managing these companies after buying them, then sure. It's not clear to me that you can make a compelling claim about whether the issues were from the bottom or the top just by looking at the final outputs.
Plus there's plenty of evidence that Microsoft hasn't been hands off across that time period. At the very least we've seen them cancel a Rare game and layoff a bunch of Rare staff because of it, The Initiative shut down for not meeting game development goals, 343 Industries stripped apart for low results versus expectations with Halo Infinite and the "new" Halo Studios is basically just a shell and an outsourcing venture in direct line with ActiVision's old Call of Duty tactics.
They will just continue smash thru exactly what is killing them because they do not know how to reset. More micro transactions, Halo 14-39, games launching before they're ready, price increases, etc. All of that looks good on paper, so they will take no action against. The XBOX is hitting icebergs, and instead of slowing down, they will just call for more speed.
Microsoft laid off most of its Halo talent in a previous lay off cycle, stripping 343 Industries of most of its staff and rebooting it as Halo Studios as a shell to mostly outsource development to other companies in the way that Call of Duty was built on the game development equivalent of sweat shops. They've already shown that they don't have the guts to make Halo 14-39, they seem to be only doing yet another remake of Halos 1-3 and maybe Reach, this time in Unreal and with "AI" to help "upscale" everything. Just four Halo games endlessly remade until people forget why they were ever originally popular.
Xbox is a sideshow at Microsoft at this point--and arguably has been one for a very long time. Yes, it brings in non-trivial revenue but not a lot of profit. I don't really expect that you'll see new Xbox-related development in a few years.
That messaging is for investors. To a dev's ears, it's a meaningless thing to say.
It reminds me when Elon took over twitter and made a comment to the effect of "we need to rethink the entire tech stack from the ground up". Someone asked Elon what was wrong with the tech stack, and he called them a jackass.
Impacted non-studio dev here. It's a bloodbath like some of the leaks in the past few weeks have said. Many important platform/infra teams getting gutted, even in areas where there's supposedly a ton of future investment.
Xbox has an interesting opportunity going forward, that I expect they'll fumble.
Interest in physical media has actually been on the upswing, and, with Sony announcing their plans to abandon physical media, it feels like MS has a chance be the "good guys" like what Sony did to MS when MS threatened to ruin physical media prior to the Xbox One release.
However, I'm expecting Microsoft to simply follow Sony's path, because I think they are already going down a path that favors digital-only, and I also think they just don't care to distinguish themselves. It seems like Xbox's claim to fame for the past few years is "It has game pass, and it can play a lot of the same games PlayStation can."
> Interest in physical media has actually been on the upswing, and, with Sony announcing their plans to abandon physical media, it feels like MS has a chance be the "good guys" like what Sony did to MS when MS threatened to ruin physical media prior to the l One release.
Not only that, but RAM/GPU/SSD prices going up so much recently (which is especially jarring for SSDs, which for like a decade had been getting more affordable; I bought a 120 GB SATA SSD in 2012 for around $100, and I was able to buy a 1 TB m.2 one for around the same price a few years ago) is starting to equalize pricing for PC gaming. In 2022, the initial Steam Deck launched for just $400, and it continued to be offered at that price for a few years, which made it cheaper than the Switch 2 launch price.
I feel like if I were a console manufacturer, I would be trying to figure out a way to take advantage of that. Other than price (previously), the other obvious selling point of PC gaming is more control over your system, so there could be an opening to try to lure away wayward PC gamers with some changes that give them a bit more control on the console. I agree with you that I can't really imagine Microsoft doing this though.
The problem with the physical media for today's consoles is that it is the game in name only. The version on the disc is quickly outdated by launch day patches, follow-up patches, add-on content, etc.
I do think there is a market for a return to an XBox 360 model where the tech behind the games is artificially constrained to allow for games to be published solely on DVDs again. No installation required, no patches required, smaller budgets, quicker release time lines. But Microsoft is not the company to pursue that approach
anyone who has the disk can download the patches and extra content. there is no way to block a specific copy or prevent transfers like with a digital purchase. the point of physical media is sharing and resale, not the piece of plastic sitting on your shelf.
i agree that mandatory downloads are a big problem (thats why willitplay is a thing) but offline installs from disk are the biggest change that made ps5 games load so much faster than ps4 and opened up a lot of new options for devs. reading data from ssd will always be faster than a blu ray. the only downside is you have to manage space a bit more but its worth it. if you want straight from disk get ready for slower uglier harder to develop games.
> I doubt that they will go back to where Sony are now.
I agree. However, I do think they would get some positive attention (and some accompanying sales) if they were to backtrack and announce a console more like the 360.
It feels doable if they care to do it. Physical media should still be viable for holding all the game data for a while longer. Blurays can manage up to 128 GB, and I think the average game install size is ~60GB right now, giving most games some room to grow.
The biggest issue with a strategy like that is that they're, like you said, pushing digital-only hard already, and they're also trying to save money, so the idea of spending more money to make future consoles with disk drives, and to make disks, is unlikely to appeal to them.
It is a shame, though, because it seems like the Xbox 360 will have been widely viewed as peak Xbox until the end of Xbox.
What's fascinating to me are the Valve comparables here.
<500 employees vs 18k at Xbox
17B ARR vs 20B ARR
At the end of the day there are two strong differences here. Valve has always been lead by people who were game devs, and have always conveyed a message that the gaming experience matters most. Xbox was led by Phil Spencer, who at least was known as being an avid gamer, but in his tenure pushed for things like xbox game pass to drive continual revenue and windows integrations that affected performance of games. Now it's being led by an industry outsider.
It boils down to trust in the end, and willingness to place profit over brand. If you look at the responses to this in r/xbox or other communities, it's overwhelmingly a stance of zero surprise. Xbox has always placed the business first, and this is the natural end of that mission - you get a bloated org with a platform that people don't end up trusting.
I do think resetting is the correct thing to do; there's no reason for Xbox to have 10k+ employees. Still it's another black mark against the brand. Also look at the framing of this message - it's about how their structure has affected the business. In this entire 47 sentence post, there is a single sentence that talks about the affect on the players:
> That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players.
It says a lot when the players are the secondary consideration.
This likely represents increased freedom and faster decision making for Mojang and King.
Moving up the org reporting chain lets you do more, because you have fewer people to convince.
It’s not as good as being fully independent, but that will never be an option for Minecraft again. Actually being spun off might even be worse, because any new owner will be even more fixated on just the numbers.
Don't know if it is just me, but seems like a weird thing to read on their official website. I could see it as an email sent out in crisis and maybe it would get leaked, but putting it up there yourself? I mean it has "Our business today is not healthy", "we have 14 management layers" and such. To me this comes across as a manager's "See mee, see me, I want the whole world to see me" more than actually trying to fix a problem
For that kind of announcement, I found it surprisingly open and detailed (at least if everything in there is true).
Still, some points are telling.
> Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.
So the layoffs are not because they're operating at a loss and had to cut costs urgently. The margins are there, they aren't even thin, they're just not thick enough...
> In addition, Mojang and King will now report directly to me. These two studios have increasingly become platforms and are our largest by monthly active players. They bring critical geographic, demographic, and differentiation to XBOX.
Was a bit surprised that Minecraft got such a special status, but not at all surprised by King. All the studios getting nerfed, except the engagement maximizing mobile games...
Minecraft is an enormous game and the success of the movie among Gen Z/Alpha (a demographic that is fading from the silver screen) shows the potential of a multimedia franchise. It was by far their best purchase (and in some ways runs counter to the idea that "Not every studio fits with us".
But yeah, on the other end: 15 year old Skinner box experiment continues to Skinner box and remind us that war truly never changes.
This is purely greed on Microsoft's point. They absolutely have a profitable business with some great games, and they are sad that their management decisions led to this outcome.
But it's the rank and file who will pay the price for these poor management decisions. Like it always is.
To hear that the new boss wants to increase capitalization on Minecraft, to make it more like a Roblox, is horrifying and truly goes to show Xbox has leadership with near zero understanding of what they have or how to run it.
I wish good landings for all those affected, I hope for the best for all the studios whose future is uncertain now.
This reads like corporate death rattle. Microsoft never had any clue what it takes to make a console - a console. Now it seems they've also completely lost the plot on what makes a business - a business. They should've been Steam, instead they ran out of it.
I think now a console like the Ouya could really be successful, I find when they tried this 10 years ago it was the worst moment possible as game hardware was cheap and competition strong. Now with the AI boom eating all hardware capacity and indie game development going up like crazy it seems like a perfect moment to build a new hardware platform on affordable last gen hardware that runs indie titles.
The hardware side doesn’t make sense as much anymore. I mean if we have these massive cloud datacenters for AI and people can’t even have disc copies then why
Can't say I'm surprised. I can't see a reasonable path for Xbox to do anything but just stay alive other than as MS's overarching gaming brand.
Xbox is on the losing side of the consoles, with no distinguishing features to speak of. You buy a console to play games and for it to be convenient. Xbox is no more or less convenient than a Playstation, and what few exclusives there are left are on Sony's side of the fence. Game Pass, while good, isn't really making money. What more is there to Xbox then (beyond the studios and such, which aren't Xbox themselves)?
The people I know that like Xbox like Game Pass and Buy Once Play Anywhere. Xbox is the value proposition for people that want to play on Console + {PC/Handheld}.
> Xbox is the value proposition for people that want to play on Console + {PC/Handheld}
Okay. Then who is that? Most of the people who play games who I know are either A.) Console gamers who only use PCs for work, 2.) PC gamers who don't see the point in a console, or III.) The top 1% who just go where the games are and are willing to spend to get there, and that group isn't generally a fan of not actually owning their games, nor are they very price conscious (they don't like higher prices, but they'll drop 400 USD to buy a PS4 and Bloodborne, since that's the only way to play that game).
I'm yet to see someone using Game Pass on a handheld.
So if that's the intended market, no wonder it isn't doing too hot.
> It is neither possible nor desirable to own every great independent studio.
The sheer hubris. Yes, the monopoly is not desirable for gamers because the games end up all being the same MS-dictated corporate crap. Microsoft imploding is good for everybody in the long run and we can't wait for that day.
I've got an original xbox, a PS2 and a PS1 all softmodded or mod-chipped with all the games I could never afford 20-25 years ago. I even have wireless controllers. I never worry about the console being connected to the Internet or maintaining a subscription.
In this economy, if you're playing catchup to competitors you really can't have growth AND large profit margins. Why is that not obvious?
XBOX brought in 5 billion, and after all development costs, marketing, operating expenses, investment in research, etc., they are STILL left with 200 million dollars.
What's the problem here? Shareholder value? (as in the mythical/speculative value of MSFT, because OF COURSE they don't want/care for part of the profits/dividends)
If the money being invested in research has a good return - i.e. a great product/service is created - then you will grow.
Chopping down the employees here is a horrible move. Besides crashing employee morale into the ground, losing hard-to-replace developers/staff, it also generally gives off shitty vibes to consumers.
People will think why invest more into a failing entity? I can see people worried about the future of their "purchases" (if you can call them that these days).
This announcement so soon after XBOX had to start yelling "we are not shutting down" from the roof tops doesn't look good.
On one hand, the idea of using Microsoft’s crazy amounts of money to try to build a subscription gaming business feels like it should have been more successful than it has been. On the other, I think gaming has some distinct qualities vs TV/Movies/Music or other types of software that makes the idea seem way less appealing. Curious to see what the new direction looks like
GamePass has awful choices of game, save or one two. Nobody wants to pay $35 a month for games (that sporadically disappear) which can be purchased outright at full retail price for $70.
I mean, no one except the 30 million or so people who are paying for it. I'm quite happy with the GamePass selection, and I consider it an excellent value for me.
Any details about the studio spin-outs? The rumors were that Double Fine etc. would be closed, but all we know now is that some of them are being sold to management and others are being sold to other investors. Nothing about any commensurate restructurings.
> Compulsion Games and Double Fine Productions will return to management and transition to independent studios with their IP, catalog, and runway for their next games. Ninja Theory and Undead Labs have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3. In France, Arkane’s management is beginning required consultation with its Works Council to review potential strategic options.
Yeah, that is what I was referring to about the lack of detail on restructuring. I want to know if people are losing their jobs and/or titles are being cancelled as part of these sales.
Senua and State of Decay 3 are the only currently announced titles of the studios in question and it does say that those games will be completed by their studios under their new owner. It's still an interesting mystery who the new owner will be, though.
I think the Xbox Series X will be my last Xbox after owning Xbox, Xbox 360, Xbox One, and the Xbox Series X. I was all-in on their platform and I even paid for Game Pass for many years.
But they kept increasing the cost of Game Pass with no new features, the platform has seemed stagnant, and honestly I can't tell you why my Series X is better than my Xbox One. Literally I don't see a difference. I'm sure there is one but as a user I really didn't feel like it was a big step up. I bought it because I had every other Xbox and it seemed like the next logical step.
That coupled with most games feeling like lootboxes wrapped in just enough of a game to justify calling it one, at higher and higher price points, all while trying to get more money after they've taken your $70/$80 for the base game. Oh wait, you bought the poor-person $70 version? You really need to the Ultra Collectors Edition Gold Special Release Version for $120. Oh also, make sure you are buying the season pass...
Meanwhile I buy games on my steam deck and/or from indie developers for a max of $30 and get way more gameplay/fun that the "AAA" games (which have largely sucked IMHO).
I'm over here playing Mass Effect 1-3, Skyrim, Fallout 4, and other games OVER A DECADE AGO. They are the only games not completely ruined by lootboxes, always-online BS, or trying to sell you a shell of a game with extras you have to buy [0]. I was excited for Starfield (Skyrim in space!!) but it was a complete bust. After spending, quite literally, 1000's of hours in Skyrim (and buying and rebuying the Anniversary/Special/Collector's edition enough times to be embarrassing) I could not get excited about Starfield and stopped playing after a few hours. The new Halo was meh, I played through it and the open world was somewhat cool but I guess they wanted to do seasons of new content and I have zero interest in that. Give me a solid single player game, that's all I want. I cancelled Game Pass after realizing I was paying an absurd amount of money to play a single game (Deep Rock Galactic).
I think I'll stick to my Steam Deck which I enjoy way more than my Series X.
[0] Yes, Skyrim/Fallout had expansion content but it's tame compared to most games today.
I cancelled Game Pass when the recent price hikes quit.
Then realised just how few games I'd actually bought this generation. Game Pass was a mistake, or at least putting big AAA releases on there on day one was.
I think I've bought like 1-2 games this whole generation and even with Game Pass I might have bought 1-2 more max. Yes, I dabbled in a handful of games but never more than a hour or two before I lost interest (and I never had the interest to pay $60 for it).
Mostly I was playing indie/older games that could have been playing on the Xbox One.
I want XBOX to be one of the few companies that entertains more than a billion people each day
"more than a billion"? What are we doing here? Do you have any idea what your target market is? Surely someone in your organization can provide you with a good stretch goal ... >10% of all humans using an XBox daily is not that.
Seriously, I cannot fathom why you would say this. Innumeracy? Narcissistic delusion? Stealth launch for a new industrial human cloning project?
You need the right products and services. If you know what those are, then you need employees to build them. Until you figure out what those are, you are (sadly) better off with fewer people.
They don't realized that it is their business decisions that ruined the experience of the console gaming and they probably still double down on that.
Before, you would buy and play a console to be able to play in a minute, eventually with buddy around. Playing time duration was a key metric in game reviews.
Now, as they want to milk us the maximum it is a nightmare, game are mandatory online, you wait minutes and even dozen of minutes to be able to play like 3 minutes rounds, you are constantly nagged with restrictions, hours updates in the middle of game that prevents you to play, they force you to subscribe, register, give up on your data and all, consent screens everywhere, upsell barriers everywhere, and little opportunity to play with your friends...
So, after a few months, everyone will lose interest in buying games and even play. It's not fun, lot of lost time and frustration.
> I’ve made the difficult decision to reduce our team by approximately 3,200 ... This will include approximately 1,600 role eliminations today
> we are establishing a Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services. Helen Chiang has been promoted to this role and will report directly to me
Seems tone deaf to do both of these messages at the same time.
The crazy thing about Xbox games, or any game today, is that they require infrastructure, they require maintenance and subscriptions, and they require a constant release cycle, and moreover, a thriving community of humans who are playing the same exact game at the same exact real time as others. It seems like the primary lost art of gaming is single-player, offline, solitary modes.
Anyone could literally pick up an Atari 2600 from 1977, plug in a cartridge from 1978, plug it into a TV from 1981, and play the same exact video games with no problems. Now who will be playing the same Xbox games in the year 2076?
Yes, this is part of why I lost interest in video games (probably mostly just getting older if I'm honest).
However at the risk of sounding basic, RDR2 (2018) and Cyberpunk (~2022, once they fixed all the bugs) are both really good single player games that are a lot more fun to play than anything from 1980.
My son setup Gamepass a few years ago. It was the biggest rip off I've ever seen. So many things about Microsoft are out of kilter. I'm about to migrate my daughter away from a 3 year old Lenovo Yoga to a Macbook Air M5 - it's just too hard to administer, its now sluggish and the AI is completely in the way. She doesn't need it, and despite a few business practices of Apple I don't really like if I have to choose between them and Microsoft, then I choose Apple.
I was not like this as a teenager. I went through DOS, Windows 3.1x, Window 95, Windows 98, Windows 2000/XP and then all the way to Windows 7. I have completely changed my mind now, it's really only Apple I want to use. Everything about Apple is easier.
Microsoft just never sorted out their exclusivity problem, tried to acquire their way to it, only to then be stymied by regulators, all the while having second-best hardware compared to the PS5.
Unfortunately, the 14 layers of management are also responsible for deciding how the 14 layers will get cut. It's likely that all or most all of the middle management will survive but the ICs doing the real work will be the ones that take the hit.
I saw the same thing happen at Amazon. They claimed to be reducing layers of management in 2024/25, yet all that happened was a shuffling of the boxes on the org chart a bit and cuts to the ICs. Managers that had too many reports were forced to give some up for managers with too few, but most managers stayed in place.
"Today, in some parts of the company, work passes through as many as 14 layers of management. Our platform teams are 40% larger than they were at the start of this generation, even as our player base and playtime have declined. "
It’s wild that we’re still unraveling the effects of COVID-19. It really feels like every video game exec convinced themselves the pandemic boom was permanent, and that we were all going to be stuck at home forever playing games.
as a player this feels like the confirmation of what we suspect since years, the gamepass math never closed. the sad part is the 3200 people paying the price for decisions they never took
- The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million
So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous).
Some points -
- They are huge business even now - 5 billion per quarter revenue is no joke
- They did not have to buy all those studios
- They looked at Netflix, and wanted the sweet monthly subscription cash stream
- Then they did not have to give away popular games day one on Game Pass
- And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.
- Once again, short term vision, crazy decisions, bad spending spree and a constant need to "make numbers go up" and who has to pay for all this?
The bigger issue is that console manufacturer revenue is highly cyclical. This is hard to see in e.g. Xbox and Sony since they are both part of a larger conglomerate, but really obvious for nintendo.
You generally have a cycle of - "Launch": high marketing costs, low/negative HW margins - "Mid-cycle": lowering manufacturing costs, large game sales, high margin DLCs - "end-of-cycle": falling HW sales, fewer exclusives (-> preparation for next gen), fewer consumers (-> waiting for next gen). Here you usually have maximum profits since you don't subsidize HW and marketing is minimal (platforms are already locked in)
Generally you have to establish a big userbase during the mid-cycle such that you can levarage it during the late-cycle to be able to afford next-gen. Xbox has the big issue that their mid-cycle was catastrophic, which means they now don't have the console base to get into the next generation: If they have 3% margin _right now_ in the end-of-cycle where marketing and development costs are at their lowest, this does not bode well for the overall health of the business.
That was true historically but is no longer the case. Even last gen manufacturing costs didn't go down as much as they used to. This current gen they actually increased multiple times.
and yet everybody - including Microsoft - is in a big rush to sell us AI services, which could look an awful lot like a historical utility business. 3% will be a dream return in that scenario!
- A company which has undertaken a concerted, long-term effort to consolidate the industry under its umbrella (something they themselves call out as a problem in this post), reducing consumer choice
- A company which has captured a significant chunk of the console market. They're one of the big three (alongside Sony and Nintendo), and have been since the early 2000s, arguably, for crying out loud.
At a certain size (typically as measured by market capture) the expectation for growth needs to be reality checked. This is still $150M of pure gravy every single year. Sure, this is going to a corporation, but that's more money than most people could possibly dream of earning in ten lifetimes.
Every year. For a company that's already putting money towards opex in the form of developing new games and new content for existing ones, for a ridiculously broad portfolio.
To be clear: it is Microsoft's and Xbox's prerogative to pursue more profit, but I reserve the right to call this out as absurd under the circumstances.
If you want to make the argument that Xbox has suffered from a lack of focus in the past decade (... or even longer), or that there's been mismanagement (I would say since around the time 343 got created), then those are fair arguments, though I don't think those are justifications, on their own, for cutting thousands in headcount.
Allowing this org to balloon to fourteen levels of management on any vertical is a joke. Allowing the absorption of so much of the game dev industry and still being unhappy with $150M in annual profit after being such an active participant in the oligolpolization of console gaming is just a bit unserious.
That actually seems... tiny? Xbox is nearly 17,000 employees. That's like $8k in profit per employee. That's worse than big box retailers and like 1/100th of what is common in big tech and (to the letter's point) far worse than their biggest competitor.
Like sure at least you can say they aren't losing money, but Nadella can't be looking at that after just spending 75 billion on Activision Blizzard and be happy with it as the status quo.
EDIT: BTW these numbers you quoted from OP are quarterly, not annual
The issue is rate of return. They are evidently spending $4.85bn on Xbox per year. The US federal interest rate is 3.5% so if you just put that money in US bonds you would get about $175M per year of much purer simpler gravy.
Richard: "Okay. Well, that's a gain of $200 million over 20 years. Um, 16.66 repeating. That's less than 1% return. Inflation is, like, 1.7. I think CDs are 2%. So that's less than a CD."
You're neglecting to consider that any time they acquire a studio or have a flop or two -- poof goes that $150M and probably more. It's not a risk-free venture. Entertainment is all about hits, and misses hurt.
Would you put up $5K to win $150 on a hypothetical roulette wheel that hits 90% of the time? The math's not perfect obviously but Xbox is a somewhat similar situation. Microsoft is putting up nearly $5B a year to make $150M. They'd be better off stuffing the $5B into bonds or something. There is a point where the returns aren't high enough to justify the expenses when risk is taken into consideration.
As said elsewhere in the thread:
> You’re saying that they should take the money people pay to buy Xboxes and put it in T-bills instead of delivering Xboxes?
A lot of the strategy you outlined -- buying all these studios, replicating netflix, giving away day one games, raising game pass -- was a strategy put in place by Phil Spencer. Phil pushed for this investment with the promise it would pay off later for MS. He's talked publicly about having to convince Nadella to put up ungodly amounts of cash for these investments and about how the bar for expected return was very very high. It seems like it clearly hasn't worked out to Microsoft's expectations or they've lost patience for waiting, and Phil has now "retired to spend more time with his family" (i.e. been fired).
Now Asha is here and presumably has a mandate to fix this and get back the profit margins that were expected from xbox. Sarah Bond, the xbox president, has resigned, and with this letter it seems the previous Xbox COO is out too. There is clearly a huge shift in Xbox leadership happening and it shouldn't be surprising that Asha -- who is known as a business-driven executive and not a 'gamer' -- is going to be reverting a lot of previous strategy decisions.
My 2c is that Phil's strategy made sense on paper, but I don't think they were able to manage this many studios in practice: nearly all the studios they bought have failed to produce the number of games expected on time or on budget. It also turned out that overly cheap gamepass would cannibalize their business and overly expensive gamepass turned away subscribers. I think the netflix model isn't something you can speedrun and execution of it turned out to be very hard and expensive. Maybe it would've worked out with more time but it seems Nadella didn't think so anymore.
Buying Activision for 20x of its annual profit, on the other hand, makes zero sense. ABK was not lacking capital, had the same MBA management Microsoft has and did not have much room to grow, Blizzard alone had 5K employees. Their IPs had long time since plateaued or had been in decline already. What was Microsoft plan to increase profit? Switch everyone to Teams? Put more people to work on CoD and release 2-3 CoDs per year, hoping they all will sell as well as the annual CoD? The more realistic path to return of the investment could come from increasing Xbox's share of the market by making their newly acquired IPs Xbox exclusive. But they did not do even that.
Buy a plethora of studios. Pay an order of magnitude over the odds for the big ones - just to be sure you get them! ‘Rescue’ smaller ones of questionable financial value - as part of Xbox they’d somehow be successful enough to justify the price paid. Heavily manage the studio heads - but, uh, also give them total creative freedom - and allow them to make niche games. Sell hardware at a loss - but also make the games available on all platforms. Don’t allow any software that takes advantage of your most powerful hardware, because it also has to run on the other, less powerful console you are also selling. Also, the future is streaming! But, uh, maybe not!
Not just the strategy, but almost every aspect of the ‘strategy’, was incoherent - as current management is very close to outright saying.
IIRC Xbox had been criticized for quite a while at that point for having very few exclusive/first-party games worth buying an Xbox for. I always assumed this move was to try and fix that problem.
To be fair to Phil Spencer, this was the strategy across the industry right after COVID. Remember the shopping spree Embracer Group went on between 2020 and 2022? I think we were in an e-sports & live service bubble that has now popped.
Past performance is no guarantee of future success.
It was a risky bet that became even higher risk when MSFT spent ~$80 billion dollars rolling up game studios near the peak of the historic COVID gaming bubble. They bet it would greatly increase Game Pass sub growth. Instead, Game Pass sub growth slowed down. At the time I thought it was a reasonable plan - but not at the prices MSFT was paying for content. Then the DRAM drought killed hardware sales to gamers forcing the issue.
https://www.bloomberg.com/news/articles/2025-10-23/microsoft...
If anything, it should be easier to make cool new features when you own the hardware side of the platform experience too, but no, it's Steam that has stuff like remote play together, not PSN or Xbox.
I love the Steam Deck because it feels like a consumer electronics device: it has the reliability of Linux but not the sweat. The Steam Deck is the only device I've seen that works 100% perfectly with Airpods, for instance, including Apple devices.
I was at Best Buy the other day and saw an ASUS device that looked pretty cool until I picked it up and saw a Windows desktop with fonts not scaled appropriately for the size of the device. Like, wazzup? Steam Big Picture turns my big Windows machine at home into a game console and does the same for my Mac Mini. How is it you can have the back of frickin' Microsoft and not be able to do the same?
Not to say that Steam isn't packed with features that are valuable to many gamers, but just having a great selection of games that "just work" and knowing I can enjoy my investment on the devices I have now and devices I get in the future is worth a lot.
For example, I used the example of remote play together, which is very neat and a lot of people love it, but I personally don't use it.
On the other hand, I make extensive use of Steam's gifting feature, including its ability to handle multiple gifts to multiple people in a single transaction, and to schedule exactly when those gifts will land. And this is something that the other major stores don't seem to support at all, a big advantage for Steam for me, but I'm sure there's many people who don't care at all about gifting.
Well it turned mine into a 2000s linux/wine debugfest flashback when I wanted to play GTA IV: Ballad of Gay Tony... Also don't get me started on having to keep the poweroff button pushed on the xbox controller for mouse emulation for games not having controller support in the menus. It is far from the polished experience you had, but possibly I just held it wrong.
Microsoft killed it
Gamepass is quite literally the most anti-steam strategy ever. It's a massive loss leading (or rather, low margin leading) service relying on a pseudo-rental service to provide value. Steam got to where it is by keeping all its costs lean and developing a service around taking a cut from premium digital goods.
>From other child comments many studios they bought probably were below average.
In revenue, maybe. That's the fault of Microsoft in two fronts. One for purchasing game studios who always operated at low margins, and two for directing them to focus on quality over budget. Double Fine and Ninja Theory aren't studios you buy with an expectation of 30% ROI in 6 years (ignoring the pandemic in the middle of that). Let alone when you explicitly tell them not to worry about finances.
On an artistic level, Hellblade was an insutry darling and about as close as you can get to an "oscar-bait" of a game. It's something you buy for prestige. Double Fine is a very seasoned indie studio who delivered several cult classics. You buy that for a brand that gives you variety from the current "online FPS juggernaut". Those strategies changed dramatically over the decade.
Gamepass as a subscription to make sure you always have something to play, that has a lot of old games or indie games and other games that have no commercial value makes sense to me. The back catalog for any of the current consoles is plenty deep with games that have lost their ability to move units independently but still have a lot of value and can also give that perception of value. Such a plan is picking up pennies, but it's a lot of pennies.
I've never understood putting your new releases out on gamepass and bragging about that as your primary value proposition. Many new games are, say, 20-30 hour experiences, assuming you play them from start to finish once. One does not need to spend too much time with "this % of other players got this achievement" to see how many players tend to drop off of a game even that long. So if you put your new game that you would have sold for $60-80 dollars to me directly and it translates to three weeks of engagement on your $15-ish/month (depending on level) subscription, it's hard to see how that is an economic win. Put that game on Gamepass in a year or two, sure, that can make sense, but on release? And that not as a mistake, but a deliberate strategy? I can not fathom the mindset that leads to that.
As a deal for customers it seems to have been pretty good but I've never understood how Microsoft expected to make money on that plan. The streaming-video proposition of making a high-budget release to keep your subscribers makes quite a bit more sense, you could never have counted on getting $70 out of a customer for those anyhow, and even that economic proposition I think has proved more complicated than the streaming companies expected. The Gamepass model has just seemed insane.
I expect it to move to more like what I described at the beginning. As a way to turn a lot of old and hard-to-monetize content into a subscription stream it's brilliant. As a way of releasing new AAA titles it's crazy. Movie studios played with that model and I don't think they liked it at all.
Compare that to my nephews who have a lot of time for gaming, but they’re always fighting to scrounge up the money for another month of Nintendo online or Xbox online and go without it for at least half the year
I _think_ the thinking is that not everyone is going to buy more than a couple full priced new releases per year (in general). $80 or whatever is just too much for most people to drop on a game they "might" like. On the other hand, most people would have few reservations being perpetually subscribed to a service that lets them play every new game "for free" (so long as they keep rolling in on a monthly basis). Theoretically, the subscription money would exceed what they'd normally collect from the average person buying the usual 2 or 3 full priced games per year.
Where I think it breaks down is quite a number of gamers are hopelessly addicted to playing all the latest games, all day every day. MS is surely losing money when those guys substitute buying physical games for a subscription.
> So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous).
How is that profit margin distributed though? King (Candy Crush etc) and Mojang (Minecraft) are specifically called out as money-makers, it's possible that they're carrying the majority of profits while everything else is a dud:
> We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested.
As an example, Double Fine (one of the studios being chopped) has released 2 games since 2021, Keeper (191 peak player count on steam) and Kiln (163 peak players); these would be flops even for a normal indie game, for a studio getting Microsoft salaries those are enormous flops.
Now, I think the vast majority of the pain is more than self-inflicted... I think actual business, marketing and focus need to start taking priority over idealistic political PoV. Let the games target their natural audiences and have the broadest appeal... at a certain point, trying to gain 1% of audience means alienating 25% or more.
If you're a video game company, you invest millions of dollars in a project up front, for years, and you don't know until after release whether you:
- Make back all the money you spent plus a healthy profit on top.
- Just break even, but you lost the opportunity cost of all the other things that money could have been spent on with better utility.
- Your game flops and you wasted all the money you spent developing it.
It's also highly uneven. Extremely likely that King (Candy Crush) and Mojang (Minecraft) are making a ton of money, and everything else is a money pit where you pour in millions of dollars and you don't even make your money back.
Absolutely drop-dead gorgeous but I don't think I am going to ever finish it until I get a Deck 3/4 in like 5-7 years.
Hard to really say. Kiln and Keeper can easily be made up for by the sales of Psychonauts 2. I'm sure an indie Double Fine would not have been able to make those kinds of games.
This takes me back to Pertinent, another small game from a reputable studio, had its main writer saying that "this kind of game would not be possible without Gamepass". Which I 100% believe. Microsoft definitely didn't buy Double Fine trying to make the next Fortnite, but that arthouse strategy clearly isn't a factor these days.
With the money being spent on AAA titles these days, they are not going to make any money without increasing the price of Game Pass majorly. The big price bump they quickly backtracked on was an attempt to make Game Pass somewhere closer to being profitable.
Also this is part of why I'm really worried about how weak the concept of game ownership is getting.
See also how anyone buying GTA6 near launch will be unable to resell it.
You can tell the PS5 was designed to be a digital-first system by the disc drive slapped on the side like a tumour hanging off the otherwise symmetrical body.
Edit: Also the average level in the real world is a lot more than 1%. 1% is like just the trans portion.
Of course, it's not like you couldn't have done a google search yourself, if you really cared.
I hate this timeline. We can’t even talk about fucking corporate margins without some chud shoehorning some of this shit in.
People also don't respect how WILDLY influential GamerGate as been. There's good arguments to be made that Trump and his shitty White House would never have come to pass if not for moot re-enabling political discussions on 4chan at the behest of some combo of Epstein and Bannon, explicitly to stoke reactionary rage at anything "gay" in games.
Like don't get me wrong it's deeply stupid and perhaps respect is the wrong word, but it's crazy how much those old events are shaping current culture war nonsense.
For Xbox being what it is today, which is mostly about the subscription and not the hardware console or the exclusives, you have to compound their acquisition frenzy of 2018-2020 or so, which totals about 75 billion+.
They didn't want the developers nor the catalog. What Microsoft wanted is to change the economics and dynamics of the entire games industry, to make it Netflix-like (play what's in the catalog today, pay monthly even if you don't play anything) vs. what Steam offers (purchase once, own "forever", even if it's de-listed).
But that didn't play out. Optimistic estimates put total revenue for Xbox since then in the 20B ballpark. At a ~5% margin (as other commenters have pointed out) the profit is about 1B dollars.
It means that after almost a decade, the entirety of Xbox is in the red for about 74 billion dollars, which is 74 billion away from breaking even.
Steam still dominates PC gaming. Xbox consoles can't be more irrelevant today.
This isn't about over-hiring or AI. It was a bet at the executive level that went horribly wrong. They can still do things like selling IPs at a bargain to compensate, but still. Horribly wrong.
Note: Microsoft doesn't publish hard factual data so the numbers above are somewhat speculative (e.g. "analysts data")
Both exist. I would say single player games tend to content in the range of 10+ hours. Think First Light, Ghost of Yotei in recent years.
Competitive and multiplayer games will tend more towards what you are thinking. CSGO, FIFA, and of course many others.
But I feel like even that doesn’t really capture the full range of everything.
A company that sells consoles complaining about not having enough games after 25 years in business and acquiring most popular game studios is hilarious.
They keep cutting game studios, killing games and then set ambitious profit margins. At some point you have to question, do the people in charge understand their own business at all?
They just gutted bungee and basically killed Destiny 2, not because the game won’t sell, but because it won’t generate the profits they unrealistically set.
While Bungie had historically been tied to Xbox / Microsoft during the Halo era, Bungie spun out to be its own company in 2007, and then was bought by Sony in 2022. It was Sony, not Microsoft, driving the most recent layoffs at Bungie.
Never ending growth and profits just seem to ruin everything
I saw this coming from day one. The instant they did Netflix for Games, it was going to gut their margins. And then the inevitable pullback, either holding new games for months or raising the price, was going to kill the value proposition.
They said "This will make us a mint" and celebrated the victory years too early.
I wonder how are they taking in 5 billion per quarter when their latest console barely outsold the first Xbox. I doubt it was making a bit less than 5 billion per quarter with quotes like "Ultimately, Microsoft lost an accumulative total of $4 billion from the Xbox, only managing to turn a profit at the end of 2004." on wikipedia.
So how are two consoles with roughly the same sales numbers so far apart in revenue?
Myself and 2 of my friends stopped our subscriptions the day that happened and never went back. I know it’s anecdotal but I’m happy to see others did the same.
Mix that with the increasingly higher concentration of wealth, and things are just going to get worse.
> Sharma posted in 2026 that she had recently begun playing video games under the gamertag AMRAHSAHSA to "learn and understand" the games industry
Imagine running the Xbox division and only just now picking up a controller.
The other part of me though says that, no, it is in fact pretty possible that she hasn't played any video games of note, other than Wii Sports that one time. And even if she has played games casually, is it really too much to ask to have the person leading the Xbox brand be someone who can press the X button on their controller and not be confused by that?
A 'Gamer' would have found that more difficult to do.
At least they didn't create a fake profile for her the way Elon Musk made one.
I think the "glass cliff" is going to claim another victim.
IMO Phil was very clearly pushed out by “AI will cut costs talk”. No one makes huge investments into acquiring companies and then suddenly retires (after running the division successfully for decades) and none of his underlings were promoted into the role, they all left when he did.
The rebrand to ‘XBOX’ is a good example of how they’re already out of ideas
Spencer's strategy for Xbox was very 2010 coded: rely on the billion/trillion dollar company to undercut the competition and gather market share and leverage. Classic embrace, extend, extinguish. That's why they bought a bunch of arthouse studios who don't immediately make money, invested hard in a subscription service that was wildly unprofitable (a strategy that even TV services couldn't make profitable, mind you), and focus on moving software more than hardware.
That strategy shifted dramatically between rising interest rates, a cooling consumer market, business uncertainties, and companies simply wanted to throw any excess fat into the AI rat race. So those art house studios were removed, Gamepass needs to enshittify pre-maturely,production needs to slow from a variety of offerings to the usual safe and sure releases. And of course, the biggest expense needs to be trimmed down on: because no one is stopping them from doing it in the US.
The number will still go up, but in different ways. They aren't doing this because they are in the red, they are doing it because they want all the money instead of a lot of it.
Microsoft is never going to figure out gaming. It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.
To me it's mostly unfortunate that this has left PlayStation with no direct competition because they've noticed and leaned into the not-giving-a-shit attitude after they had such a great console generation with the PS4. It's kinda crazy that we're already almost due for a new console generation and there's very little appetite for new consoles after this generation where it feels like it barely got started. And between graphics almost certainly at the point of diminishing returns, and hardware prices like they are right now, I can't imagine there's a market to sell something more capable than current gen consoles. The industry is in a very strange state.
The graphics can only carry you so far. There's indy adventure games with SNES level graphics that have millions of daily users.
Yes, 100%. I love good graphics, but game play is the most important thing. If you don't have good gameplay the graphics mean nothing. A game with great game play and great graphics is something to behold.
I recently finished Split Fiction and they really nailed it. I hope studios take notice!
When we played it, we had just finished It Takes Two, which was also great, but Split Fiction immediately dethroned it. I can't wait to see what Hazelight comes up with next.
Switch 2 is a fantastic console with an astonishingly fun first party library, and Nintendo just over there doing their own thing like they’ve always done.
I spent a few years in and around the industry and there was so much insanity around the need for in game monetization that it just made things much worse.
And because the game studios didn't care about it, none of the money stuff worked, making executives even more upset.
All to catch some vision of F2P money which is an entirely different business that these companies couldn't possibly support.
It's very sad for the industry overall (this particular decision is MS killing stuff off because the margins aren't good enough to funnel more cash into GPU gods).
But there's one specific statistic to why Nintendo can keep doing what it does in a way no one else can: 98% retention rate. You get into Nintendo and you basically never leave. Even for Japan, that's well above the 70% retention rate you'd expect. Keeping that kind of institutional knowledge for an entire career makes them really good at what they do, and the unfortunate decades of Japan's economy meant they were less tempted by amassing huge loans or risks on experimental stuff.
Maybe they didn't become trillionaires, but it means they amassed a huge war chest and can weather storms that US companies are currently in the middle of.
The way things interact in the game world peaked around mid 2000s, just in time when CPUs started to not follow moors law.
As of now, interactive environments are still almost as good as half life 2 from 2004. Gaming is all about the feel of it, which also includes the visual component.
This feature was mostly ignored by the playerbase because developers found it easier to create static setups and focus on iterating on other parts of their gameplay.
That's the thing -- for a while they had figured out gaming. The xbox and 360 were solid consoles with lots of great internal and external games. Halo was incredible.
Then the company did the thing that Amazon did, Blizzard is doing, and all the big tech companies do -- they thought their big war chest meant they should make bigger games. Budgets ballooned, game timelines extended. Now they are stuck with games and studios with 10 year dev cycles trying to create the biggest, the most incredible, the most expensive games.
There's SO many devs out there making incredible games for fractions of the cost. It's a shame Microsoft (and others) keep thinking that reaching for bigger means better outcomes. No one wants "the game only Microsoft can make", everyone wants another great Zelda. Or Gears of War. Or Satisfactory. Or Mina the Hollower. Or UFO 50. Or Animal Well.
Hell, people want a game about shelving 3000 books in an Arcane library. Let games be smaller, more exploratory, more creative experiences. Let your studios get weird with it. Let them explore spaces and take risks. Stop sinking tens of billions into games. Start sinking tens of millions into them.
Overall I think western AAA game development is dead. The executive class killed it with their greed and incompetence, and as long as these huge corporations are allowed to keep buying smaller studios/publishers and shutting them down a few years later, nothing is going to change.
Also worth noting Skyrim first came out on the 360; an honor shared by GTA5, but at least they have an imminent release.
Gaming is like cuisine. Can it be art? Sure. But most people will never visit a Michelin starred restaurant in their whole lives. They go to McDonald's and their local equivalent. Mainstream games have been like McDonald's for a long time. It's not about being a thought provoking artistic expression. It's about engineering a predictable entertainment experience that the average Joe can enjoy while being half checked out after a day of work the same way he enjoys a Budweiser or a Big Mac.
Of course, no critic will ever be caught praising McDonald's for its culinary artistry. But it doesn't matter. People will keep spending money on it, and the business continues. Same deal for gaming.
I feel they kind of did in the Xbox 360 era. Maybe it was just down to luck because Sony dropped the ball in the early years of the PS3 and Microsoft got the jump on them a bit.
The 360 was amazing looking back on it, Xbox Live, trying out innovative ideas like 1vs100, attracting lots of publishers to the platform for games, Xbox Summer of Arcade.
I was a big OG Xbox fan but even then I knew deep down it was never going to catch up to Sony with the PS2. Then the 360 came out and it was brilliant.
Sadly they threw it all away with the Xbox One and while recovered some credibility somewhat with the Series X, it's definitely not the same as those golden years of the 360.
Maybe the 360 was an aberration in Microsoft's history and the years since then have just been a regression
Microsoft is a dying company, and they are trying not to end up like IBM, but their fate is inevitable.
And even then, already the PS4/XbOne generation added stratification making it more "PC-like" with the XbOne-X having heftier hardware (not to mention it being PC-like compared to PS1/PS2/PS3/Xbox360), that then continued with the Xbox-series-X and Xbox-series-S.
Consoles aren't specialized hardware for "magic experiences" and everyone knows this, it's just another "device" that happens to be connected to a TV with a controller where people are gatekeeping software availability.
Compared to: - PlayStation 5 - PlayStation 5 Pro
or: - Nintendo Switch - Nintendo Switch OLED - Nintendo Switch Lite
Anyone who's literate in English (and knows that OLED means "nicer screen") can immediately rank the PlayStations and Switches into "good, better, best". But with the Xbox, how is anyone supposed to know which one is which? Is the Series version better or worse? Is it a whole new generation, with whatever backwards-compatability implications that a new generation brings? I need a chart and I probably still won't be able to tell you if you ask me in a month.
A few years into the generation they updated the Xbox One, putting it into a smaller form factor called the Xbox One S, and at the same time released a spec bump model called the Xbox One X. I don't believe any of these are still available for purchase.
The new generation has the smaller/lower-powered Xbox Series S, and the higher-specced Xbox Series X. Leaving the overall generation with seemingly no name, other than "Xbox Series" I guess?
But yes, the names are terrible because S and X both refer to consoles from last gen and current gen.
Nintendo, the company who released the Wii, wiiU, gameboy color, game boy advance, DS, 2DS, 3DS; all of which are similar but vaguely incompatible?
I haven't bought a console since the Xbox360 and Wii. But I have a friend who still games pretty heavily and is low income. He can not afford the latest PS5 and is still on a PS4. We were talking the other day and he said "I love consoles because they are simpler and cheaper than a PC but now I can't afford either. The graphics aren't getting much better so what am I paying for? What happened to $400-$500 consoles? Remember when consoles were 200-300?" Of course those last few prices were 90/00's but I agree, the cost of a new console is quite insane for not much gain.
Two years ago, you could get an XBOX/Switch for 300, or a PS/Steam Deck for 400. Granted, the PS and XBOX were digital only. But now the cheapest XBOX is 500, the Switch 2 will soon also be 500, the PS5 starts at 600, and the Steam Deck is 789. Things have been going up slowly, but the last year has been absolutely killer.
Now things are even worse with the RAM and SSD components crisis. The Series S has now the price of the Series X when it launched.
truth. far too many MBAs in that company. "Let's monetize Solitaire!!!!" Only an idiot would even come up with that idea, never mind follow through on it.
But then she did some minor, pandering actions and suddenly everyone was "oh boy! A new era of xbox!" Only it was all a ruse to ensure people didn't jump ship too quickly and make the bleeding too heavy. They want people to keep pumping money into a platform heading to the graveyard.
You go when we tell you to go! Not before!
Also one must consider the likes of Hideo Kojima who can sell ~7 million copies of a new IP that is effectively a cinematic Walking Simulator as an Auteur acrimoniously splitting from the traditional studio system.
Clair Obscur: Expedition 33 also shipped over 5.4 million copies as a AA, in what is also arguably an interactive cinematic on-rails RPG.
God of war is plainly movie on rails compared to E33
Yeah, he split from the traditional studio system to create... his own traditional studio system.
Kojima is precisely what happens when you stop thinking of games as actual an interactive entertainment format and start thinking of it as a "cinematic experience" instead.
Death Stranding is only a game by the narrowest of margins. What it is is a movie with Kojima's Spotify 'favourites' list as the soundtrack that so happens to have one interactive element or two thrown in there for good measure.
It's pretty telling that all he's done after splitting away from Konami and surrounding himself with his own sycophantic group of developers is Death Stranding. Kojima is the direct result and pretty much the face of a lot that is wrong with the games industry right now.
Perhaps you are mistaking them with Ubisoft's open world games? or describing another installment of Life is Strange?
I strongly disagree. I'd say that Death Stranding has an incredible open world "sandbox", rivaling the ones of GTA. I can spend dozens of hours there without worrying about the campaign - it's not a Hollywood movie.
And for Western devs, we have Rockstar doing that. RDR2 is a wonderful movie, but a pretty poor game. Unfortunately, they forgot what medium they were working with.
Nintendo also shipped Metroid Prime 4, with massive delays and unsatisfied customers, following the same "interactive Hollywood" philosophy which disappointed Metroid fans.
Same thing goes for Star Fox, a remake of a remake of a remake, with poor visual and dialogue choices.
And meanwhile, the same silent push for digital-only, forced upgrades and the like...
I'm not convinced that Metroid at least really is a great data point for "Nintendo is ruining things in-house". From Wikipedia[1]:
> Nintendo announced Metroid Prime 4 with a teaser trailer during the Nintendo Direct presentation at E3 2017, and announced that Retro Studios, who developed the previous main Prime games, would not be involved.[15][16] In February 2018, Eurogamer reported that Prime 4 was being developed by Bandai Namco Studios in Japan and Singapore.
> In January 2019, the Nintendo EPD manager Shinya Takahashi announced that development had restarted under Retro with Tanabe remaining as producer. Takahashi said the previous studio had not met Nintendo's standards and that the decision to restart was not taken lightly.[21] Shortly after, Nintendo reevaluated Prime 4 after noticing changing attitudes towards open-world games, but maintained the direction as the development was already taking longer than planned. The team ignored new developments in action and shooting games to prioritize the adventure elements.
There's a perspective where this is almost the exact opposite of the problem being discussed about Microsoft. They chose to let it get developed externally, suffered delays, and by the time they moved it back in-house, the ecosystem had moved from under them. They probably could have chosen to rethink everything and delay it further, but they also arguably could have avoided having to make that call by keeping it in-house and letting the studio who made the previous entries work on it from the start and landing it in time that the original vision still fit what people wanted.
[1]: https://en.wikipedia.org/wiki/Metroid_Prime_4:_Beyond#Develo...
MP4 is what OP was talking about, an "interactive Hollywood" experience that betrays previous Metroids, adds discutable open-world design cues, and locks features behind $30 figures.
A remake (1) of a remake (2) of a remake (3)
(1) A remake (Switch 2 Starfox, a remake of StarFox 64)
(2) StarFox 64 (A remake of Super Nintendo's StarFox)
(3) ??? I don't know what the 3rd level of remake you mention is, but I'm curious!
Star Fox's development is an incredibly wild story where British teenagers argued what the SNES could do with bespoke hardware, and they ended up being shipped out to produce it because Nintendo felt they couldn't ever do it themselves. It all started with Argonaut's demo of what would eventually be released in Japan as "X". Entirely software-based 3D, on the original Game Boy.
There's actually a very humble quote by Miyamoto where he learned that someone can't just get better as a function of age and experience, after he clearly realized that these teenagers could produce something no one else in Nintendo ever had a hope of. Perhaps it's why the franchise has done so little -- Nintendo's just not in a remotely similar headspace the Argonaut lads were.
-----
Fun videos on the subject:
"The Teenagers Who Taught Nintendo How to Make Star Fox" - People Make Games, https://www.youtube.com/watch?v=to4Ekb0kXiE
"The Making of Star Fox" - Strafefox, https://www.youtube.com/watch?v=GDhNT2Qv-Mo
I assumed that's what OP meant, all of those are the exact same game with the same story and dialog, remade in 3 different game engines.
But Star Fox? Phenomenal. Such a fun game. Luckily I have the pro controller so I could map A to the back paddle or else my poor old tendons couldn’t handle the rapid fire shooting required at the high levels, but I’ve had an absolute BLAST playing the remake.
Neither of your examples fit that description. Metroid Prime 4 wasn't chasing Hollywood cinematic design; it was a highly targeted attempt by producer Kensuke Tanabe to make a tight, isolated first-person exploration formula resonate (especially in Japan where it has consistently failed). Its goals are mechanical, not cinematic. Meanwhile, Star Fox is a classic arcade rail-shooter remake with modernized cutscenes, not a prestige movie-game. Early sales data shows it's actually working well, too, having just debuted at #1 on the physical charts in Japan and nearly doubling Star Fox Zero's launch week in the UK.
Ultimately, Nintendo operates like a Consumer Packaged Goods company. They treat their library of IPs like a diversified product portfolio rather than betting the farm on individual interactive movies. They use massive, high-margin, mechanics-first games like Tomodachi Life and Pokopia to generate enormous cash reserves. They then use those profits to subsidize legacy IPs like Metroid or Star Fox to keep core fans happy and feed their broader brand ecosystem. Because Nintendo spreads its risk across a wide spectrum of lower-budget games, they can easily absorb a minor product flop. Sony's interactive Hollywood model sinks $300M into a single basket, meaning one bad miss can completely wreck a studio.
Although Nintendo is still following the path of "gaming enshittification" with lesser budgets; and I would argue that Star Fox mostly sells because there's barely anything to play on that 500$ thing...
And it's not surprising Nintendo isn't doing well in this clown market. They are taking a hit because they resisted pressures from shareholders who wanted them to raise prices on its new system. Nintendo eventually gave in, but with a much smaller price increase and a delayed effect from announcement to implementation (~4 months forewarning). And on top of all that they are not hyping AI to the moon.
And I haven't even gotten to the overall economic climate of Japan yet. Nintendo's stock falls would happen regardless of if they followed the above.
These are good, pro-consumer moves. It shows that more companies need to think past next quarter and resist the whims of people who don't have your company's long term interests in mind. You're the expert here, not them.
however for Xbox they were not really good at story driven games, but good at Live Games such as Halo.
with Live Games - you iterate on game play, maps, skins - live events i.e community building without alienating people by dabbing in social justice.
End of day - these are all marketing problems & lack of capable leadership who knows their core audience.
But at the same time I appreciate the candor of Asha saying that the corporate management are to blame and letting studios go back to being independent where possible.
Phil Spencer really messed up. Everyone in the industry knew Microsoft were making bad calls trying to dig themselves a hole with gamepass and simultaneously digging a hole with their acquisition spree. I’m glad that Asha is laying this bare even though it sucks to be brought in as the hatchet person.
This is an example of the glass cliff and I’m hoping she can help right the ship. I think they need to split to a wholly owned subsidiary rather than be in Microsoft proper, and I expect that to be announced at the Q1 investor meetings.
Phil really dug their hole deep. Microsoft themselves encouraged it. It’s been a decade of sheer incompetence at the highest level so I’m hoping they can right this without taking out half the industry in their wake.
I’m not really sure how the C-suite is escaping blame here.
Xbox exec: Deletes AI from games.
Color me surprised.
Anyone who's been paying attention to Halo for the past 15 years knew there was bad management the entire time. (Halo used to be the game that everyone wanted to have and to be; now it's an also-ran due to self-sabotage.) The first step is admitting you have a problem, so good job there, keep following through.
She has done everything but focus on delivering games (product).
Right now, the 5 and 10 year US treasury rates are 4.2% and 4.47%. The 30 year is 4.99%.
A business with a return on invested capital less than that is in fact operating at a loss. Unless there is reason to believe the situation will change in the near-to-mid future, such a business would literally be better off liquidating everything and just investing in treasuries.
You would need access to internal data to figure out their ROIC, but a 3% margin is not promising.
A high revenue but low margin business is a lost opportunity to invest that same revenue in a different area with better margins.
If one bank pays 4.25% on your savings and the other pays 3.25%, which one are you going to chose to put your money in all else being equal? Why is the 3.25% one not a good choice despite you still making money?
People inherently understand business, they use the same principles in their daily life, but they just get confused on making the connections.
But you are talking the "consumer perspective". Right now the median interest on consumer savings accounts is less than 1%. [1] Someone getting 3.25% from their bank isn't "struggling" compared to their luckier neighbor that found a 4.25%. They are probably closer to the top 10% or top 1% and have a larger savings deposit and/or high credit/sustainably low debt. Most Americans can just envy that, not qualify for it.
There are opportunity costs in moving your money from a stable bank that you have an existing relationship and shopping it around to get that perfect 4.25% highest margin that you can find. Transfers are usually free for consumers, but a bank may give you a lower APR on your credit cards and a cheaper checking account if you keep your accounts all in the same place with that bank. Trying to move all of that at once for a similar deal at the 4.25% bank can risk hard credit checks and account closure notices that consequently drop your credit rating, including possibly enough to make the bank at 4.25% question your stability and change their mind on the deal.
I think consumers actually today have a better idea of the risks of these kinds of "small improvement" things than large companies. Wall Street is a much worse "Credit Rating Bureau" than the three (truly terrible) consumer Bureaus. Businesses have grown so large they no longer understand Opportunity Cost at any real level. If you shut down the things that bring in $5 billion revenue, you no longer have $5 billion revenue, you have a gamble that some other industry can ramp up to that quickly. $5 billion has never been "quick money". (Inflation would have to get a whole lot worse for that to happen and that point the company has too many other problems.)
[1] https://wallethub.com/edu/savings-account-statistics/143529
Microsoft's ownership wants to put their money into the 4.25% bank, not the 3.25% one. Don't lose your mind overthinking it.
Sure,
https://news.xbox.com/en-us/2026/07/06/resetting-xbox/
Using Phil as a scapegoat and Sharma as the savior is disingenuous.. and is honestly pretty consistent with how i view Microslop: opportunists, tasteless, and visionless executives, shareholders and fanboys
The fall of Xbox started before the launch of thier current gen:
- HW: they announced 2 SKUs, with polar opposite performance profiles
- SW: their system sellers got delayed to couple years
The reset needs to happen at the highest executive order, not at the lowest, workers implement whatever project was greenlit
People chose PS5/Switch over Xbox (it now sells 3x less than Switch 1, wich is a previous gen console), people see through the lies of the media
You said it yourself, Xbox was being outsold 3:1 by PS5 which is still shocking numbers given the investment, and the fact that PS5 was having trouble selling units at the same rate as they’d been selling PS4s.
Humans often think in terms of deontological ethics. Corporations operate in terms of consequentialist ethics, and the only consequence that matters is that the numbers go up.
b) She's been in the role for 4ish months, not years.
Occam's razor: Spencer and Bond jumped off a sinking ship, Asha wasn't doing enough in AI. Push her to be the fall gal for the sinking ship and put in whoever will milk AI more in her place. Win-win. Asha will be gone in a few years with her job done and a cushy parachute, and Xbox will be a shadow of its former self. But that's not a failure; that's the goal.
But even then you wouldn’t be able to deny that Xbox was floundering under Phil.
And for all of this you’d still be left with conjecture?
14 layers of management :-P
This is Microsoft politely saying that not all studios are good enough for them.
And by good enough they mean enough of a money printer.
> We can't afford it, and it's a bad investment anyway
But they've already spent the money. They spent about 70 billion on activision blizzard. That was and still is an outrageous amount of money that will take fever to break even let alone turn a profit.
A cynic might say they spent most of that for King, which continues to be profitable. The rest of Activision Blizzard just came along for the ride
1. a long dragged out distraction over decades trying to make it work
2. a painful but quick 40B write down and the ability to refocus the company on better projects tomorrow
.. then they are, quite rightly imo, going to pick #2. In fact I would assume this going to be the next announcment.
It really just killed all my interest in it because I couldn’t just turn it on and play a game unless I let it stay on all the time wasting energy and downloading constant updates in the background.
My experience with Steam is very similar (I don't have it run on startup because I like my PC to do other things from playing games).
Online updates really have ruined gaming for a lot of people.
Just like vinyl, humans seem to prefer a physical "thing" they pick up - put in the machine - and instantly have access to the "thing". It's simple, predictable, fixable (generally) and swapable. The digital revolution is not what we had hoped for...
From hitting run Run to first Player Input is seconds in most cases. No console bootup, no system updates, no game patches, no agreeing to game EULA version 5.129912342, no denying the game access to online content on every third screen, etc.
I'm sure its loading slightly faster emulated, but 90% of it is just not having the junk that has accumulated over the last 20 years.
Of my friends who own vinyl collections, they almost always use Spotify/Apple Music 90% of the time.
Then I will need to update the game I want to play (somehow FIFA 23 still requires updates?), then re-sign in to EA whose password of course I also forgot so now I'm on my phone resetting my password for EA.
Now it's been 45minutes and I'm frustrated and realize I could have loaded up Steam or Switch and been playing this whole time. Not to mention that once the Xbox itself is working it will be running slower than the Nintendo Switch I own which is only about 2yr newer than it. just a bad system!
I legit got my old PlayStation 2 back up and running so I wouldn't deal with this. (sorry been needing to vent all this lmao)
This is the new trendy management style - a few executive owners and then everyone else are expendable ICs, with almost no movement opportunity upwards. Only those on the Peter Thiel list or the equivilent among your private equity owners will be considered for key executive positions.
It’s great for concentrating ownership and mass applying ruthless management tactics at scale, and for using IP as leverage to hollow out a company.
Indie games are at an incredible place right now (I am aware it's crazy cut-throat, though). It would be nice to see what quality comes out in response to this disaster.
Call of Duty alone lost $300 million: https://arstechnica.com/gaming/2026/04/microsofts-game-pass-...
I look forward to the source code leaks.
Yeah, that's a bullshit number. It's like when people provide piracy counts as lost direct sales, a lot of people will download something for free, those same people won't always pay full price if they can't download it for free.
I downloaded a TON of games from Game Pass, played <1hr, and uninstalled. Without GP I would have just never bought the game.
They never had the user base to sustain so many studios making AAA games under a subscription model.
xbox-specific issues aside, this proposes an interesting view of the future of work.
Your manager who used to just focus on motivating and unblocking their people? Now they have to ship code too since they’re a player coaches! You’re a DRI who needs management to get your project unblocked? Too bad your player coach who has to ship code now also has 20 direct reports because the hierarchy was flattened so you can’t get time with them until next week and are blocked until at least then.
It is the hot new trend from the “thought leaders” who have all consistently copied each other’s bad ideas for the past 10 years.
South of Midnight took 7 years to make and cost $100 million to make... yet sold hardly any copies and I'm not even sure who they were trying to make it for.
Meanwhile you have studios like Sandfall and Warhorse pumping out games on a fraction of the budget that ship millions (and imho, make better games).
1. https://www.mobygames.com/game/240054/south-of-midnight/cred...
Let's be honest here.
Expedition 33 was on game pass and still sold 8 million copies.
SoM was an Xbox/PC/Game Pass exclusive for a year.
It's not a perfect comparison.
I mean, if you're assuming that Microsoft had a fully hands-off approach to managing these companies after buying them, then sure. It's not clear to me that you can make a compelling claim about whether the issues were from the bottom or the top just by looking at the final outputs.
Gross and classless title. There was a time where people at least had the sense of shame to not do this kind of thing when firing people
How will they achieve cleaner code, with fewer workers? Seems like a well-intentioned platitude.
It reminds me when Elon took over twitter and made a comment to the effect of "we need to rethink the entire tech stack from the ground up". Someone asked Elon what was wrong with the tech stack, and he called them a jackass.
What do you mean? My experience has always been that the more cooks there are in the kitchen, the messier the codebase is. Has yours been different?
Xbox was a Live Games platform. they lost that identity trying to please everyone not their core audience.
compare to Nintendo - who stuck to their identity - as fun games first. graphics not necessary.
they can cut so many jobs - but unless they return to what makes Xbox great. the platform / ecosystem won't recover.
Interest in physical media has actually been on the upswing, and, with Sony announcing their plans to abandon physical media, it feels like MS has a chance be the "good guys" like what Sony did to MS when MS threatened to ruin physical media prior to the Xbox One release.
However, I'm expecting Microsoft to simply follow Sony's path, because I think they are already going down a path that favors digital-only, and I also think they just don't care to distinguish themselves. It seems like Xbox's claim to fame for the past few years is "It has game pass, and it can play a lot of the same games PlayStation can."
Not only that, but RAM/GPU/SSD prices going up so much recently (which is especially jarring for SSDs, which for like a decade had been getting more affordable; I bought a 120 GB SATA SSD in 2012 for around $100, and I was able to buy a 1 TB m.2 one for around the same price a few years ago) is starting to equalize pricing for PC gaming. In 2022, the initial Steam Deck launched for just $400, and it continued to be offered at that price for a few years, which made it cheaper than the Switch 2 launch price.
I feel like if I were a console manufacturer, I would be trying to figure out a way to take advantage of that. Other than price (previously), the other obvious selling point of PC gaming is more control over your system, so there could be an opening to try to lure away wayward PC gamers with some changes that give them a bit more control on the console. I agree with you that I can't really imagine Microsoft doing this though.
I do think there is a market for a return to an XBox 360 model where the tech behind the games is artificially constrained to allow for games to be published solely on DVDs again. No installation required, no patches required, smaller budgets, quicker release time lines. But Microsoft is not the company to pursue that approach
i agree that mandatory downloads are a big problem (thats why willitplay is a thing) but offline installs from disk are the biggest change that made ps5 games load so much faster than ps4 and opened up a lot of new options for devs. reading data from ssd will always be faster than a blu ray. the only downside is you have to manage space a bit more but its worth it. if you want straight from disk get ready for slower uglier harder to develop games.
I doubt that they will go back to where Sony are now.
I agree. However, I do think they would get some positive attention (and some accompanying sales) if they were to backtrack and announce a console more like the 360.
It feels doable if they care to do it. Physical media should still be viable for holding all the game data for a while longer. Blurays can manage up to 128 GB, and I think the average game install size is ~60GB right now, giving most games some room to grow.
The biggest issue with a strategy like that is that they're, like you said, pushing digital-only hard already, and they're also trying to save money, so the idea of spending more money to make future consoles with disk drives, and to make disks, is unlikely to appeal to them.
It is a shame, though, because it seems like the Xbox 360 will have been widely viewed as peak Xbox until the end of Xbox.
I think the reason for going with 50GB for games on the MS side was to remain compatible with the previous generation of consoles.
<500 employees vs 18k at Xbox
17B ARR vs 20B ARR
At the end of the day there are two strong differences here. Valve has always been lead by people who were game devs, and have always conveyed a message that the gaming experience matters most. Xbox was led by Phil Spencer, who at least was known as being an avid gamer, but in his tenure pushed for things like xbox game pass to drive continual revenue and windows integrations that affected performance of games. Now it's being led by an industry outsider.
It boils down to trust in the end, and willingness to place profit over brand. If you look at the responses to this in r/xbox or other communities, it's overwhelmingly a stance of zero surprise. Xbox has always placed the business first, and this is the natural end of that mission - you get a bloated org with a platform that people don't end up trusting.
I do think resetting is the correct thing to do; there's no reason for Xbox to have 10k+ employees. Still it's another black mark against the brand. Also look at the framing of this message - it's about how their structure has affected the business. In this entire 47 sentence post, there is a single sentence that talks about the affect on the players:
> That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players.
It says a lot when the players are the secondary consideration.
Darn it! The ONE studio that I really wanted them to set free and go back to how well things worked before, and they tighten their grip. Whyyyy?
Moving up the org reporting chain lets you do more, because you have fewer people to convince.
It’s not as good as being fully independent, but that will never be an option for Minecraft again. Actually being spun off might even be worse, because any new owner will be even more fixated on just the numbers.
This reads like something from The Office.
Still, some points are telling.
> Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.
So the layoffs are not because they're operating at a loss and had to cut costs urgently. The margins are there, they aren't even thin, they're just not thick enough...
> In addition, Mojang and King will now report directly to me. These two studios have increasingly become platforms and are our largest by monthly active players. They bring critical geographic, demographic, and differentiation to XBOX.
Was a bit surprised that Minecraft got such a special status, but not at all surprised by King. All the studios getting nerfed, except the engagement maximizing mobile games...
But yeah, on the other end: 15 year old Skinner box experiment continues to Skinner box and remind us that war truly never changes.
But it's the rank and file who will pay the price for these poor management decisions. Like it always is.
To hear that the new boss wants to increase capitalization on Minecraft, to make it more like a Roblox, is horrifying and truly goes to show Xbox has leadership with near zero understanding of what they have or how to run it.
I wish good landings for all those affected, I hope for the best for all the studios whose future is uncertain now.
Xbox is on the losing side of the consoles, with no distinguishing features to speak of. You buy a console to play games and for it to be convenient. Xbox is no more or less convenient than a Playstation, and what few exclusives there are left are on Sony's side of the fence. Game Pass, while good, isn't really making money. What more is there to Xbox then (beyond the studios and such, which aren't Xbox themselves)?
Okay. Then who is that? Most of the people who play games who I know are either A.) Console gamers who only use PCs for work, 2.) PC gamers who don't see the point in a console, or III.) The top 1% who just go where the games are and are willing to spend to get there, and that group isn't generally a fan of not actually owning their games, nor are they very price conscious (they don't like higher prices, but they'll drop 400 USD to buy a PS4 and Bloodborne, since that's the only way to play that game).
I'm yet to see someone using Game Pass on a handheld.
So if that's the intended market, no wonder it isn't doing too hot.
The sheer hubris. Yes, the monopoly is not desirable for gamers because the games end up all being the same MS-dictated corporate crap. Microsoft imploding is good for everybody in the long run and we can't wait for that day.
XBOX brought in 5 billion, and after all development costs, marketing, operating expenses, investment in research, etc., they are STILL left with 200 million dollars.
What's the problem here? Shareholder value? (as in the mythical/speculative value of MSFT, because OF COURSE they don't want/care for part of the profits/dividends)
If the money being invested in research has a good return - i.e. a great product/service is created - then you will grow.
Chopping down the employees here is a horrible move. Besides crashing employee morale into the ground, losing hard-to-replace developers/staff, it also generally gives off shitty vibes to consumers.
People will think why invest more into a failing entity? I can see people worried about the future of their "purchases" (if you can call them that these days).
This announcement so soon after XBOX had to start yelling "we are not shutting down" from the roof tops doesn't look good.
Not even national security institutions operate like this
Good old times. The last time I tried to buy something on Xbox it fails miserable with multiple cryptic error messages - mostly around my credit card.
No problem though to biy the game on my mac via browser and then after a few more settings actually showed up on my xbox.
> Compulsion Games and Double Fine Productions will return to management and transition to independent studios with their IP, catalog, and runway for their next games. Ninja Theory and Undead Labs have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3. In France, Arkane’s management is beginning required consultation with its Works Council to review potential strategic options.
not a part of Microsoft, I find it weird a company leader wouldn't sign their whole name even if an internal memo.
But they kept increasing the cost of Game Pass with no new features, the platform has seemed stagnant, and honestly I can't tell you why my Series X is better than my Xbox One. Literally I don't see a difference. I'm sure there is one but as a user I really didn't feel like it was a big step up. I bought it because I had every other Xbox and it seemed like the next logical step.
That coupled with most games feeling like lootboxes wrapped in just enough of a game to justify calling it one, at higher and higher price points, all while trying to get more money after they've taken your $70/$80 for the base game. Oh wait, you bought the poor-person $70 version? You really need to the Ultra Collectors Edition Gold Special Release Version for $120. Oh also, make sure you are buying the season pass...
Meanwhile I buy games on my steam deck and/or from indie developers for a max of $30 and get way more gameplay/fun that the "AAA" games (which have largely sucked IMHO).
I'm over here playing Mass Effect 1-3, Skyrim, Fallout 4, and other games OVER A DECADE AGO. They are the only games not completely ruined by lootboxes, always-online BS, or trying to sell you a shell of a game with extras you have to buy [0]. I was excited for Starfield (Skyrim in space!!) but it was a complete bust. After spending, quite literally, 1000's of hours in Skyrim (and buying and rebuying the Anniversary/Special/Collector's edition enough times to be embarrassing) I could not get excited about Starfield and stopped playing after a few hours. The new Halo was meh, I played through it and the open world was somewhat cool but I guess they wanted to do seasons of new content and I have zero interest in that. Give me a solid single player game, that's all I want. I cancelled Game Pass after realizing I was paying an absurd amount of money to play a single game (Deep Rock Galactic).
I think I'll stick to my Steam Deck which I enjoy way more than my Series X.
[0] Yes, Skyrim/Fallout had expansion content but it's tame compared to most games today.
Then realised just how few games I'd actually bought this generation. Game Pass was a mistake, or at least putting big AAA releases on there on day one was.
Mostly I was playing indie/older games that could have been playing on the Xbox One.
Microsoft cuts 4,800 Jobs, Half from Xbox division
https://news.ycombinator.com/item?id=48804401
Seriously, I cannot fathom why you would say this. Innumeracy? Narcissistic delusion? Stealth launch for a new industrial human cloning project?
Before, you would buy and play a console to be able to play in a minute, eventually with buddy around. Playing time duration was a key metric in game reviews.
Now, as they want to milk us the maximum it is a nightmare, game are mandatory online, you wait minutes and even dozen of minutes to be able to play like 3 minutes rounds, you are constantly nagged with restrictions, hours updates in the middle of game that prevents you to play, they force you to subscribe, register, give up on your data and all, consent screens everywhere, upsell barriers everywhere, and little opportunity to play with your friends...
So, after a few months, everyone will lose interest in buying games and even play. It's not fun, lot of lost time and frustration.
> we are establishing a Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services. Helen Chiang has been promoted to this role and will report directly to me
Seems tone deaf to do both of these messages at the same time.
Anyone could literally pick up an Atari 2600 from 1977, plug in a cartridge from 1978, plug it into a TV from 1981, and play the same exact video games with no problems. Now who will be playing the same Xbox games in the year 2076?
Nintendo games generally do not require maintenance or infrastructure. The vast majority of indie games do not require maintenance or infrastructure.
However at the risk of sounding basic, RDR2 (2018) and Cyberpunk (~2022, once they fixed all the bugs) are both really good single player games that are a lot more fun to play than anything from 1980.
How many more of those will we see? Not sure
I was not like this as a teenager. I went through DOS, Windows 3.1x, Window 95, Windows 98, Windows 2000/XP and then all the way to Windows 7. I have completely changed my mind now, it's really only Apple I want to use. Everything about Apple is easier.
Bravo!
>Today, in some parts of the company, work passes through as many as 14 layers of management.
LMAO – reset approved.
I saw the same thing happen at Amazon. They claimed to be reducing layers of management in 2024/25, yet all that happened was a shuffling of the boxes on the org chart a bit and cuts to the ICs. Managers that had too many reports were forced to give some up for managers with too few, but most managers stayed in place.