9 ms·

This is a total mess IMHO. - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million So fir

by rockyj 3mo ago

This is a total mess IMHO. - 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?

throwaway613746 2mo ago
[dead]
hbn 3mo ago
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.
- tracker1 2mo ago
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  - wholinator2 2mo ago
    What's woke about xbox?
    - ryandrake 2mo ago
      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.
      - tracker1 2mo ago
        [flagged]
        pyth0 2mo ago
        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?
        tracker1 2mo ago
        And you totally skip the "self-insert"... But I'm sure you'd cast Lizzo as Helen of Troy.
        Dylan16807 2mo ago
        Who was the "self" being inserted here? That's a confusing term for a game made by so many people.
        tracker1 2mo ago
        https://www.reddit.com/r/marvelmemes/comments/17h76ej/so_a_insomniac_writer_self_inserted_themselves/?rdt=35423 https://www.reddit.com/r/marvelmemes/comments/17h76ej/so_a_i... Of course, it's not like you couldn't have done a google search yourself, if you really cared.
- deleted 2mo ago
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- Dylan16807 2mo ago
  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.
  - hbn 2mo ago
    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.
    - Dylan16807 2mo ago
      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".
  - bombcar 2mo ago
    The vast majority of people buy a game, play it a few weeks, and then it sits forever - even if they could trade it in for a few bucks. Lamepass should have been much closer to "buy a new release, get a month of gamepass games for free" or something.
    - Dylan16807 2mo ago
      The kind of person that actually cancels gamepass within a month is the kind of person to actually trade in the game. And with an efficient trading market they'd get more than a few bucks so early on.
      - bombcar 2mo ago
        True, they set themselves up for "the only people who subscribe are those who use/abuse the subscription" - which is a recipe for failure.
righthand 3mo ago
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.
- tapoxi 2mo ago
  Are you conflating Asha Sharma with Satya Nadella? Asha just joined Xbox, she had no role in any prior decision making.
  - righthand 2mo ago
    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.
    - Jare 2mo ago
      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.
- dwroberts 2mo ago
  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
mjr00 3mo ago
> - 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.
- tracker1 2mo ago
  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.
  - wincy 2mo ago
    [dead]
  - foepys 2mo ago
    Billion USD grocery chains operate on 2-3% margins just fine...
    - tracker1 2mo ago
      Yeah, because video games are as essential to the home as groceries.
2OEH8eoCRo0 3mo ago
Compulsively chasing only the highest margins has been toxic for the country as a whole.
- tracker1 2mo ago
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  - nicebyte 2mo ago
    2015 called
  - pebble 2mo ago
    I think you got lost, this is not the Steam forums.
- ebbi 2mo ago
  What else do you expect from publicly listed companies? Mix that with the increasingly higher concentration of wealth, and things are just going to get worse.
  - snackbroken 2mo ago
    50 years ago, publicly listed companies understood that chasing short-term growth targets undermined long-term sustainability. The current failure mode is not an inherent property of being a publicly listed company, it's a consequence of incompetent leadership and bad regulatory policy.
- cortesoft 2mo ago
  "Chasing the highest margins" is almost the entire point of a market based economy, and is the main selling point for capitalism. I get your complaint, but if you reframe it I think it isn't the real problem here. The whole point of a market-based economy is to allocate resources to making things people actually want. How does the market figure out what people want more of? Well, profit margin. If someone is making a lot of profit selling something, that is a really good sign that people want more of that thing. Other people see the high profit margin, and move to get into that business. More of that thing is created, and people's demand is satisfied. The high profit margin is the signal (and the incentive) to get more of that thing. In other words "Compulsively chasing only the highest margins" can be rephrased as "investing in things that people want more of"
zitterbewegung 2mo ago
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. https://www.bloomberg.com/news/articles/2025-10-23/microsoft-pushes-xbox-studios-to-hit-higher-profit-margins?embedded-checkout=true https://www.bloomberg.com/news/articles/2025-10-23/microsoft...
- johnnyanmac 2mo ago
  >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.
  - jerf 2mo ago
    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-principles/ 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.
etempleton 2mo ago
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.
johnnyanmac 2mo ago
Different eras of Xbox, and tech as a whole. 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.
darth_avocado 2mo ago
> 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.
- ErneX 2mo ago
  Bungie is not a MS studio since 2007.
- belthesar 2mo ago
  Point of clarification: 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.
- tayo42 2mo ago
  This attitude seemed prevelant at Blizzard too based on a book I read (Play Nice)they wouldn't fund anything that wasn't a billionaire dollar idea. Never ending growth and profits just seem to ruin everything
  - operatingthetan 2mo ago
    The result is that everything in the american economy is getting squeezed.
  - kmac_ 2mo ago
    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.
chrisfosterelli 2mo ago
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.
- Forgeties79 2mo ago
  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!
  - chrisfosterelli 2mo ago
    I totally agree. Being able to buy three-year cards for gold and then convert them to GP for $1 was an absolutely killer deal in terms of bang-for-buck. I stopped renewing once they closed that 'loop-hole' personally, I only play a few games a year (and usually ones that are on sale) so full price game pass just never made any financial sense for me. I already spend less than that per month and play whatever I want.
PaulHoule 2mo ago
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!)
- port11 2mo ago
  Fair, but who told them to buy up everything? That part annoys me to no end. And the bad plays are management-related, so they’re firing a bunch of people…
  - tomtheelder 2mo ago
    Well it was Phil Spencer, who got fired. They basically cleaned house in management already.
sharts 2mo ago
Why is any of this surprising? This is just MBA fundamentals.
mattalex 2mo ago
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.
- ksec 2mo ago
  It has been really really long since I read anything on HN with someone that has some basic understanding of business. May be all is not lost. Yes. 3% margin is lower than inflation of US treasury rate. As some business would even call it borderline charity. It is also not a commodity market, which means it is not healthy. And any headwind is going to be damaging.
- Narishma 2mo ago
  > "Mid-cycle": lowering manufacturing costs, 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.
  - dcrazy 2mo ago
    And they have hiked the prices of the current gen very late in the cycle to reflect component costs.
    - 2mo ago
burnte 2mo ago
> - 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.
artyom 2mo ago
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")
- brikym 2mo ago
  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.
  - ZiiS 2mo ago
    Yes that is exactly why they want to switch to a Netflix model.
  - aleksiy123 2mo ago
    I don’t think that’s really true. 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.
ActionHank 2mo ago
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".
jshen 2mo ago
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.
- cortesoft 2mo ago
  This is the frustrating thing reading these comments, where people seem to assume that any profit margin is good enough to sustain a business. People see a 3% return and think, "Well, they aren't losing money so there is no reason they can't just keep doing business as usual." What this idea is missing is that the investors in a company aren't choosing between "keep my money in this company" and "sit on the cash", they are choosing between "keep my money in this company" and "invest my money somewhere else" In other words, you aren't just looking at direct returns on an investment, you also have to think of the OPPORTUNITY COST of the investment. By keeping their money invested in a business making 3% returns, they can't invest that money somewhere else.
  - account42 2mo ago
    So basically: The stock market is cancer.
    - tommit 2mo ago
      Talk about frustration reading these comments. People knee-deep in Kool-aid, thinking this is the only and god-given way things should be.
    - jshen 2mo ago
      It's more like evolution through natural selection. If you can buy a treasury that returns 3.6%, you will NOT invest money in a business that has more risk, is only returning 3%, and has no believable growth story. Even worse, if you own shares in that company, you will sell them and shift the investment dollars to something with better returns or better chance for growth. It's this competition that leads to prosperity, the alternative is central planning which leads to poverty.
jm4 2mo ago
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.
laserDinosaur 2mo ago
>The make around 5 billion in revenue per quarter 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?
willio58 2mo ago
> 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.
hoherd 2mo ago
Another thing that is crazy to me (and maybe this is a premonition) is that if you play MS games online on Xbox, you have to have a subscription, but if you play on other platforms you can play for free. They are literally punishing their own users with additional fees. I thought this was just Minecraft, which is why my kids and I always play Minecraft on our iPads instead of on the Xbox, but when I recently bought Forza Horizon 6 I was amazed to see that I could play online with other players for free, whereas on Xbox I had to pay to play online in Forza Horizon 4 and 5. So they are basically saying "you gave us a bunch of money for hardware? Cool, now give us more money every month to use it online!" It's absurd, and it's one of the things that drove me away from Xbox. I also have friends who have been lifelong Xbox fans who have had enough and are leaving for Steam.
- ErneX 2mo ago
  I think they changed it not long ago so you can play free to play games without the online subscription. Just like on PlayStation network. But paid online games you need to be subbed yes.
  - brianwawok 2mo ago
    Which is real dumb when in like self hosting a Minecraft server. Pay to play online has turned me off Xbox, I won’t buy next gen
    - hoherd 2mo ago
      Yeah, I forgot to mention that the pay-to-play even applies to multiplayer within your own LAN. I just verified that nothing had changed since I last played: you are unable to join LAN games unless you buy a monthly xbox pass. Complete BS.
tonyhart7 2mo ago
seems like you don't understand business I don't usually take HN audience seriously when talking about economics
sakex 2mo ago
3% profit margin means you're better off selling the business and investing the cash into US bonds at current rates.
- port11 2mo ago
  If everyone thinks like that, no jobs are created. Xbox hires a ton of people and creates genuine value for consumers. Okay, that last part you can question, but I’m an original Xbox-er so I believe in it. 3% profit should be totally fine for any business. The planet is cooked, I think we can live with the shareholders making a bit less.
deleted 2mo ago
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pjmlp 2mo ago
Fully spot on, I really don't get late capitalism, it feels pretty much back to a feudal society, with big tech replacing the lords up in the castle.
lelanthran 2mo ago
> So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". At a roughly 3% profit, they are barely breaking even and have no money to invest in staying current. It's not a sustainable business.
prmoustache 2mo ago
> - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million How are they still doing 5 billions in revenue per quarter? Are Xbox and games still sold? In my area they seem to have disappeared from the physical stores alley. I realized that a few weeks ago there were Playstation and Nintendo products in the video game area but no Xbox anything.
King-Aaron 2mo ago
These companies are discovering that selling products to consumers is no longer the thing they need to do in order to earn money.
- port11 2mo ago
  Might work if you don’t: out-price your hardware, get rid of disc trays, make GamePass expensive, force Microsoft accounts and online mandates, buy up every studio and force them to out out crappy updates,… ahm, no it’s the users, they’re getting old and cranky. Yikes, I bought every Xbox console and plenty of day-1 releases, but skipped the last gen when it became clear that the platform isn’t about gamers anymore. Triple-As are also getting tiresome, so I think plenty of people are happy to get a cheaper title on Steam that feels like better value.
  - King-Aaron 2mo ago
    Yeah, we had every playstation since the original, and a vast library of games. Admittedly I ended up with a digital PS5 (gift), so I ended up in the digital ecosystem. This will hurry me up into buying a disc drive for it I suppose. I tend to agree about the lackluster AAA industry, but I don't think that's the gamers 'fault' for wanting indie games, more private equity and the share market environment forcing developers to generate slop as opposed to good titles. It's a sad way that the broader economy is going in that regard.
    - port11 2mo ago
      I didn’t mean to go with the easy, default criticism of AAAs as slop and repetitive; it’s just that _lots_ of smaller devs/studios are putting out excellent gameplay and/or narratives.
rob74 2mo ago
The times when companies only restructured when they were actually making losses are long gone. Today, if they "underperform" (i.e. they're not as profitable as the stock market thinks they should be), investors want to see blood today rather that tomorrow.
rldjbpin 2mo ago
xbox is not a startup and neither m$ a vc. the board is not in love with gaming to continue sponsoring it. but if the solution is to make it even worse to game in their platform, then i hope this crashes and burns for good.
reactordev 2mo ago
a couple are symptoms of their problems and the others are causes. They lack the understanding to know which ones. They tried (and failed) to build a subscription model out of game renting while cannibalizing the very studios they purchased. There was no saying no. They were going to take you over whether you wanted them to or not. They would also scheme to half-ass your marketing partnership so you wouldn't make targets so you would be vulnerable to a take over. It's Microsoft at it's finest. A lesson in Greed Above All Else. https://wccftech.com/xbox-layoffs-gut-id-obsidian-zenimax-online/ https://wccftech.com/xbox-layoffs-gut-id-obsidian-zenimax-on...
KaseKun 2mo ago
You have to leave your local maximum to find the global maximum.
jstummbillig 2mo ago
Revenue is just not a useful concept to understand the state of a company. I can easily generate revenue by simply exploding costs. Blockbuster had huge revenue. If we talked about costs as much as we talk about revenue (which carries roughly the same amount of information) people would judge theses reports very differently.
fourseventy 2mo ago
Tell me you know nothing about business without telling me you know nothing about business.

by rockyj 3mo ago

throwaway613746 2mo ago

[dead]

hbn 3mo ago

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.

tracker1 2mo ago
[flagged]
- wholinator2 2mo ago
  What's woke about xbox?
  - ryandrake 2mo ago
    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.
    - tracker1 2mo ago
      [flagged]
      - pyth0 2mo ago
        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?
        tracker1 2mo ago
        And you totally skip the "self-insert"... But I'm sure you'd cast Lizzo as Helen of Troy.
        Dylan16807 2mo ago
        Who was the "self" being inserted here? That's a confusing term for a game made by so many people.
        tracker1 2mo ago
        https://www.reddit.com/r/marvelmemes/comments/17h76ej/so_a_insomniac_writer_self_inserted_themselves/?rdt=35423 https://www.reddit.com/r/marvelmemes/comments/17h76ej/so_a_i... Of course, it's not like you couldn't have done a google search yourself, if you really cared.
deleted 2mo ago
[deleted]
Dylan16807 2mo ago
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.
- hbn 2mo ago
  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.
  - Dylan16807 2mo ago
    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".
- bombcar 2mo ago
  The vast majority of people buy a game, play it a few weeks, and then it sits forever - even if they could trade it in for a few bucks. Lamepass should have been much closer to "buy a new release, get a month of gamepass games for free" or something.
  - Dylan16807 2mo ago
    The kind of person that actually cancels gamepass within a month is the kind of person to actually trade in the game. And with an efficient trading market they'd get more than a few bucks so early on.
    - bombcar 2mo ago
      True, they set themselves up for "the only people who subscribe are those who use/abuse the subscription" - which is a recipe for failure.

righthand 3mo ago

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.

tapoxi 2mo ago
Are you conflating Asha Sharma with Satya Nadella? Asha just joined Xbox, she had no role in any prior decision making.
- righthand 2mo ago
  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.
  - Jare 2mo ago
    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.
dwroberts 2mo ago
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

mjr00 3mo ago

> - 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.

tracker1 2mo ago
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.
- wincy 2mo ago
  [dead]
- foepys 2mo ago
  Billion USD grocery chains operate on 2-3% margins just fine...
  - tracker1 2mo ago
    Yeah, because video games are as essential to the home as groceries.

2OEH8eoCRo0 3mo ago

Compulsively chasing only the highest margins has been toxic for the country as a whole.

tracker1 2mo ago
[flagged]
- nicebyte 2mo ago
  2015 called
- pebble 2mo ago
  I think you got lost, this is not the Steam forums.
ebbi 2mo ago
What else do you expect from publicly listed companies? Mix that with the increasingly higher concentration of wealth, and things are just going to get worse.
- snackbroken 2mo ago
  50 years ago, publicly listed companies understood that chasing short-term growth targets undermined long-term sustainability. The current failure mode is not an inherent property of being a publicly listed company, it's a consequence of incompetent leadership and bad regulatory policy.
cortesoft 2mo ago
"Chasing the highest margins" is almost the entire point of a market based economy, and is the main selling point for capitalism. I get your complaint, but if you reframe it I think it isn't the real problem here. The whole point of a market-based economy is to allocate resources to making things people actually want. How does the market figure out what people want more of? Well, profit margin. If someone is making a lot of profit selling something, that is a really good sign that people want more of that thing. Other people see the high profit margin, and move to get into that business. More of that thing is created, and people's demand is satisfied. The high profit margin is the signal (and the incentive) to get more of that thing. In other words "Compulsively chasing only the highest margins" can be rephrased as "investing in things that people want more of"

zitterbewegung 2mo ago

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. https://www.bloomberg.com/news/articles/2025-10-23/microsoft-pushes-xbox-studios-to-hit-higher-profit-margins?embedded-checkout=true https://www.bloomberg.com/news/articles/2025-10-23/microsoft...

johnnyanmac 2mo ago
>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.
- jerf 2mo ago
  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-principles/ 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.

etempleton 2mo ago

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.

johnnyanmac 2mo ago

Different eras of Xbox, and tech as a whole. 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.

darth_avocado 2mo ago

> 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.

ErneX 2mo ago
Bungie is not a MS studio since 2007.
belthesar 2mo ago
Point of clarification: 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.
tayo42 2mo ago
This attitude seemed prevelant at Blizzard too based on a book I read (Play Nice)they wouldn't fund anything that wasn't a billionaire dollar idea. Never ending growth and profits just seem to ruin everything
- operatingthetan 2mo ago
  The result is that everything in the american economy is getting squeezed.
- kmac_ 2mo ago
  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.

chrisfosterelli 2mo ago

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.

Forgeties79 2mo ago
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!
- chrisfosterelli 2mo ago
  I totally agree. Being able to buy three-year cards for gold and then convert them to GP for $1 was an absolutely killer deal in terms of bang-for-buck. I stopped renewing once they closed that 'loop-hole' personally, I only play a few games a year (and usually ones that are on sale) so full price game pass just never made any financial sense for me. I already spend less than that per month and play whatever I want.

PaulHoule 2mo ago

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!)

port11 2mo ago
Fair, but who told them to buy up everything? That part annoys me to no end. And the bad plays are management-related, so they’re firing a bunch of people…
- tomtheelder 2mo ago
  Well it was Phil Spencer, who got fired. They basically cleaned house in management already.

sharts 2mo ago

Why is any of this surprising? This is just MBA fundamentals.

mattalex 2mo ago

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.

ksec 2mo ago
It has been really really long since I read anything on HN with someone that has some basic understanding of business. May be all is not lost. Yes. 3% margin is lower than inflation of US treasury rate. As some business would even call it borderline charity. It is also not a commodity market, which means it is not healthy. And any headwind is going to be damaging.
Narishma 2mo ago
> "Mid-cycle": lowering manufacturing costs, 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.
- dcrazy 2mo ago
  And they have hiked the prices of the current gen very late in the cycle to reflect component costs.
  - 2mo ago

burnte 2mo ago

> - 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.

artyom 2mo ago

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")

brikym 2mo ago
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.
- ZiiS 2mo ago
  Yes that is exactly why they want to switch to a Netflix model.
- aleksiy123 2mo ago
  I don’t think that’s really true. 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.

ActionHank 2mo ago

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".

jshen 2mo ago

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.

cortesoft 2mo ago
This is the frustrating thing reading these comments, where people seem to assume that any profit margin is good enough to sustain a business. People see a 3% return and think, "Well, they aren't losing money so there is no reason they can't just keep doing business as usual." What this idea is missing is that the investors in a company aren't choosing between "keep my money in this company" and "sit on the cash", they are choosing between "keep my money in this company" and "invest my money somewhere else" In other words, you aren't just looking at direct returns on an investment, you also have to think of the OPPORTUNITY COST of the investment. By keeping their money invested in a business making 3% returns, they can't invest that money somewhere else.
- account42 2mo ago
  So basically: The stock market is cancer.
  - tommit 2mo ago
    Talk about frustration reading these comments. People knee-deep in Kool-aid, thinking this is the only and god-given way things should be.
  - jshen 2mo ago
    It's more like evolution through natural selection. If you can buy a treasury that returns 3.6%, you will NOT invest money in a business that has more risk, is only returning 3%, and has no believable growth story. Even worse, if you own shares in that company, you will sell them and shift the investment dollars to something with better returns or better chance for growth. It's this competition that leads to prosperity, the alternative is central planning which leads to poverty.

jm4 2mo ago

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.

laserDinosaur 2mo ago

>The make around 5 billion in revenue per quarter 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?

willio58 2mo ago

> 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.

hoherd 2mo ago

Another thing that is crazy to me (and maybe this is a premonition) is that if you play MS games online on Xbox, you have to have a subscription, but if you play on other platforms you can play for free. They are literally punishing their own users with additional fees. I thought this was just Minecraft, which is why my kids and I always play Minecraft on our iPads instead of on the Xbox, but when I recently bought Forza Horizon 6 I was amazed to see that I could play online with other players for free, whereas on Xbox I had to pay to play online in Forza Horizon 4 and 5. So they are basically saying "you gave us a bunch of money for hardware? Cool, now give us more money every month to use it online!" It's absurd, and it's one of the things that drove me away from Xbox. I also have friends who have been lifelong Xbox fans who have had enough and are leaving for Steam.

ErneX 2mo ago
I think they changed it not long ago so you can play free to play games without the online subscription. Just like on PlayStation network. But paid online games you need to be subbed yes.
- brianwawok 2mo ago
  Which is real dumb when in like self hosting a Minecraft server. Pay to play online has turned me off Xbox, I won’t buy next gen
  - hoherd 2mo ago
    Yeah, I forgot to mention that the pay-to-play even applies to multiplayer within your own LAN. I just verified that nothing had changed since I last played: you are unable to join LAN games unless you buy a monthly xbox pass. Complete BS.

tonyhart7 2mo ago

seems like you don't understand business I don't usually take HN audience seriously when talking about economics

sakex 2mo ago

3% profit margin means you're better off selling the business and investing the cash into US bonds at current rates.

port11 2mo ago
If everyone thinks like that, no jobs are created. Xbox hires a ton of people and creates genuine value for consumers. Okay, that last part you can question, but I’m an original Xbox-er so I believe in it. 3% profit should be totally fine for any business. The planet is cooked, I think we can live with the shareholders making a bit less.

deleted 2mo ago

[deleted]

pjmlp 2mo ago

Fully spot on, I really don't get late capitalism, it feels pretty much back to a feudal society, with big tech replacing the lords up in the castle.

lelanthran 2mo ago

> So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". At a roughly 3% profit, they are barely breaking even and have no money to invest in staying current. It's not a sustainable business.

prmoustache 2mo ago

> - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million How are they still doing 5 billions in revenue per quarter? Are Xbox and games still sold? In my area they seem to have disappeared from the physical stores alley. I realized that a few weeks ago there were Playstation and Nintendo products in the video game area but no Xbox anything.

King-Aaron 2mo ago

These companies are discovering that selling products to consumers is no longer the thing they need to do in order to earn money.

port11 2mo ago
Might work if you don’t: out-price your hardware, get rid of disc trays, make GamePass expensive, force Microsoft accounts and online mandates, buy up every studio and force them to out out crappy updates,… ahm, no it’s the users, they’re getting old and cranky. Yikes, I bought every Xbox console and plenty of day-1 releases, but skipped the last gen when it became clear that the platform isn’t about gamers anymore. Triple-As are also getting tiresome, so I think plenty of people are happy to get a cheaper title on Steam that feels like better value.
- King-Aaron 2mo ago
  Yeah, we had every playstation since the original, and a vast library of games. Admittedly I ended up with a digital PS5 (gift), so I ended up in the digital ecosystem. This will hurry me up into buying a disc drive for it I suppose. I tend to agree about the lackluster AAA industry, but I don't think that's the gamers 'fault' for wanting indie games, more private equity and the share market environment forcing developers to generate slop as opposed to good titles. It's a sad way that the broader economy is going in that regard.
  - port11 2mo ago
    I didn’t mean to go with the easy, default criticism of AAAs as slop and repetitive; it’s just that _lots_ of smaller devs/studios are putting out excellent gameplay and/or narratives.

rob74 2mo ago

The times when companies only restructured when they were actually making losses are long gone. Today, if they "underperform" (i.e. they're not as profitable as the stock market thinks they should be), investors want to see blood today rather that tomorrow.

rldjbpin 2mo ago

xbox is not a startup and neither m$ a vc. the board is not in love with gaming to continue sponsoring it. but if the solution is to make it even worse to game in their platform, then i hope this crashes and burns for good.

reactordev 2mo ago

a couple are symptoms of their problems and the others are causes. They lack the understanding to know which ones. They tried (and failed) to build a subscription model out of game renting while cannibalizing the very studios they purchased. There was no saying no. They were going to take you over whether you wanted them to or not. They would also scheme to half-ass your marketing partnership so you wouldn't make targets so you would be vulnerable to a take over. It's Microsoft at it's finest. A lesson in Greed Above All Else. https://wccftech.com/xbox-layoffs-gut-id-obsidian-zenimax-online/ https://wccftech.com/xbox-layoffs-gut-id-obsidian-zenimax-on...

KaseKun 2mo ago

You have to leave your local maximum to find the global maximum.

jstummbillig 2mo ago

Revenue is just not a useful concept to understand the state of a company. I can easily generate revenue by simply exploding costs. Blockbuster had huge revenue. If we talked about costs as much as we talk about revenue (which carries roughly the same amount of information) people would judge theses reports very differently.

fourseventy 2mo ago

Tell me you know nothing about business without telling me you know nothing about business.