"Bloomberg has published a new report about the state of Microsoft's Xbox division, providing some potential insight into the reasoning behind so many baffling decisions the company has made in the past two years. Apparently, Microsoft leadership has been pushing Xbox to reach a much higher profit margin than is typically expected in the video game industry, and the result is a fundamental shake-up in everything the company has been building, leading to raising prices, canceling games, and sweeping layoffs across its many acquired studios."
"According to the report, Microsoft set a goal for Xbox of 30 percent "accountability margins," which is apparently the term the company uses in place of "profit margins." As lays out, the average profit margin in the industry is anywhere from 17 to 22 percent, with Xbox having averaged anywhere between 10 to 20 percent over the past six years."
"According to 's sources, this new number was implemented in the fall of 2023 by Microsoft Chief Financial Officer Amy Hood. While not every project is expected to hit the 30 percent goal, several developers under Xbox's umbrella have been given a different target goal than they had previously, with cheaper projects or ones that are expected to generate substantial revenue taking priority over riskier ones."
Microsoft set a 30 percent "accountability margins" target for Xbox, well above the industry average of 17–22 percent and Xbox's historical 10–20 percent. The 30 percent goal was implemented in fall 2023 by Chief Financial Officer Amy Hood. Not every project must meet the 30 percent target, but many studios received new targets that prioritize cheaper or higher-revenue projects over riskier ones. The shift toward higher margins has coincided with price increases for services, cancellation of projects, widespread layoffs across acquired studios, and the release of some first-party games on competing platforms to maximize returns.
Read at Kotaku
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