Microsoft's Sky-High Profit Goals For Xbox May Be Doing More Harm Than Good - Report

"2025 has been a tumultuous year for the Xbox brand, with massive layoffs, multiple price hikes for both its console portfolio and Game Pass subscriptions, and continued controversy over Microsoft's work with Israel casting a shadow over the company's gaming wing. A new report from Jason Schreier at Bloomberg has shed some light on what's going on behind the scenes at Xbox, and a lofty profit goal looks to be the catalyst for these decisions."

"Bloomberg's report also indicates that the requirement for Xbox first-party games to be available on the Xbox Game Pass subscription service has hurt software sales overall. However, Xbox has employed a "member-weighted value" credit system which, as the report states, "is calculated based on several factors, such as the number of hours that Game Pass players collectively spend on a particular title.""

"Part of Xbox's new strategy has been releasing first-party games on competing consoles. Indiana Jones and the Great Circle, Sea of Thieves, and Forza Horizon 5 have all launched on PlayStation 5 in recent months, with notable success according to sales figures. Those familiar with the situation told Bloomberg that "moving forward, games that are either cheap to make or deemed more likely to generate significant revenue windfalls may take priority over riskier bets.""

2025 saw Xbox implement massive layoffs, multiple console and Game Pass price increases, and face controversy linked to Microsoft's work with Israel. Top executives set an across-the-board profit-margin goal of 30 percent, while industry averages range from about 17 to 22 percent and Xbox margins historically sat between 10 and 20 percent. A requirement that first-party games appear on Game Pass reduced traditional software sales. Xbox uses a "member-weighted value" credit calculated from factors like collective player hours. First-party titles have expanded to competing consoles, and cheaper or higher-revenue projects are now prioritized over riskier bets, prompting cancellations.

Read at GameSpot