"Pressure from Microsoft to achieve industry-topping profit margins has led to Xbox being butchered over the last two years, after not imposing specific targets on the gaming unit in the past. Citing sources with knowledge of internal matters, Bloomberg reports that Microsoft CFO Amy Hood set across-the-board targets of 30 percent profit margins in fall 2023, prompting its gaming division to respond by increasing prices, canceling projects, and laying off thousands of employees."
"Cost-cutting is always a fairly obvious motivation for slashing jobs and raising the price of products or services, but Microsoft's lofty profit targets would explain why its gaming division has been so extensively gutted. During an investor call in July, Hood said that the Xbox division's operating income had increased by 34 percent in its most recent quarter due to "continued prioritization of higher margin opportunities.""
Microsoft CFO Amy Hood set across-the-board profit targets of 30 percent for business units in fall 2023. Xbox responded by raising game and service prices, canceling projects, and laying off thousands of employees. Analysts say a 30 percent margin is far above the video game industry norm of roughly 17–22 percent. Leaked documents indicate Xbox achieved a 12 percent margin during the first nine months of fiscal 2022, before the new targets. The higher targets triggered aggressive cost-cutting and prioritization of higher-margin opportunities across the gaming division. Microsoft reported that Xbox operating income rose 34 percent in its most recent quarter.
Read at The Verge
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