"Over the past two years, executives at the Seattle-based software giant have set an across-the-board goal of 30% accountability margins, a term Microsoft uses in lieu of profit margins, according to people familiar with the business. The gaming division, which includes dozens of studios, has responded by canceling products, raising prices and slashing thousands of jobs, said the people, who asked not to be identified discussing nonpublic information."
"The average profit margin in the video-game industry in recent years has ranged between 17% and 22%, according to estimates from S&P Global Market Intelligence, while coming in between 10% and 20% over the past six years at Xbox. Court documents from 2023 revealed that Microsoft's gaming business had a 12% profit margin for the first nine months of the company's 2022 fiscal year."
"The new goal, which hasn't been previously reported, is at the outer range of what a gaming studio can typically reach in a boom year, said Neil Barbour, an analyst with S&P Global. A 30% or better margin is usually reserved for a publisher that is really nailing it, Barbour said. In the past, game makers at Xbox weren't asked to hit specific numerical targets, said the people, and were largely told to focus on making the best games possible without worrying too much about finances."
Microsoft set an across-the-board target of 30% accountability margins for its Xbox gaming division over the past two years. Xbox studios responded by canceling products, raising prices and cutting thousands of jobs. Industry average profit margins recently ranged between 17% and 22%, while Xbox's margins have been between 10% and 20% over the past six years; court documents showed a 12% margin for the first nine months of fiscal 2022. CFO Amy Hood implemented the target in fall 2023, increasing finance oversight and prompting strategic shifts under gaming chief Phil Spencer. Analysts say 30% margins are unusually high.
Read at www.mercurynews.com
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