Microsoft pushing for profits “well above the industry average” is reportedly behind Xbox’s layoff and cancellation misery

The bit of reporting I’m about to relay to you probably isn’t surprising, but it’s worth making sure you’ve got a pillow on standby to scream into once you’ve digested it. Microsoft, they of more money than a company could ever need or know what to do with, have reportedly spent the last two years pushing Xbox to deliver profit margins which are well above the industry average. Cue all of the layoffs, cancellations, and shutterings.

Bloomberg have reported this profits push, which they cite as having seen company execs set an across-the-board goal of 30% profit margins, or “accountability margins” as they’re known in Microsoft corpospeak. Not every individual game or project is expected to hit the 30% mark, but lots of developers across Xbox have been made aware of the target, the report claims.

The 30% goal reportedly came into force from autumn 2023, when Microsoft chief financial officer Amy Hood’s team took up a more prominent role, with Xbox moving away from a past which Bloomberg’s sources claim wasn’t as doggedly driven by financial metrics as the be all and end all.

To put the margin being aimed for in context, Bloomberg turn to data analytics firm S&P Global Market Intelligence, who put the average profit margin in the games industry at between 17% and 22% in recent years. Xbox’s profit margins over the past six years are cited as has having landed somewhere between the 10% and 20% marks. According to S&P analyst Neil Barbour, hitting 30% or more is “usually reserved for a publisher that is really nailing it”.

Along with the move we’ve already seen Xbox make towards cross-platform releases which aim to maximise the cash a game can bring in, rather than using it as a tool to try and tempt players onto Xbox consoles or Game Pass, the report cites sources as having pointed to an increasing risk averseness in terms of the games Microsoft green light as a likely consequence going forwards. Basically, if it ain’t massive and dripping with clear cash-grabbing potential, it might not get made. Meanwhile, on the hardware front, that division’s suggested to possibly be in line for “a significant rethinking”.

It’s a state of affairs you could guess pretty easily just by reading the tea leaves of the corp’s moves over the past year and a bit, but damn if it isn’t still depressing to have the unnecessarily greedy motivation behind it all reported in black and white.