A new report has revealed that Xbox is potentially going to shift its focus to making cheaper and less risky games. Sources claim that Microsoft is pushing its gaming division to make unrealistically high profit margins.
Xbox Reportedly Making Cheaper Games to Boost Profits
This latest update comes from an in-depth report by veteran gaming journalist Jason Schreier. According to sources he spoke with, Microsoft is reportedly considering focusing on making cheaper and less risky Xbox games. While not every project will fall under this, many Xbox studios are allegedly being encouraged to move in this direction to meet profit goals.
“Moving forward, games that are either cheap to make or deemed more likely to generate significant revenue windfalls may take priority over riskier bets,” said the people, “while Xbox’s floundering hardware division may face a significant rethinking.”
Yeah, that sounds pretty grim for the gaming division’s future.
Schreier also points to Microsoft recently canceling Everwild, Perfect Dark, and Project Blackbird as examples of them cutting back on expensive projects. As for what is behind this recent decision? According to the Bloomberg report, Microsoft has a specific profit margin goal they have implemented for its studios that it is trying to hit. However, the profits they are trying to reach might be unrealistic.
Microsoft Targeting 30% Profit Margins for Xbox Games
One of the most damning things to come out of Jason Schreier’s report is that Microsoft has reportedly implemented a 30 percent profit goal for its Xbox gaming division. However, multiple insiders who spoke to Schreier say that most game studios hit around 17 percent to 22 percent. So not only is Microsoft’s goal well above industry standards, it’s absurdly high.
The biggest revelation, however, is that the 30 percent profit margin may have been the catalyst that led to the mass Xbox layoffs and game cancellations earlier this year. According to Schreier, the new policy had an impact on Phil Spencer’s plans for the division. So it’s possible that the company’s wide-ranging cuts were a direct effort to meet this financial goal.
Xbox’s Future May Rely on Third-Party Game Sales
Interestingly, it could have also been the reason that Xbox has recently shifted its focus to becoming a third-party software publisher. After all, if a game is expected to make a 30 percent profit margin back, then it would likely need to be sold on multiple platforms. This would explain why Xbox has been launching key titles such as Forza Horizon and Gears of War on PS5, PC, and even Switch 2.
But this also makes you wonder how much this new policy has impacted Xbox Game Pass as well. It would be interesting to see what kind of profit margins games were making on the subscription service. Perhaps they weren’t actually making that much, and that’s why Microsoft recently raised the Xbox Game Pass price in September.
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