According to Bloomberg, Xbox plans to undertake a large-scale downsizing next month, and Asha Sharma, the new leader, will undertake a comprehensive reform of the video game sector in order to contain the current decline in income.
According to informed sources, Microsoft is expected to undertake a staff reduction shortly after the end of the fiscal year on 30 June, with an unknown number of staff reductions. Microsoft also plans to cut significantly the budget for marketing and other business areas.
Since assuming the post of CEO of Xbox in February this year, Asha Sharma has come to the forefront. She had spoken publicly about the challenges facing the company and planned to “replace the business”. According to Bloomberg, Asha Sharma wrote in her e-mail to employees on Wednesday that the “responsible profit margin” (Microsoft’s indicator to reflect the profit margin) for company operations had collapsed to 3 per cent.
She wrote: “Without the blizzard and King, our continued investment in content, platform and hardware subsidies has exceeded $20 billion over the past five years, but our annual income has fallen by nearly $500 million over the same period. This cannot continue.”
The Xbox, which is the giant of the game industry, has been very difficult in recent years. Its hardware sales have fallen sharply and it has not been able to continue with the popular games, and the number of subscribers to the Game Pass service has been stagnant. Under the pressure of Microsoft to increase profitability, Xbox has closed many studios over the past two years, cancelled the development of multiple games and raised the price of games.
According to Sharma, Xbox has a number of classic game series of leading industries with great potential and player needs, “but we have not provided them with sufficient funds to compete and win”. At the same time, stable monopolistic games and new IP releases are crucial to success. “We need to reassess the balance between these factors and our investment priorities for the next five years”.
Sharma indicated that Xbox needed to rebuild its platform infrastructure and rethink its product mix in the coming weeks and months. Xbox expanded in order to increase the supply of content, but found that “the front line is too long when a changing strategy is implemented in an environment where content is more accessible”.
In recent years, most of the first-party games under the Xbox flag have landed on the Sony PlayStation and Nintendo Switch platforms, resulting in a wider audience for works such as ” The Porcuper ” and ” The Extreme Race: Horizon ” . But this strategy of abandoning exclusivity may be undermining the attractiveness of the Xbox host itself.
Xbox is trying to reverse this situation. At a recent Xbox game fair, Sharma announced that War Machines: Times of Change and the Revolution would keep the Xbox mainframe to itself and no longer land on PlayStation and Switch platforms. She and the management team indicated that future games would be handled on a case-by-case basis.
According to the source, Sharma and the team also withdrew the halo that was scheduled to be released last week at PlayStation, which could damage the already fragile relationship between the two companies.
A return to monopolization may excite Xbox fans and enhance brand prospects, but it also means abandoning significant sales revenues. PS5 sales have exceeded 90 million units, while analysts expect Xbox sales to be only one third.
In its mail, Sharma reiterated once again the spare parts crisis that Xbox is facing, and it is expected that by the holiday season of 2027 the company will have five times the cost of storage and content in 2024. As a result, the company will have to change the overall strategy for the next generation of hosts, codenamed “Helix”.
Sharma writes: “Although the whole industry is facing a spare parts crisis, we believe that we have been more affected than many others by the choices we have made over the past five years. Our current mainframe production cannot meet the needs of players, and we need new business models and hardware partnerships, while continuing to work on Helix’s development.”
Sharma did not mention redundancy in the employee’s memorandum, and she said: “My task is not a 30 per cent liability profit or a business software profit. It’s the first game and entertainment company.”
To achieve this goal, Sharma paints a picture of a company in need of change. She stressed: “For some of you, these realities are surprising and even frustrating. We will not succeed by concealing difficult facts or by repeating the same approach in anticipation of different results.”