With Xbox CEO Asha Sharma having revealed that the division’s revenue is going down by 3 percent year-on-year, as well as reports of impending layoffs, a new report by Windows Central’s Jez Corden has indicated there are quite a few reasons behind the company’s current state. Among many other reasons, he noted that a few successful Xbox releases have been hampered by having to absorb losses from games that didn’t quite sell as well.
While Forza Horizon, Age of Empires, Microsoft Flight Simulator, Sea of Thieves, Grounded, and The Elder Scrolls 4: Oblivion Remastered were “major wins” for Xbox, titles like Avowed, Kiln, Keeper, South of Midnight, Hellblade 2: Senua’s Saga, Forza Motorsport, and The Outer Worlds 2 allegedly didn’t meet Microsoft’s sales expectations. Sources told Corden that this includes sales data and player engagement through Game Pass.
Other games noted as having missed targets include Ninja Gaiden 4, Minecraft Legends, Minecraft Earth, Bleeding Edge, Battletoads, Towerborne, and Ara: History Untold, “among others”.
The cancellation of other titles, like Perfect Dark, Everwild, and Zenimax’s Project Blackbird, have also been major investments that didn’t pay off. Perfect Dark developer The Initiative was reportedly a “huge drag” on the profitability of the Xbox division before its closure. Interestingly, Undead Labs also seemingly contributed to this, but it seems to be back on track, having recently unveiled gameplay from State of Decay 3.
Long development cycles have played a huge role in this, with Corden bringing up Fable, which required developer Playground Games to make major changes to its in-house engine, ForzaTech (originally meant for developing racing games). There were also discussions about using Unreal Engine, but Playground Games’ expertise in ForzaTech helped it win out. Interestingly, this is also reportedly a good thing, since Microsoft might be looking to cut down on licensing costs from using third-party game engines.
As for the 30 percent “accountability margin” that Xbox has to hit, Corden has noted that the number is actually an average, split across various divisions and game studios. Some studios, in fact, had accountability margins of 40 percent to help offset losses from other parts of the company.
When it comes to hardware, Microsoft has struggled to obtain enough memory and storage modules to build more Xbox consoles. According to Corden, the prices for these components have risen so much that Microsoft is allegedly losing “hundreds of dollars per Xbox Series X/S console sold right now.”
A report from earlier this week has indicated that, due to the current health of Xbox’s business, the company might be looking to shut down a studio under the Xbox Game Studios banner. While no official announcement has been made yet, this closure, along with layoffs, is slated to happen shortly after Microsoft’s current fiscal year ends on June 30th.
