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- Microsoft CEO Satya Nadella says gaming needs to innovate if it hopes to compete with short-form content.
- He believes good profit margins are also necessary to drive innovation.
- This statement comes after Xbox raised prices across the board to improve its profit margins.
Gaming prices have gone up across the board recently, but among the three console manufacturers, Xbox has undoubtedly led the charge.
According to reports, Microsoft expects profits as high as 30% from the gaming division, and Satya Nadella recently shared his outlook on the financial side of the gaming business. From his perspective, profitability is paramount to an innovative future for gaming.
Why it matters: Microsoft’s profit-seeking approach to gaming makes it a major outlier in an industry that has traditionally operated on thin margins.
Satya Nadella believes gaming faces more competition than ever in the form of short-form content.
This is because TikTok videos, YouTube shorts, and various reels on other platforms dominate engagement today, creating a cycle of consumers gravitating toward short-form content.
Nadella is of the opinion that gaming needs to innovate to come up with a solution to challenge this dominant style of content. He also believes profits are important toward that end.
The best way to innovate is to have good margins because that’s the way you can fund.
Going by the Microsoft CEO’s response, it comes as no surprise that Xbox prices have gone up as much as they have recently.
Microsoft’s next-gen console is also expected to cost more than $1000, setting the stage for an ultra-premium piece of hardware from the brand. Of course, whether this will be enough to keep the Xbox business going remains to be seen.
Traditionally, consoles have been sold at a loss, and gaming profit margins have not been the best. However, the medium has still seen a lot of innovation and experimentation over the years, so Satya Nadella’s response is very interesting.
Even with games being priced at $70 or $80 today, the experiences haven’t necessarily improved significantly over the $60 era, so it will be interesting to see whether Microsoft can truly provide the innovation it seeks following the latest price changes across Game Pass and consoles.
What do you think about the CEO’s stance on profit margins? Do you expect innovation from Xbox moving forward? Let’s discuss in the comments and on the Tech4Gamers Forums.
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[Senior News Reporter]
Avinash is currently pursuing a Business degree in Australia. For more than 5 years, he has been working as a gaming journalist, utilizing his writing skills and love for gaming to report on the latest updates in the industry. Avinash loves to play action games like Devil May Cry and has also been mentioned on highly regarded websites, such as IGN, GamesRadar, GameRant, Dualshockers, CBR, and Gamespot.
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