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- Microsoft has instructed its Xbox division to charge a profit margin of over 30% on its projects.
- This puts them way above the industry standard, which ranges from 17% to 22%.
- The number is usually reserved for companies doing exceptionally well with hit projects.
For the longest time, the profit margin in the gaming industry has ranged from 17% to 22%, depending on quality. While it is still standard for most, Xbox has taken a different direction, raising it quite a bit.
Amid falling sales and inflated prices, a new report reveals that Microsoft is now pushing for an over 30% profit margin on Xbox, across both consoles and software. This reportedly led to mass layoffs and the cancellation of multiple projects.
Why it matters: For a company that is primarily a publisher now, it is weird that Microsoft favours higher profit margins over making great projects that could generate huge future revenue.
Bloomberg reports that Microsoft is asking the Xbox gaming division to increase its profit margins above the industry standard. So, now they’re pushing for 30%, up from the 20% mentioned above.
For context, in recent years, Xbox’s profit margin ranged from 10% to 20%, so this is a significant increase. The same thing led to the cancellation of Perfect Dark and more, as well as the recent rise in console prices.
The source remarks that a 30% or above margin is usually reserved for a publisher that is nailing with all its projects, and we can’t really say the same for Xbox. There has also been a shift in the overall policy, as previously, numbers weren’t involved.
This will also lead Xbox to prioritize cheaper, high-yield games with a lower risk of failure. Not every project has been given the new target, but many in-house studios will now aim for it in future releases.
What are your thoughts on Microsoft pushing for a 30% profit margin with Xbox? Let us know your opinions in the comments or join the discussion at the official Tech4Gamers Forum.
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News Reporter
Abdullah is an avid gamer who primarily plays single-player titles. If you can’t find him anywhere, he’ll probably be at his desk playing The Witcher 3 for the millionth time. When he isn’t playing games, he’s either reading or writing about them.
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