Usually, during a console generation, consoles start generating profit on every sale, and with a smaller price tag too, but that is not the case now.
Jez Corden, editor at Windows Central, published a detailed analysis of the complicated situation at Xbox, which CEO Asha Sharma outlined earlier this week: after deducting costs, the division was able to maintain only a weak 3% margin. That is why, after reducing the price of Game Pass Ultimate and relaunching the exclusivity program, Sharma’s next goal is to reset Xbox, including an upcoming round of layoffs, rumored to affect as many as a thousand people, and possibly the closure of another studio, with Double Fine and Compulsion Games among the potential candidates. These have already been mentioned in the news, and they also came up among today’s stories.
How did the division get into such a severe situation? Hardware sales have been declining for a long time, and several games, including Avowed, Keeper, Kiln, South of Midnight, Hellblade 2, Forza Motorsport, and The Outer Worlds 2, fell well short of Microsoft’s expectations, while others, such as the canceled Perfect Dark reboot, Rare’s Everwild, and ZeniMax Online’s Project Blackbird, proved to be pure investment losses. On top of that, games such as Undead Labs’ State of Decay 3 and Playground Games’ Fable reboot took far longer than planned, although both currently look good and are scheduled for 2027. Corden added that there is another problem tied to the ongoing memory shortage. According to him, Xbox could not secure enough memory at fixed prices and may now be losing hundreds of dollars on every Xbox Series console sold:
“To make matters worse, Xbox struggled to secure enough memory at fixed prices necessary to maintain healthy hardware margins. I’m told that Xbox is currently losing not tens, but hundreds of dollars on every Xbox Series console sold, and Sharma noted that wholesale memory prices have risen 700% since the Xbox Series cost calculations were made” – Corden wrote.
Sharma noted that because of decisions made over the past half-decade, component shortages affect Xbox more than its competitors, and new partnerships and business models will be needed to continue producing console hardware. This can easily be connected to earlier rumors that the upcoming Project Helix console will also be manufactured by partners such as Asus or MSI.
Source: WCCFTech, Windows Central
