Xbox CEO Says Current Margins 'Cannot Continue'

Xbox CEO Asha Sharma and Chief Content Officer Matt Booty told staff that Xbox's current economics "cannot continue," citing more than $20 billion in spending over five years, declining revenue outside Activision Blizzard King, console supply constraints tied to RAMaggedon, and an overextended studio portfolio. The memo stops short of announcing layoffs, but a Bloomberg report says substantial Xbox cuts are expected after Microsoft's fiscal year ends on June 30. Engadget reports: The takeaways are pretty grim. For starters, the simple math of Xbox's revenue isn't adding up to success. "Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time," the execs state. "Going forward, this cannot continue." They also acknowledge the impact of RAMaggedon: "We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix." (Helix, in this case, is Project Helix, the codename for Xbox's new console.) Then there's the kicker, a renewed admission that Xbox still can't support the many studios it acquired in the late 2010s in an effort to grow its first-party game ambitions. "We have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content," the pair said, noting elsewhere that with so many good games, not to mention the plethora of other forms of entertainment available, "Going forward, our competition is attention."

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