The huge loss of staff in the Microsoft Xbox game sector this summer triggered concerns and speculation throughout the industry. According to a recent report by Bloomberg, Microsoft has set a profit target of up to 30 per cent for the Xbox game sector, an indicator that goes well beyond the industry average and directly leads to a series of shock adjustments, including large-scale layoffs, project cancellations, controversial price increases and multi-platform strategic advancements.
Jason Schreier, a journalist for Bloomberg, reported that the profit target had triggered a ripple effect: thousands of employees had experienced multiple layoffs; projects developed over the years in the Rare studio, Everwild, and the Initiative studio, Perfect Darkness, had been cancelled; the Blackbird Plan in Zeni Max’s studio had been put on hold and triggered large-scale layoffs; and last year Microsoft had shut down Arkane Austin, the Red Xia Island developer, and Tango Gameworks, the Sound Wave developer. At the same time, Microsoft increased the sale price of the Xbox Series X/S mainframe and raised the monthly cost of the final version of the Xbox Game Pass to $29.99, and provoked widespread controversy among the player community. Despite an attempt to raise the price of the game to $80, Microsoft has temporarily set aside the scheme to maintain the $70 price, following strong opposition from players to the $10 increase in World II, but the industry generally expects to resume the price increase next year.
According to Bloomberg, the average profit margin for the video game industry is between 17 and 22 per cent, while the profit margin for Xbox has remained between 10 and 20 per cent over the past six years. By reference, the Sony PlayStation sector achieved a 16 per cent profit margin in the first quarter of 2025. The report revealed that the new target was imposed by Microsoft Chief Financial Officer Amy Hood in the fall of 2023, just during the $69 billion acquisition of visual snowstorms by Microsoft.
It is analysed that low-cost high-return projects may take precedence over high-risk creation. The hardware sector of the Xbox “struck” may face “significant strategic re-engineering”. This trend is confirmed by recent statements by Sarah Bond, President of Xbox, who claims that the next generation of Xbox hosts will locate “high-end quality experience” and points out that the concept of monopolization is “old”. Today, the Xbox game studio has become one of the most successful distributors on PlayStation.
In a statement to Bloomberg, Microsoft suggested that profit objectives were not one-size-fits-all: “We see business as a whole, balancing creativity, innovation and sustainability in a diversified product mix. As with all creative business, sometimes difficult choices are needed to stop projects that are no longer viable for various reasons and to redirect resources towards more strategic creation.”