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Microsoft has broken its silence to officially deny reports that it had imposed a mandatory 30% profit margin target on its Xbox gaming division, a figure that many considered unrealistic in the gaming industry.
The denial came in a new report published by CNBC, which addressed several reports and rumors that have followed Microsoft over the past year. The report indicated that the company made it clear that although it set ambitious goals for its various divisions, it did not impose the 30% profit margin target on Xbox.
Bloomberg had previously published a report that Microsoft had set a high target for the gaming division to achieve a profit margin of 30%, which was said to have contributed to difficult decisions such as laying off employees and canceling a number of projects. According to the Bloomberg report, this trend was attributed to Microsoft CFO Amy Hood, who described the target as part of company-wide accountability margins, including Xbox.
The report also indicated that several industry sources supported this information at the time, confirming that they had heard of high profitability targets within Xbox, but Microsoft has now confirmed that this percentage is incorrect, especially since the average profit margins in the gaming industry usually range between 17% and 22%, which is much lower than the figure circulating.
This controversy comes at a difficult time for the Xbox division, as the past year witnessed the layoff of thousands of employees and the cancellation of a number of prominent projects, including Perfect Dark from The Initiative studio, Everwild from Rare, and an unannounced MMO project from ZeniMax Media codenamed Blackbird. It was also recently announced that Xbox will not present the Xbox Wrapped summary this year due to marketing budget constraints.
It is still unclear whether Bloomberg will update its report or provide additional clarification on the nature of the financial goals within Microsoft, and as the debate continues, the future of Xbox’s financial strategy remains in question, especially in light of the significant changes in the division.
