Internal Xbox Communications Reveal Strategy Overhaul Amid Financial Pressure Hardware Supply Chain Issues and Studio Overextension
Internal communications to Xbox employees around the world by the company’s CEO, Asha Sharma, and chief content officer, Matt Booty, details the major, strategy redefining overhaul that is coming to Xbox. The document, outlining the first 100 days in office, shows that the company’s revenue has been declining while the division has been overextended. The memo also indicates that the company is facing an extreme hardware components crisis and has decided that it is time to completely reorient its business model as a consumer has many other entertainment based enemies other than gaming on consoles, namely attention.
According to the internal documents, Xbox is under incredible financial pressure. The company’s gaming division is expected to finish the fiscal year with a meager 3% accountability margin, which is down significantly year over year. Without major acquisitions, Microsoft spent over $20,000,000,000 over the last 5 year period on content, platforms and hardware subsidies, yet in the same 5 year period, it had nearly $500,000,000 less revenue each year. The company warns employees that this trend will not last.
A major part of Xbox’s problems is a severe crisis in hardware component manufacturing brought on by rapidly skyrocketing prices of storage components. As it stands, the price of storage for the consoles is over four times what it was last autumn, and when the holidays arrive this year, they will be over five times the base cost for the company. Similar prices were observed for memory components as well. This supply chain issue, born from years of bad strategic decisions, means that the company cannot build enough machines to meet the needs of consumers, although the leadership has committed to supporting its future Helix hardware platform through a new business strategy and outside partnerships to fix its hardware deficits.
On the software side, the two executives indicated that things have been getting off to a decent start as the company’s Game Pass subscription numbers have finally returned to positive growth after 8 months of straight decline. The company’s studios are also on the verge of consistently delivering first party games as Gears of War E Day, as well as Clockwork Revolution, have both been promised for the near future to try and establish a consistent stream of first party releases each year. The leaders did admit, though, that due to rapid expansion the studios were overextended and several first party IPs did not get the funding that they needed and this means that in the next 5 years all of the company’s IP and development priorities will be reexamined.
To accommodate the upcoming changes the company plans to make a complete overhaul of its tech base. Its current platform infrastructure consists of hundreds of tangled dependencies, and relies too heavily on third party vendors. Sharma and Booty plan on rebuilding the entire engineering stack of Xbox so that it is more efficient to build and quicker for development. The company is considering acquisitions of other companies that have strong ties with mobile, PC and streaming, as well as hardware to finally put its previous business model completely in the past.
