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Xbox CEO Asha Sharma has denied reports suggesting Microsoft was considering selling its gaming business.
In an interview with the New York Times, Sharma declared: “Xbox is not for sale.”
“We will do whatever it takes to set the company up for success, and we will look at the right partnerships, the right operating model and everything needed to achieve that,” Sharma continued.
One of the big questions emerging from Sharma’s appointment as Xbox CEO earlier this year, and the subsequent layoffs and restructuring that have occurred in recent months, revolves around the long-term future of Microsoft’s gaming business. Will Microsoft sell off Xbox? Are the cuts and restructure laying the groundwork for a sale?
Details on a potential shakeup came from The Information (via Reuters), which said that Microsoft hadn’t ruled out turning the Xbox brand into a wholly-owned subsidiary. It said the move could result in Xbox being operated as a joint venture with other partners or even potentially sold.
Sharma’s Xbox reset has since become clearer. Nearly 2,000 Xbox staff have already been cut, with more to come this financial year. Multiple studios have either exited Xbox or face closure, and various games have been canceled. Xbox is now focused on fewer, bigger video game franchises such as The Elder Scrolls, Fallout, and Minecraft, with the likes of Halo moved over to Call of Duty company Activision. Through it all, there are question marks hanging over the viability of Xbox’s confirmed next-gen console, Project Helix.
While some believe this reset and the cuts that have come with it are part of a strategy to make Xbox easier to sell, analysts aren’t convinced. Some have said Xbox would likely have few suitors interested in buying the business outright, considering Microsoft bought Activision Blizzard for an eye-watering $69 billion, Xbox’s huge payroll, extensive studio setup, and hardware business. More likely, analysts have suggested, is that big companies may pick off parts of Xbox as Microsoft continues to look to trim the business.
The NYT speculates that an eventual spinoff could create an independent Xbox that would partner with Microsoft while keeping its costs off the company’s balance sheet. But Sharma cast doubt on this as an option, too, saying: “We’ve got a long way to go with Microsoft, and we’re going to take the long-term view.”
Who would even buy Xbox when Xbox itself admits its business is unhealthy? Xbox ended the financial year with a 3% accountability margin (assumed to be profit margin), down year-over-year. Excluding Activision Blizzard King, over the past five years Microsoft spent over $20 billion on ongoing investments in what Sharma called its content, platform, and hardware “subsidy,” but annual revenue declined nearly half a billion during that time.
“We are operating at margins that are 3-10x lower than comparable platform and publishing businesses,” Sharma said in a blog post announcing the layoffs in July. “We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected. As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox.”
Meanwhile, Microsoft has increased the price of Xbox consoles. Microsoft blamed this on console storage and memory prices, which have increased by more than 2.5x, and it expects another doubling by the fall of 2027. “The entire consumer electronics industry is struggling with the current components crisis, but the effects are particularly hard on consoles,” Microsoft said when it announced the price rises. “… the industry is facing the most severe hardware crisis in its history,” Sharma added in the Xbox “Reset” memo.
For now, Sharma’s focus is on growing Xbox, which, she told the NYT, still has 500 million players a month. Microsoft’s ambitious target is for Xbox to reach 1 billion people a day — a figure that has been ridiculed online. How will Xbox achieve this? By tapping into markets such as Africa and South Asia via cloud computing, and investing in Minecraft as a Roblox competitor, the NYT reported.
Wesley is Director, News at IGN. Find him on Twitter at @wyp100. You can reach Wesley at [email protected] or confidentially at [email protected].
