That's because of ABK though.
You could argue that with XBox hardware dead and Gamepass looking like a dead end (because GAAS is taking over), that MS should just get out of the biz entirely and spin off ABK+Whatever studios MS hasn't killed yet.
Xbox (MS), is just fine. PC alone they trump all install bases for any console. They are making a new powerful next gen Xbox, handhelds, and with all their acquisitions this gen their library should grow, AND. those game will generate revenue on other platforms such as Sony, Nintendo, PC, and Xbox consoles.
How much are they spending?Xbox division is 9% of Microsoft's revenue, right next to 10% for for windows. It doesn't bleed money at all. ~$24B from a gaming division.
They just got their second-highest holiday period in xbox history last winter. Where are the stats that spell it out that this division requires the axe? I don't see it.
I've said in numerous threads on this forum that Microsoft *never* fully recovered from the build-up and unveiling of the Xbox One in 2013.
To go back and watch that entire thing, even now, it's really a miracle that they survived it.
I've always been invested in the various gaming shows, news, etc like E3 in those days. I've never seen a company get absolutely embarrassed like Sony did to them that year.
Seeing that burn live was absolutely ridiculous in the face of what Microsoft was trying to do.
Couple that with Don Mattrick's response to "Just buy a 360", which even Geoff Keighley was offended by or in disbelief about, it was insane.
I think they never really made it all the way back from that. When you continue to misstep after a terrible fall like that, as they have over the years, it's just hard to come out stronger.
lol Xbox lost and msft won. You folks forgot why they entered the industry. Sony has been checked, thus the logical conclusion is Windows expansion.
Xbox division is 9% of Microsoft's revenue, right next to 10% for for windows. It doesn't bleed money at all. ~$24B from a gaming division.
They just got their second-highest holiday period in xbox history last winter. Where are the stats that spell it out that this division requires the axe? I don't see it.
Does that change the essence of her story? What this partnership cleared up was the question if there was a path forward for Xbox gamers who wanted to play their entire digital library including games that weren't Play Anywhere. But it's still part of Microsoft's plan to gets out of the hw business and let other companies manufacture and sell Xbox branded handhelds/PCs that area running Windows 11.
Funny enough I do
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Where are the stats that spell it out that this division requires the axe? I don't see it
Xbox can justify its existence by implementing A.I., the use of Cloud and Azure, BUT they NEED to improve their margins ASAP. if they don't.....let's break this down clearly and do a rough, realistic estimate.
We'll use PlayStation's recent revenue breakdown and margins, then map it to Xbox's ~$20B in revenue, and adjust for Xbox's known structural disadvantages:
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PlayStation Benchmark
From recent financials:
- Total revenue ≈ $30B (approx.)
- Profit margin ≈ 10–12% overall for the segment
- Hardware margin: ~0–5% (often low or loss-making)
- Game Sales & Services: ~15–20%
- Add‑on content/subscription: ~25–30%
Result: PlayStation earns roughly $3B–$3.5B in profit.
Xbox total revenue ~= $20B.
️
Xbox Proportionate Revenue
If Xbox had PlayStation-like efficiency:
- Profit ~= $20B * ~10–12% ~= $2B–$2.4B
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Xbox Reality Check
But Xbox has significant headwinds:
- Hardware sold at a loss (~‑5%), possibly costing $250M–$500M/year.
- Game Pass:
- Cannibalizes software sales
- Lower margins (~5–10%) vs traditional game sales (~15–20%)
- Larger workforce due to recent acquisitions (ABK), inflating OPEX
- Mixed shift toward services (~15–20%), making margins thinner
Rough adjustment:
- Hardware loss: ‑$300M
- Services & Game Pass margin drop:
- PlayStation-like services ~= 25–30%; Xbox ~= ~10–15%
- Delta ~= roughly ‑$500M–$1B
- Workforce cost = ABK + Xbox overhead ($500M–$1B)
PlayStation-like Profit: $2B–$2.4B
Final Xbox Profit Estimate
Adjust for Xbox headwinds: roughly -$1.3B–$2.3B
Resulting range:
- At best: around breakeven (~$0–$500M)
- At worst: loss of roughly $1B–$2B per year
Even if you map PlayStation's revenue structure onto Xbox:
Summary
PlayStation-style Profit ~= $2B
Xbox adjustments ~= $1–$3B in drag
Final Outcome: Xbox profits range from tiny (a few hundred million) to significant losses — making its profits almost invisible or nonexistent in realistic scenarios.Estimating Xbox's Profitability Using PlayStation as a Benchmark
Step 1: PlayStation's Revenue & Profit Overview
- Total Revenue (FY2023): ~$27.5 billion
- Revenue Breakdown:
- Hardware (PS5/PS4): 30–35% (~$8.3–$9.6B)
- Network Services (PS Plus, subscriptions): 20–25% (~$5.5–$6.9B)
- Digital Software (games, DLC): 30–35% (~$8.3–$9.6B)
- Physical Software & Other: 10–15% (~$2.8–$4.1B)
- Operating Profit Margin: 5.7–6.5% ($1.6–$1.8B)
- Margin Drivers:
- Hardware sold near break-even or slight loss
- Heavy R&D, marketing, and development costs
- High-margin software and subscription services balance losses
- Workforce: ~13,000 employees in gaming segment
Step 2: Xbox's Estimated Revenue & Cost Structure
- Total Revenue (2024 estimate): ~$20 billion
- Revenue Breakdown (estimated):
- Hardware (Xbox Series X/S): 20–25% (~$4–$5B)
- Content & Services (Game Pass, digital sales): 65–70% (~$13–$14B)
- Other (peripherals, licensing): 5–10% (~$1–$2B)
- Console Losses:
- ~$100–$200 loss per console sold
- Assuming 20M units sold → cumulative ~$3B loss
- Annualized (5M units in 2024) → ~$750M loss
- Game Pass Cannibalization:
- ~25–30M subscribers, ~$2B annual revenue
- Estimated 20% cannibalization of full-price game sales
- Potential profit erosion of ~$1–$1.5B
- Workforce Size & Cost:
- ~22,000 employees (including Activision-Blizzard
- Average cost ~$150K/employee → ~$3.3B annually (vs. Sony's ~$1.95B)
Step 3: Estimating Xbox's Profit Margin
- Baseline margin (if PlayStation-like): ~6% on $20B → ~$1.2B profit
- Adjustments:
- Hardware losses: -$750M
- Game Pass cannibalization: -$1 to $1.5B
- Higher workforce costs: additional ~$1.35B labor expense vs. Sony
- Estimated Operating Profit Range:
- Best case (less severe adjustments): ~$500M profit
- Likely case: operating loss of $500M to $1B
- Margin range: approximately -2.5% to -5%
Step 4: Key Challenges for Xbox
- Structural console losses remain unresolved, unlike PlayStation's break-even PS5 hardware.
- Game Pass subscription revenue sacrifices high-margin full-price game sales.
- High labor costs due to workforce size and recent acquisitions increase overhead.
- Smaller console install base spreads fixed costs less efficiently.
- Activision acquisition adds integration costs and debt servicing pressures.
- Step 5: Summary & Conclusion
Bottom line:
Metric PlayStation (FY2023) Xbox (Estimate, 2024) Total Revenue ~$27.5B ~$20B Operating Margin ~6% -2.5% to -5% (losses) Operating Profit ~$1.6–$1.8B -$0.5B to -$1B (loss) Hardware Losses Minimal (break-even) ~$750M annual loss Game Pass Impact N/A ~$1–$1.5B profit erosion Workforce Cost ~$1.95B ~$3.3B Console Units Sold ~75M ~20M
Despite generating ~$20B in revenue, Xbox's gaming division is likely operating at a loss — due to hardware losses, Game Pass cannibalization, and a bloated workforce — contrasting sharply with PlayStation's profitable model.
To estimate Xbox's profitability, we'll break down the available data and make reasonable assumptions based on PlayStation's financials, Xbox's revenue, and known challenges. Here's a step-by-step analysis:
---
### **1. PlayStation's Financials (Reference Point)**
- **Revenue (2023):** ~$27 billion ([Sony Gaming & Network Services](https://www.sony.com/en/SonyInfo/IR/library/presen/strategy/pdf/2023/GNS_E.pdf))
- **Operating Profit Margin:** ~6-7% (historically ~8-12%, but recently lower due to rising costs).
- **Operating Profit:** ~$1.6–$1.9 billion.
PlayStation's profit comes from:
- Hardware: Low or negative margins (consoles are often sold at a loss).
- Software/Digital: High margins (30% platform cut, full-game sales, MTX).
- Subscriptions (PS+): High margins (recurring revenue with low incremental costs).
---
### **2. Xbox's Revenue Breakdown (Estimate)**
Xbox's annual revenue is ~$20 billion ([Microsoft FY23 reports](https://www.microsoft.com/en-us/investor/earnings/fy-2023-q4.aspx)), including:
- **Hardware (Consoles):** ~$4B (estimated 5-6M units sold at ~$500 ASP, but sold at a loss).
- **Loss per console:** ~$100–$200 (historically, consoles lose money early in the lifecycle).
- **Total Hardware Loss:** ~$0.6–$1.2B.
- **Game Sales/Digital (30% platform cut + 1st-party):** ~$8B.
- **Margins:** ~30% (after costs) → ~$2.4B profit.
- **Game Pass & Subscriptions:** ~$5B (25M subscribers at ~$180/year).
- **Margins:** ~50% (content costs are high, but scaling helps) → ~$2.5B profit.
- **Other (Cloud, Licensing, etc.):** ~$3B.
- **Margins:** ~20% → ~$0.6B profit.
**Total Gross Profit (Pre-Expenses):**
$2.4B (games) + $2.5B (Game Pass) + $0.6B (other) - $1B (hardware loss) = **~$4.5B**.
---
### **3. Xbox's Expenses**
- **R&D + Marketing:** ~$2B (high spending on studios, exclusives, and Game Pass promotions).
- **Workforce Costs:** ~$3B (20K employees at ~$150K average, including benefits).
- **Overhead/Other:** ~$1B.
**Total Operating Expenses:** ~$6B.
---
### **4. Xbox's Estimated Profitability**
- **Gross Profit:** $4.5B
- **Operating Expenses:** $6B
- **Operating Profit/Loss:** **~-$1.5B annually**.
---
### **5. Why Xbox is Losing Money**
1. **Console Losses:** Selling hardware at a loss with no clear path to recoup (unlike PlayStation, which has stronger software attach rates).
2. **Game Pass Cannibalization:** Subscribers buy fewer full-priced games, reducing high-margin sales.
3. **High Content Costs:** Game Pass requires massive spending on 1st/3rd-party deals (~$1B/year for content).
4. **Workforce Size:** Xbox has ~20K employees (similar to PlayStation's ~18K), but with lower revenue efficiency.
---
### **6. Comparison to PlayStation**
| Metric | PlayStation | Xbox (Estimate) |
|----------------------|---------------------|-------------------|
| Revenue | $27B | $20B |
| Operating Profit | +$1.6B | **-$1.5B** |
| Margin | ~6% | **-7.5%** |
| Key Issue | Lower margins | Structural losses |
---
### **Conclusion**
Xbox is likely losing **~$1–2B annually** when accounting for:
- Hardware losses.
- Game Pass's mixed impact (high revenue but lower profitability than traditional sales).
- High fixed costs (workforce, content, R&D).
This aligns with reports of Xbox's gaming division being a "loss leader" for Microsoft's broader cloud/ecosystem strategy. Without Azure/Office subsidies, Xbox's standalone profitability would be even worse.
**Final Estimate:** Xbox's gaming division operates at a **-5% to -10% net margin**, implying **$0 to -$2B in annual profit**.
another interesting point, i guess.... i have to imagine that the numbers people inside Xbox/MS knew the "the Xbox Business" was projected to contract in the near future: they needed ABK's to survive. (as a gaming division) literally. And it's pretty know that Xbox was almost axed like 2 or 3 times already....there is a saying in Spanish: "dar patadas de ahogado" which can be localized in English to: Fighting a losing battle... that's Xbox.After $80 billion spent on studios in a span of a few years, MS CxO and board actually wanted some return on investment.
Before that Phil and Co could get by with whatever. But $80 billion was significant cash even for MS. So the oversight started and with that 3rd party push. All IMO of course.
Inb4 the usual suspects come in and talk about the "dream" that some people have of Xbox going 3rd party and getting out of hardware."I'm sad because from my perspective Xbox has no desire or literally can't ship hardware anymore.This partnership is about a slow exit from the hardware business completely. Personally, I think Xbox hardware is dead."
Really good video. Laura echoed the exact same thoughts I have.
The "recap" in the beginning about how quickly they have shifted their narratives is what I've talked about multiple times in the past. She did it way more efficiently and effectively.
The reality is that Xbox is lost. It has no identity anymore. And it's quickly rushing towards its inevitable death. There are some who will stay with this sinking ship because of their digital library - the sunk cost fallacy - but most will jump ship.
The numbers will speak for themselves when the new ASUS "Xbox" Rog Ally flop, and the narrative shifts to "well, it was always going to be a niche product."
True. And, to be honest, it makes way more business sense for Xbox to be a third-party publisher with an optional subscription service (if they still want it) like EA does with EA Play. No subscription will be better, though.I can't see Ally X, Xbox PC or Gamepass having any long term success. PC gamers find their attempt to pivot towards being a Steam competitor laughable.
In the long run they'll end up being a third party publisher only, most of this will be down to acquired IP like Call of Duty and Minecraft.
But the longer they take in becoming that, the harder it will be for them. In the meantime, they will continue to gut their studios, disband their teams, devalue IPs and their perception with poor games, and layoff talented developers.
What the hell does it mean?Nvidia around the corner to remove consoles.
What the hell does it mean?
That's what people do now if they want a Sony exclusive, what's the difference?And tell everyone else to fuck off and spend +300/500 bucks?
I really like her thinking. Her video about how culture ruined Xbox One is also worth watching.It's unusual for her to be so blunt about Xbox. You can tell she has a lot of great memories regarding its early days and a lot of frustration with the direction it's going in. I think it's because she genuinely cares about it, though.
You need to Google "cost of revenue", or just "costs" in general.Xbox division is 9% of Microsoft's revenue, right next to 10% for for windows. It doesn't bleed money at all. ~$24B from a gaming division.
They just got their second-highest holiday period in xbox history last winter. Where are the stats that spell it out that this division requires the axe? I don't see it.
Don't be silly now.It had a better run than Sega.
Microsoft wish they had released games that reached 10% of the quality of what SEGA released back then.It had a better run than Sega.
Pretty sure that people won't be pleased to spend that money knowing their multiplatform franchises will suddenly turn into exclusives, hence why Square got fucked over Final Fantasy and why Epic Games Store is hated.That's what people do now if they want a Sony exclusive, what's the difference?
You need to Google "cost of revenue", or just "costs" in general.
Revenue is like less than half the story of any company's financials.
Those people either never invested or owned a business in their life, or they are being disingenuous. That's about it.Surprising how many people don't understand this. They just look at the big revenue numbers and assume the company/division is doing great.
it did to be fair. the 360 alone is enough.Don't be silly now.
Microsoft wish they had released games that reached 10% of the quality of what SEGA released back then.
Your saying Xbox has had a better run than SEGA had, behave.it did to be fair. the 360 alone is enough.
cireza they did, Halo is far better than anything sega ever put out.
genesis and dreamcast were the only good consoles sega had. dreamcast was good but its life was cut short, even the original xbox is better than it. the 360 blows anything they did away and by far.Your saying Xbox has had a better run than SEGA had, behave.
Arcade, Master system, Megadrive, Saturn, Dreamcast. Vs. Xbox and half of the 360's life.
Even if im generous and chop out the Arcade, its still not even close.
I bet that if Laura was running Xbox instead of Phill, Xbox would be in a much better situation.
genesis and dreamcast were the only good consoles sega had. dreamcast was good but its life was cut short, even the original xbox is better than it. the 360 blows anything they did away and by far.
The only thing that would have resulted from that was drastically less CoD sales.if they actually wanted to compete and sell consoles they would have made COD and all bethesda games xbox only
I'm not getting into list wars but saying xbox first party has better better output than Sega over their respective lifetimes is frankly fucking stupid.genesis and dreamcast were the only good consoles sega had. dreamcast was good but its life was cut short, even the original xbox is better than it. the 360 blows anything they did away and by far.
MS started Gamepass at a time when subscription services were few and you could get by with Netflix and be happy. Back when it was $10 a month. At that time, it wasn't a bad idea.That's big facts. Her, Peter Moore, J Allard, Seamus Blackley...any of them in charge would see a very different Xbox brand vs what we're seeing today. One putting their own console first and competing with software exclusivity.
Even Don Mattrick would have likely pushed through making the Zenimax stuff exclusive and avoided buying ABK (favoring COD marketing rights and maybe some timed exclusives). And none of them would have bothered with a stalled-out service like Game Pass, whose target growth was highly unrealistic from the beginning.
This video was posted recently. Laura has pretty good insight of the games' industry, and this video sounded really factual and of interest.
Those people either never invested or owned a business in their life, or they are being disingenuous. That's about it.
genesis and dreamcast were the only good consoles sega had. dreamcast was good but its life was cut short, even the original xbox is better than it. the 360 blows anything they did away and by far.