- The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million

So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous).

Some points -

- They are huge business even now - 5 billion per quarter revenue is no joke

- They did not have to buy all those studios

- They looked at Netflix, and wanted the sweet monthly subscription cash stream

- Then they did not have to give away popular games day one on Game Pass

- And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.

- Once again, short term vision, crazy decisions, bad spending spree and a constant need to "make numbers go up" and who has to pay for all this?

Microsoft is never going to figure out gaming. It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.

To me it's mostly unfortunate that this has left PlayStation with no direct competition because they've noticed and leaned into the not-giving-a-shit attitude after they had such a great console generation with the PS4. It's kinda crazy that we're already almost due for a new console generation and there's very little appetite for new consoles after this generation where it feels like it barely got started. And between graphics almost certainly at the point of diminishing returns, and hardware prices like they are right now, I can't imagine there's a market to sell something more capable than current gen consoles. The industry is in a very strange state.

But at the same time I appreciate the candor of Asha saying that the corporate management are to blame and letting studios go back to being independent where possible.

Phil Spencer really messed up. Everyone in the industry knew Microsoft were making bad calls trying to dig themselves a hole with gamepass and simultaneously digging a hole with their acquisition spree. I’m glad that Asha is laying this bare even though it sucks to be brought in as the hatchet person.

This is an example of the glass cliff and I’m hoping she can help right the ship. I think they need to split to a wholly owned subsidiary rather than be in Microsoft proper, and I expect that to be announced at the Q1 investor meetings.

Phil really dug their hole deep. Microsoft themselves encouraged it. It’s been a decade of sheer incompetence at the highest level so I’m hoping they can right this without taking out half the industry in their wake.

  It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio

It really just killed all my interest in it because I couldn’t just turn it on and play a game unless I let it stay on all the time wasting energy and downloading constant updates in the background.

This does sound quite reasonable actually.

Also, I think I didn't read "AI" anywhere, which is refreshing.

Call of Duty alone lost $300 million: https://arstechnica.com/gaming/2026/04/microsofts-game-pass-...

I look forward to the source code leaks.

Maybe Microsoft is spending so much on AI that it is being forced to re-evaluating short term strategy in other business areas as financial have changed.

So perhaps in long term all these studio's making exclusives and getting people hooked on the Game Pass at a short term low price would have worked if they had dominated market share over playstation. But AI Data Warehouse & Power Plants funding and taking large stakes in multiple AI companies has depleted the cash.

And harder to raise money now hype is clearing and expectations of what AI can actually deliver are lowering, as per OpenAI's struggle to IPO.

This is the new trendy management style - a few executive owners and then everyone else are expendable ICs, with almost no movement opportunity upwards. Only those on the Peter Thiel list or the equivilent among your private equity owners will be considered for key executive positions.

South of Midnight took 7 years to make and cost $100 million to make... yet sold hardly any copies and I'm not even sure who they were trying to make it for.

Meanwhile you have studios like Sandfall and Warhorse pumping out games on a fraction of the budget that ship millions (and imho, make better games).

xbox-specific issues aside, this proposes an interesting view of the future of work.

Gross and classless title. There was a time where people at least had the sense of shame to not do this kind of thing when firing people

https://x.com/ScottApogee/status/2074198967550685268

The Xbox was my main gaming platform from around 2005 to 2018, and the experience got worse and worse as time went on. At this point in time, I really don't know why you would choose an Xbox over another console or just PC gaming.

They can try to "reset" but from the outside it just looks hopeless as long as Microsoft is involved.

I'll stick with Steam and Nintendo consoles. At least Nintendo still recognizes the importance of a fun gameplay loop, even if they struggle at other things like good online services.

In every single case layoffs degrade the company’s core product. Unless they plan to completely change the XBox business (for example to one that sells hotdogs), this move will make XBox worse.

Interest in physical media has actually been on the upswing, and, with Sony announcing their plans to abandon physical media, it feels like MS has a chance be the "good guys" like what Sony did to MS when MS threatened to ruin physical media prior to the Xbox One release.

However, I'm expecting Microsoft to simply follow Sony's path, because I think they are already going down a path that favors digital-only, and I also think they just don't care to distinguish themselves. It seems like Xbox's claim to fame for the past few years is "It has game pass, and it can play a lot of the same games PlayStation can."

Xbox is on the losing side of the consoles, with no distinguishing features to speak of. You buy a console to play games and for it to be convenient. Xbox is no more or less convenient than a Playstation, and what few exclusives there are left are on Sony's side of the fence. Game Pass, while good, isn't really making money. What more is there to Xbox then (beyond the studios and such, which aren't Xbox themselves)?

This reads like something from The Office.

Xbox was a Live Games platform. they lost that identity trying to please everyone not their core audience.

compare to Nintendo - who stuck to their identity - as fun games first. graphics not necessary.

they can cut so many jobs - but unless they return to what makes Xbox great. the platform / ecosystem won't recover.

How will they achieve cleaner code, with fewer workers? Seems like a well-intentioned platitude.

Good old times. The last time I tried to buy something on Xbox it fails miserable with multiple cryptic error messages - mostly around my credit card.

No problem though to biy the game on my mac via browser and then after a few more settings actually showed up on my xbox.

https://mynintendonews.com/2026/06/26/nintendo-has-raised-it...

Darn it! The ONE studio that I really wanted them to set free and go back to how well things worked before, and they tighten their grip. Whyyyy?

Not even national security institutions operate like this

Is console gaming really a core pillar for Microsoft? Should they kill Xbox, fall back to the (I imagine) hyper profitable platforms of Mojang and King, and focus on making windows gaming as good as it can be, which I think would tie in with the overall improving windows strategy.

They aren’t Sony, they aren’t Nintendo, they aren’t Steam, and I feel like the only unique thing they have is the Windows + PC gaming (that Valve are working hard to erode). If they have any chance of making a viable platform, for me, it needs to be in this space.

Most companies would just shut it down and keep the IP.

<500 employees vs 18k at Xbox

17B ARR vs 20B ARR

At the end of the day there are two strong differences here. Valve has always been lead by people who were game devs, and have always conveyed a message that the gaming experience matters most. Xbox was led by Phil Spencer, who at least was known as being an avid gamer, but in his tenure pushed for things like xbox game pass to drive continual revenue and windows integrations that affected performance of games. Now it's being led by an industry outsider.

It boils down to trust in the end, and willingness to place profit over brand. If you look at the responses to this in r/xbox or other communities, it's overwhelmingly a stance of zero surprise. Xbox has always placed the business first, and this is the natural end of that mission - you get a bloated org with a platform that people don't end up trusting.

I do think resetting is the correct thing to do; there's no reason for Xbox to have 10k+ employees. Still it's another black mark against the brand. Also look at the framing of this message - it's about how their structure has affected the business. In this entire 47 sentence post, there is a single sentence that talks about the affect on the players:

> That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players.

It says a lot when the players are the secondary consideration.

Fascinating. The death of management is happening all throughout software.

That this is seen as a problem tells you everything about business today.

It has to be explosive growth or it’s pointless, according to execs and shareholders.

Still, some points are telling.

> Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.

So the layoffs are not because they're operating at a loss and had to cut costs urgently. The margins are there, they aren't even thin, they're just not thick enough...

> In addition, Mojang and King will now report directly to me. These two studios have increasingly become platforms and are our largest by monthly active players. They bring critical geographic, demographic, and differentiation to XBOX.

Was a bit surprised that Minecraft got such a special status, but not at all surprised by King. All the studios getting nerfed, except the engagement maximizing mobile games...

The sheer hubris. Yes, the monopoly is not desirable for gamers because the games end up all being the same MS-dictated corporate crap. Microsoft imploding is good for everybody in the long run and we can't wait for that day.

Oof. We're making money, but we want to make more. So we're firing people.

But it's the rank and file who will pay the price for these poor management decisions. Like it always is.

To hear that the new boss wants to increase capitalization on Minecraft, to make it more like a Roblox, is horrifying and truly goes to show Xbox has leadership with near zero understanding of what they have or how to run it.

I wish good landings for all those affected, I hope for the best for all the studios whose future is uncertain now.

Try listening to your customers next time.

We don't want to be ripped off with paying for assets we don't own.

We don't want another monthly subscription.

We want the old games, remastered, with fully functioning multiplayer.

XBOX brought in 5 billion, and after all development costs, marketing, operating expenses, investment in research, etc., they are STILL left with 200 million dollars.

What's the problem here? Shareholder value? (as in the mythical/speculative value of MSFT, because OF COURSE they don't want/care for part of the profits/dividends)

If the money being invested in research has a good return - i.e. a great product/service is created - then you will grow.

Chopping down the employees here is a horrible move. Besides crashing employee morale into the ground, losing hard-to-replace developers/staff, it also generally gives off shitty vibes to consumers.

People will think why invest more into a failing entity? I can see people worried about the future of their "purchases" (if you can call them that these days).

This announcement so soon after XBOX had to start yelling "we are not shutting down" from the roof tops doesn't look good.

  I want XBOX to be one of the few companies that entertains more than a billion people each day

Seriously, I cannot fathom why you would say this. Innumeracy? Narcissistic delusion? Stealth launch for a new industrial human cloning project?

not a part of Microsoft, I find it weird a company leader wouldn't sign their whole name even if an internal memo.

( Xbox plus the Microsoft Gaming )

That is around the same size as Finland's military....

"Minecraft and CoD are now Xbox exclusive".

Microsoft is today's IBM.

And elephants cannot dance...

- businesses like Xbox try to make as much money as possible

- investments are judged on risk adjusted return. Net returns with high risk is failure.

- the risk free asset pays about 3%. So taking any risk better get you 6-10%

- you can lose your job at anytime for any reason. Any other expectation will lead to disappointment.

A mass layoff without blaming AI? Are they that backwards?

Microsoft cuts 4,800 Jobs, Half from Xbox division

https://news.ycombinator.com/item?id=48804401

I’ve found a lot of things just from browsing the Steam store page. I don’t think I’ve ever done this with any of the others, console or otherwise. They are painful to use.

The manager ratio still sounds too high even after the changes as well. Too many managers can really slow down and demoralize a creative workplace.

But they kept increasing the cost of Game Pass with no new features, the platform has seemed stagnant, and honestly I can't tell you why my Series X is better than my Xbox One. Literally I don't see a difference. I'm sure there is one but as a user I really didn't feel like it was a big step up. I bought it because I had every other Xbox and it seemed like the next logical step.

That coupled with most games feeling like lootboxes wrapped in just enough of a game to justify calling it one, at higher and higher price points, all while trying to get more money after they've taken your $70/$80 for the base game. Oh wait, you bought the poor-person $70 version? You really need to the Ultra Collectors Edition Gold Special Release Version for $120. Oh also, make sure you are buying the season pass...

Meanwhile I buy games on my steam deck and/or from indie developers for a max of $30 and get way more gameplay/fun that the "AAA" games (which have largely sucked IMHO).

I'm over here playing Mass Effect 1-3, Skyrim, Fallout 4, and other games OVER A DECADE AGO. They are the only games not completely ruined by lootboxes, always-online BS, or trying to sell you a shell of a game with extras you have to buy [0]. I was excited for Starfield (Skyrim in space!!) but it was a complete bust. After spending, quite literally, 1000's of hours in Skyrim (and buying and rebuying the Anniversary/Special/Collector's edition enough times to be embarrassing) I could not get excited about Starfield and stopped playing after a few hours. The new Halo was meh, I played through it and the open world was somewhat cool but I guess they wanted to do seasons of new content and I have zero interest in that. Give me a solid single player game, that's all I want. I cancelled Game Pass after realizing I was paying an absurd amount of money to play a single game (Deep Rock Galactic).

I think I'll stick to my Steam Deck which I enjoy way more than my Series X.

[0] Yes, Skyrim/Fallout had expansion content but it's tame compared to most games today.

Anyone could literally pick up an Atari 2600 from 1977, plug in a cartridge from 1978, plug it into a TV from 1981, and play the same exact video games with no problems. Now who will be playing the same Xbox games in the year 2076?

> we are establishing a Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services. Helen Chiang has been promoted to this role and will report directly to me

Seems tone deaf to do both of these messages at the same time.

games are competing with netflix competing with tiktok competing with sleep

    Johnny Mnemonic: Yeah, the Black Shakes. What causes it?
    Spider: What causes it?
    [points to various pieces of equipment throughout the room]
    Spider: This causes it! This causes it! This causes it! Information overload! All the electronics around you poisoning the airwaves. Technological fucking civilization. But we still have all this shit, because we can't live without it. Let me do my work.

It was Bill Gates fear of being overtaken by some "living room PC" or set top box that never materialized. It was an industry wild goose chase basically, with echos of past efforts (remember Philips CD-i ?)

Is this a concern Microsoft has today? xbox was a money sink from the beginning.

The sad part is they bought a bunch of very good game studios.

Before, you would buy and play a console to be able to play in a minute, eventually with buddy around. Playing time duration was a key metric in game reviews.

Now, as they want to milk us the maximum it is a nightmare, game are mandatory online, you wait minutes and even dozen of minutes to be able to play like 3 minutes rounds, you are constantly nagged with restrictions, hours updates in the middle of game that prevents you to play, they force you to subscribe, register, give up on your data and all, consent screens everywhere, upsell barriers everywhere, and little opportunity to play with your friends...

So, after a few months, everyone will lose interest in buying games and even play. It's not fun, lot of lost time and frustration.

> We will reduce management layers to no more than 5, and where possible, 3

I don’t understand why they need to make a big announcement when what they’re doing is cutting the stupid management structure. Everybody hates cuts, except those that cut middle management.

They should have titled this “xbox cuts middle management: Less burocracy, faster delivery, more original games, more money for everyone involved, yay!”

I was not like this as a teenager. I went through DOS, Windows 3.1x, Window 95, Windows 98, Windows 2000/XP and then all the way to Windows 7. I have completely changed my mind now, it's really only Apple I want to use. Everything about Apple is easier.

Bravo!

>Today, in some parts of the company, work passes through as many as 14 layers of management.

LMAO – reset approved.

What comparable platform is there? Are they thinking netflix? God i hate corporate execs like this.