I think some of these game studios got so content with Microsoft constantly paying that they forgot to make games that would actually sell.
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).
They will just continue smash thru exactly what is killing them because they do not know how to reset. More micro transactions, Halo 14-39, games launching before they're ready, price increases, etc. All of that looks good on paper, so they will take no action against. The XBOX is hitting icebergs, and instead of slowing down, they will just call for more speed.
>They will just continue smash thru exactly what is killing them
Well, not exactly. Maybe partially, but definitely not entirely. They got a shit return on a lot of money they spent which drove down margins now they are cutting that. They lost 64 cents per 1 dollar invested so they are investing less.
Game Pass has caused a lot of direct sales losses to game developers in favor of Microsoft trying to find a Netflix-like cash cow for itself. The numbers never added up, but it is not a surprise everyone nodded and went along with it. I wonder what the career repercussions would be for speaking up - but it doesn’t matter because they are getting fired anyway.
Game Pass' finances ignored the one true thing about streaming services: they weren't going after the people buying DVDs, they were going after the people paying for cable.
Cable subscribers did not exist in gaming, and so Game Pass is stuck stealing Xbox's own customers. It just doesn't add up.
Any details about the studio spin-outs? The rumors were that Double Fine etc. would be closed, but all we know now is that some of them are being sold to management and others are being sold to other investors. Nothing about any commensurate restructurings.
At some point, the games industry decided it wanted to be interactive Hollywood, and the consequences are entirely predictable. Meanwhile, Nintendo just quietly shipped 3.8 million units of Tomodachi Life in two weeks, and 4 million of Pokopia in five. They're making actual games. Sony's obsession with prestige cinematic bloat, like Xbox, has also put them in a slow-motion death spiral that's going to become painfully obvious in a few years.
Sony has been pretty successful with that though, and there was a time where they pushed many fan favourites in the cinematic genre. They aren’t arcadey games like Nintendo ones of course, but something like The Last of Us has its own value and audience. It sells too.
sony's cinematic games sold well and are well regarded, but when was the last time they released any such game or even just a single player game? when they rerereleased the last of us?
If the game industry managed to come even close to the top writing and cinematography from Hollywood then it would already be much better than it is now. Instead the part of Hollywood they are chasing seems to be the big budget wide appeal movies that will be forgotten in a decade.
Yeah, I kind of loathe the cinematic direction Sony and others have taken. Their games aren't really innovative or fun but people lap them up for being B tier movies. It makes no sense to me. They don't bother making Bloodborne anymore, just more open world cinematic slop like Horizon.
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 was pretty rich seeing armchair video game industry analysts act like the new CEO was gonna usher in a new age for Microsoft's gaming division because she got to announce the updated logo and some games that would have obviously been in development long before she became CEO.
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.
I feel they kind of did in the Xbox 360 era. Maybe it was just down to luck because Sony dropped the ball in the early years of the PS3 and Microsoft got the jump on them a bit.
The 360 was amazing looking back on it, Xbox Live, trying out innovative ideas like 1vs100, attracting lots of publishers to the platform for games, Xbox Summer of Arcade.
I was a big OG Xbox fan but even then I knew deep down it was never going to catch up to Sony with the PS2. Then the 360 came out and it was brilliant.
Sadly they threw it all away with the Xbox One and while recovered some credibility somewhat with the Series X, it's definitely not the same as those golden years of the 360.
Maybe the 360 was an aberration in Microsoft's history and the years since then have just been a regression
More capable than current gen consoles is going to be local AI. Calling it now. It won't be as much about graphics as it is about selling some notion of human like NPCs and smarter enemies and some other use case they can sell to the masses.
>It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.
truth. far too many MBAs in that company. "Let's monetize Solitaire!!!!" Only an idiot would even come up with that idea, never mind follow through on it.
Microsoft is not an engineering company any more. Just look at their products. They placed ads in the start menu and file explorer. Azure is one of the worst clouds when it comes to features and reliability.
Microsoft is a dying company, and they are trying not to end up like IBM, but their fate is inevitable.
I'd say games can be either art or hype. Call of Duty is not art, really, it's hype. In the same way that no one thinks Marvel films are moving film forward, but they are hugely popular. GTA is somewhere in the middle, being mostly hype driven, but based on solid "art" in good gameplay. Indie games tend to be art over hype.
Microsoft can't do the art because it's too big, too safe, and it can't do the hype because it's not cool.
I mean, here you are too declaring a XBOX defeat. You are no better than those armchair industry analysts. The 10th gen hasn's even properly started, we don't even have rumors of WHEN it will be.
Not saying that I disagree. I absolutely agree. I think Xbox is downright moronic to buy Bethesday on a promise of Starfield being a massive hit, and after it hilariously fails, they throw out a bunch of studios just so they can focus on their next thing even more.
It's just, come one. You have to see how ironic and conceited your opening paragraph was.
They had it figured out perfectly in the Xbox360 generation (and for PC games by the late 90s), but I guess that the MS Games and Xbox divisions had a lot more freedom and were more decoupled from the Microsoft org chart back then.
Console generations are a cultural construct. And just like the bit wars of the 90s, they are cultural constructs that cannot explain the current situation.
We have not left the PS4 era. Both Sony and Microsoft use modern CPU and GPU in the PS5/Xbox Series that can 100% replicate the previous console. They use the exact same online store, ushering in a modern era where old devices will lose access to the store, but the store's never gonna close. All of this makes the use of generations to describe console gaming obsolete. We don't talk about generations in phones, or laptops. Same thing with gaming.
On one hand, the idea of using Microsoft’s crazy amounts of money to try to build a subscription gaming business feels like it should have been more successful than it has been. On the other, I think gaming has some distinct qualities vs TV/Movies/Music or other types of software that makes the idea seem way less appealing. Curious to see what the new direction looks like
This is incredibly sad for a lot of my friends who are finding themselves out of work despite delivering well received products.
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.
I don’t think Phil had any other options while existing under Satya and a relentless push to services revenue. If Windows can’t make a case for itself without moving heavily to services (advertising and pushing 365, primarily), how could Xbox?
I’m not really sure how the C-suite is escaping blame here.
- 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?
I wonder how are they taking in 5 billion per quarter when their latest console barely outsold the first Xbox. I doubt it was making a bit less than 5 billion per quarter with quotes like "Ultimately, Microsoft lost an accumulative total of $4 billion from the Xbox, only managing to turn a profit at the end of 2004." on wikipedia.
So how are two consoles with roughly the same sales numbers so far apart in revenue?
> And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.
Myself and 2 of my friends stopped our subscriptions the day that happened and never went back. I know it’s anecdotal but I’m happy to see others did the same.
Another thing that is crazy to me (and maybe this is a premonition) is that if you play MS games online on Xbox, you have to have a subscription, but if you play on other platforms you can play for free. They are literally punishing their own users with additional fees. I thought this was just Minecraft, which is why my kids and I always play Minecraft on our iPads instead of on the Xbox, but when I recently bought Forza Horizon 6 I was amazed to see that I could play online with other players for free, whereas on Xbox I had to pay to play online in Forza Horizon 4 and 5. So they are basically saying "you gave us a bunch of money for hardware? Cool, now give us more money every month to use it online!" It's absurd, and it's one of the things that drove me away from Xbox. I also have friends who have been lifelong Xbox fans who have had enough and are leaving for Steam.
> - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million
How are they still doing 5 billions in revenue per quarter? Are Xbox and games still sold? In my area they seem to have disappeared from the physical stores alley. I realized that a few weeks ago there were Playstation and Nintendo products in the video game area but no Xbox anything.
The times when companies only restructured when they were actually making losses are long gone. Today, if they "underperform" (i.e. they're not as profitable as the stock market thinks they should be), investors want to see blood today rather that tomorrow.
xbox is not a startup and neither m$ a vc. the board is not in love with gaming to continue sponsoring it. but if the solution is to make it even worse to game in their platform, then i hope this crashes and burns for good.
a couple are symptoms of their problems and the others are causes. They lack the understanding to know which ones. They tried (and failed) to build a subscription model out of game renting while cannibalizing the very studios they purchased. There was no saying no. They were going to take you over whether you wanted them to or not. They would also scheme to half-ass your marketing partnership so you wouldn't make targets so you would be vulnerable to a take over. It's Microsoft at it's finest. A lesson in Greed Above All Else.
Revenue is just not a useful concept to understand the state of a company. I can easily generate revenue by simply exploding costs. Blockbuster had huge revenue.
If we talked about costs as much as we talk about revenue (which carries roughly the same amount of information) people would judge theses reports very differently.
> We will deliver success through a flatter organization that is built around makers (individual contributors focused on building), player-coaches (leaders who remain deeply involved in the work while developing their teams), and directly responsible individuals (DRIs) who own key decisions and outcomes.
xbox-specific issues aside, this proposes an interesting view of the future of work.
"Today, in some parts of the company, work passes through as many as 14 layers of management. Our platform teams are 40% larger than they were at the start of this generation, even as our player base and playtime have declined. "
Xbox has an interesting opportunity going forward, that I expect they'll fumble.
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."
Impacted non-studio dev here. It's a bloodbath like some of the leaks in the past few weeks have said. Many important platform/infra teams getting gutted, even in areas where there's supposedly a ton of future investment.
I think the Xbox Series X will be my last Xbox after owning Xbox, Xbox 360, Xbox One, and the Xbox Series X. I was all-in on their platform and I even paid for Game Pass for many years.
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.
I want XBOX to be one of the few companies that entertains more than a billion people each day
"more than a billion"? What are we doing here? Do you have any idea what your target market is? Surely someone in your organization can provide you with a good stretch goal ... >10% of all humans using an XBox daily is not that.
Seriously, I cannot fathom why you would say this. Innumeracy? Narcissistic delusion? Stealth launch for a new industrial human cloning project?
187 comments
[ 17.3 ms ] story [ 1700 ms ] threadMicrosoft cuts 4,800 Jobs, Half from Xbox division
https://news.ycombinator.com/item?id=48804401
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).
Well, not exactly. Maybe partially, but definitely not entirely. They got a shit return on a lot of money they spent which drove down margins now they are cutting that. They lost 64 cents per 1 dollar invested so they are investing less.
Call of Duty alone lost $300 million: https://arstechnica.com/gaming/2026/04/microsofts-game-pass-...
I look forward to the source code leaks.
Cable subscribers did not exist in gaming, and so Game Pass is stuck stealing Xbox's own customers. It just doesn't add up.
Sony has been pretty successful with that though, and there was a time where they pushed many fan favourites in the cinematic genre. They aren’t arcadey games like Nintendo ones of course, but something like The Last of Us has its own value and audience. It sells too.
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.
I feel they kind of did in the Xbox 360 era. Maybe it was just down to luck because Sony dropped the ball in the early years of the PS3 and Microsoft got the jump on them a bit.
The 360 was amazing looking back on it, Xbox Live, trying out innovative ideas like 1vs100, attracting lots of publishers to the platform for games, Xbox Summer of Arcade.
I was a big OG Xbox fan but even then I knew deep down it was never going to catch up to Sony with the PS2. Then the 360 came out and it was brilliant.
Sadly they threw it all away with the Xbox One and while recovered some credibility somewhat with the Series X, it's definitely not the same as those golden years of the 360.
Maybe the 360 was an aberration in Microsoft's history and the years since then have just been a regression
truth. far too many MBAs in that company. "Let's monetize Solitaire!!!!" Only an idiot would even come up with that idea, never mind follow through on it.
Microsoft is a dying company, and they are trying not to end up like IBM, but their fate is inevitable.
I'd say games can be either art or hype. Call of Duty is not art, really, it's hype. In the same way that no one thinks Marvel films are moving film forward, but they are hugely popular. GTA is somewhere in the middle, being mostly hype driven, but based on solid "art" in good gameplay. Indie games tend to be art over hype.
Microsoft can't do the art because it's too big, too safe, and it can't do the hype because it's not cool.
Not saying that I disagree. I absolutely agree. I think Xbox is downright moronic to buy Bethesday on a promise of Starfield being a massive hit, and after it hilariously fails, they throw out a bunch of studios just so they can focus on their next thing even more.
It's just, come one. You have to see how ironic and conceited your opening paragraph was.
They had it figured out perfectly in the Xbox360 generation (and for PC games by the late 90s), but I guess that the MS Games and Xbox divisions had a lot more freedom and were more decoupled from the Microsoft org chart back then.
We have not left the PS4 era. Both Sony and Microsoft use modern CPU and GPU in the PS5/Xbox Series that can 100% replicate the previous console. They use the exact same online store, ushering in a modern era where old devices will lose access to the store, but the store's never gonna close. All of this makes the use of generations to describe console gaming obsolete. We don't talk about generations in phones, or laptops. Same thing with gaming.
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.
I’m not really sure how the C-suite is escaping blame here.
Not even national security institutions operate like this
- 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?
I wonder how are they taking in 5 billion per quarter when their latest console barely outsold the first Xbox. I doubt it was making a bit less than 5 billion per quarter with quotes like "Ultimately, Microsoft lost an accumulative total of $4 billion from the Xbox, only managing to turn a profit at the end of 2004." on wikipedia.
So how are two consoles with roughly the same sales numbers so far apart in revenue?
Myself and 2 of my friends stopped our subscriptions the day that happened and never went back. I know it’s anecdotal but I’m happy to see others did the same.
I don't usually take HN audience seriously when talking about economics
At a roughly 3% profit, they are barely breaking even and have no money to invest in staying current. It's not a sustainable business.
How are they still doing 5 billions in revenue per quarter? Are Xbox and games still sold? In my area they seem to have disappeared from the physical stores alley. I realized that a few weeks ago there were Playstation and Nintendo products in the video game area but no Xbox anything.
https://wccftech.com/xbox-layoffs-gut-id-obsidian-zenimax-on...
If we talked about costs as much as we talk about revenue (which carries roughly the same amount of information) people would judge theses reports very differently.
This reads like something from The Office.
xbox-specific issues aside, this proposes an interesting view of the future of work.
It sounds pretty similar, for example, to team structure ideas proposed by Fred Brooks in The Mythical Man Month from 1975.
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.
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."
Sure it has. Just like how demand SD card slots and 3.5mm jacks on phones is on the upswing. If you only read tech forums.
Is it true?
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.
Seriously, I cannot fathom why you would say this. Innumeracy? Narcissistic delusion? Stealth launch for a new industrial human cloning project?
Spinning fiascos as opportunity is standard practice.