Xbox Is Suffering for the Dumbest Reason Possible

For all of us who grew up on Xbox, every recent decision Microsoft’s gaming brand has made these past two years has seemed nonsensical. The company has closed studios and hiked prices across the board, all while sending its once-exclusive games onto other platforms and leaving its hardware business to flounder. Finally, it all starts to make sense once you understand that Xbox has an anvil hanging over its head at all times. On that anvil reads a dreaded number: 30%.

Microsoft is reportedly mandating Xbox reach an industry-leading profit margin on everything its gaming brand does. In a report from Bloomberg, reporters Jason Schreier and Dina Bass claim Microsoft Chief Financial Officer Amy Hood set a mandate for 30% profit margins. The report, based on unnamed sources, cites industry analysts who regularly say the average profit margin for most of the video game industry is between 17% and 22%, though likely lower. Leaked financial data from its 2023 legal fight with the Federal Trade Commission showed Xbox had a mere 12% profit margin in the first nine months of 2022.

This isn’t the first time we’ve heard this 30% figure thrown around. Jez Cordon from Windows Central previously cited Microsoft’s profit demands. Mat Piscatella, a video game industry analyst with Circana, used to work at Activision and Warner Bros. Games. In a post on Bluesky, he said he used to have a 15% profit target on every new game, “and even that proved exceptionally challenging.†What anybody who cares about video games understands is that the industry makes art, and art will never have the most significant return on investment. That’s even despite the industry being the most dominant entertainment force in the world. Microsoft’s executive leadership apparently didn’t get the memo.

That 30% figure keeps cropping up

Every decision Microsoft has made in the past few months starts to seem clearer the more you understand this 30% mandate. Xbox recently hiked prices of its consoles by around 30%. An Xbox Series X with a disc drive cost $500 in 2020. Now it’s priced at $650. Xbox blamed the current “macroeconomic environment†for the increase. PlayStation also raised PS5 prices, but only up to $550, likely in response to Donald Trump’s ongoing tariffs. Microsoft also boosted the cost of its Game Pass Ultimate subscription by around 33%, from $20 to $30 a month. The Verge reported this week that Xbox raised the cost of its dev kits from $1,500 to $2,000, a 33% increase.

That’s not to imply the bump in costs is directly related to the 30% profitability decree. Instead, it puts into perspective just what kind of crunch Xbox must be under. Microsoft and Xbox paid more than $68 billion to buy up Activision Blizzard, finalizing the deal in 2023 despite international scrutiny. Xbox leadership likely hoped that top-selling franchises like Call of Duty, World of Warcraft, and Diablo would help it meet expectations. Xbox immediately made promises of putting Call of Duty games onto its Game Pass subscription service, though relegating day-one access to those who paid for the top tier. Earlier this month, Bloomberg reported Xbox calculated the number of lost sales for offering Call of Duty: Black Ops 6 on Game Pass. The company reportedly gave up more than $300 million, according to unnamed employees.

Over the last two years, Xbox closed down numerous studios making big-budget games like the long-awaited Perfect Dark, a reimagining of the much-loved N64 game from 2000. Bloomberg said multiple developers were presented with the 30% target. Xbox will need to force developers to make less risky titles and make titles on the cheap. Basically, Xbox needs another Halo-level success—and fast.

A spokesperson for Xbox told Bloomberg that success “doesn’t look the same across every project or priority.†The spokesperson also said being in a creative business necessitates “making hard decisions†related to culling studios or stopping work on big projects.

The only way for Xbox to survive is if Microsoft lets up

We’ve all been there. Corporate comes down with impossible expectations, which managers then need to square with low-level employees as the company squeezes its staff and resources for every last penny. That makes Xbox’s next hardware venture seem all the more eye-popping. We’ve seen multiple leaks suggesting the next-gen Xbox—powered with a massive AMD chip—will be very powerful for a console. That console may be closer aligned to a console/PC hybrid, running on Xbox’s recent “full screen experience†found in the Asus ROG Xbox Ally X handheld. It could also cost over $1,000. AMD leaker Kepler on X suggested it may cost twice as much as the PlayStation 6.

$600 vs $1200 is my guess

— Kepler (@Kepler_L2) October 21, 2025

How Microsoft could even make 30% profit on such a next-gen console remains a mystery. But Xbox has been a good thing for the industry. You can thank Xbox for popularizing the “FRPG†Clair Obscur: Expedition 33, which made waves at the 2024 Xbox Games Showcase and featured prominently on Game Pass. Xbox has the kind of pull that brings gamers and studios together. Xbox can’t possibly meet expectations when both players and avid fans feel down about the entire brand. It’s hard to imagine things will get better if Microsoft keeps the boot on Xbox’s back.