80%
Probable
A few hours ago, Windows Central's Jez Corden published a deep dive into Xbox's complex situation, outlined earlier this week by CEO Asha Sharma, with the division only keeping a weak 3% margin after costs. This is why Sharma's next goal after cutting the Game Pass Ultimate price and relaunching the exclusivity program is to "reset" Xbox, including an upcoming round of layoffs (rumored to be up to a thousand) and possibly even a studio closure, with Double Fine and Compulsion Games believed to be potential candidates for the chopping block.
How did the division reach this dire state? Well, hardware sales have been declining for a long time, and several games like Avowed, Keeper, Kiln, South of Midnight, Hellblade 2, Forza Motorsport, and The Outer Worlds 2 performed way under Microsoft's expectations, while others like the canceled Perfect Dark reboot, Rare's Everwild, and ZeniMax Online's Project Blackbird turned out to be sheer investment losses. On top of that, games like State of Decay 3 from Undead Labs and the Fable reboot from Playground Games took much longer to make than planned, though both are now looking good and targeting a launch next year.
But Corden reveals there's another underlying issue related to the ongoing memory shortage situation. According to the report, Xbox failed to secure enough memory at fixed prices and might now be losing "hundreds of dollars" on each Series S or X console unit sold. Here's the exact quote:
To make matters worse, Xbox struggled to secure anywhere near enough memory with fixed prices necessary to keep its hardware margins healthy. I'm told Xbox is losing not dozens, but more in the hundreds of dollars per Xbox Series X|S console sold right now, with Asha Sharma noting that wholesale memory prices have risen 700% since the Xbox Series X|S was costed out.
That cannot be healthy at all. Indeed, if we look at Sharma's own memo, the executive notes that choices made over the previous half-decade mean the component crisis is impacting Xbox more than its peers, and that new partnerships and business models will be needed to continue making console hardware. This ties in easily with previous rumors that the upcoming Project Helix console will also be manufactured by partners like ASUS or MSI.
These are times of great upheaval at Xbox. No doubt, there will be many more changes before the new leadership is done overhauling the platform's vision. Stay tuned for all meaningful updates and rumors.
About the author: With over two decades of experience in gaming journalism, Alessio Palumbo has led the gaming vertical at Wccftech since August 2015. He started working at a young age for Italian websites like Everyeye.it, Gamestar.it, Nextgame.it, and Multiplayer.it before kickstarting the indie English-language publication Worlds Factory as its founder and Editor in Chief. In the last decade, he has coordinated the overall output of Wccftech's gaming section, managed PR relations, assigned reviews, produced daily news coverage, edited gaming content as needed, and delivered game reviews. Arguably, his trademark content is the long series of exclusive developer interviews that have been cited by Wikipedia and by the biggest news media and gaming publications. His passion for technology also makes him knowledgeable when it comes to gaming hardware and tech. His favorite genres include RPGs, MMORPGs, and action/adventure games.
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