- Could Microsoft sell off Xbox amid the company’s biggest restructuring strategy yet?
- Analysts say Xbox, as it stands, would be too expensive for even some of the biggest buyers
- It’s suggested that big players would be more interested in purchasing “specific pieces” of the business
As Xbox goes through its biggest restructuring yet, and the seemingly never-ending stream of bad news for those involved continues, the future of the gaming company is uncertain.
While some question whether it would be in Microsoft‘s best interest to sell off the gaming company, industry analysts have suggested that the move would be a hugely expensive endeavour for interested parties, but it’s possible that the Xbox we know could be dismantled piece by piece.
Microsoft’s major Xbox restructuring announcement, which Xbox CEO Asha Sharma called a “reset,” confirmed that thousands of employees were affected by layoffs, including 1,600 immediate job cuts with another 1,600 to come before the end of the current financial year.
The company has also let go of four studios, including Compulsion Games and Double Fine Productions, which are returning to independence, and Senua and State of Decay 3 creators, Ninja Theory and Undead Labs, which are currently looking for new ownership.
This new strategy follows a year of struggles for Xbox, which has increased the prices of its consoles once again, cancelled and shuttered several games and studios, with Sharma now admitting that the company is “not healthy” in its current state, with Game Pass being a key fault.
“Our business today is not healthy,” Sharma said in an email sent to Xbox employees. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected.”
Before the recent upheaval, The Information (via Reuters) reported that Sharma was looking to speed up development on games in The Elder Scrolls, Fallout, and Halo franchises and that Microsoft is considering options for its Xbox gaming unit, including a potential spinoff or restructuring as a wholly owned subsidiary.
While some believe that the recent restructuring is a plan to make Xbox easier to sell, analysts have suggested to The Verge that there wouldn’t be many interested stakeholders who would purchase the entire business, mainly because it would be too expensive considering Xbox’s current portfolio.
“I think all options are on the table, considering the drastic measures already put in place to try and restructure the business at both a cyclical and structural level,” said Yoshio Osaki, president and CEO of market research firm IDG Intelligence.
Similarly, New York University professor Joost van Dreunen told The Verge, “A wholesale divestiture of Xbox remains on the table, and it looks likelier given Xbox’s struggles with rising hardware costs and Microsoft’s focus on AI and infrastructure.”
He added, “It’s never been clear what role Xbox plays in Microsoft’s flywheel,” but a full sale is the “less likely path” since there are few buyers, including giants like Netflix, Amazon, and Tencent, who would want or afford “an entire interactive-entertainment conglomerate running north of $23 billion in annual revenue.”
Instead, Van Dreunen said the likelier scenario is that big players might go after “specific pieces” of the business, with Osaki noting “it’s possible that “individual studios, IPs, and teams are sold or spun off piecemeal.”
Sharma revealed her vision for Xbox after taking up the position of CEO in January and said she plans to return to the spirit of what the company was founded on, as well as reduce “the artificial divide between different types of devices.”
With the latest part of her plan underway, which has notably delivered another crushing blow to the studios under Xbox’s ownership, it’s unclear right now where the gaming giant is headed.
According to Osaki, the full vision will be clear by “year-end,” while van Dreunen thinks it will be “within 24 months.”
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