Asha Sharma took over Microsoft Gaming just 100 days ago with a careful promise: she wanted to understand what made Xbox work and protect it. The diagnosis has arrived, and it is not exactly the kind of thing you put in a celebratory company memo. Sharma and Xbox Studios chief Matt Booty now say the company needs an Xbox reset after a blunt review of a brand they describe as stretched thin, underperforming, and out of balance.
In a message sent to Xbox employees and later published publicly through Xbox Wire, the two executives laid out what they called “hard truths” about Microsoft’s gaming business. The short version: too much spending, too little return, and not enough investment in the games that are supposed to make people care about the platform in the first place. A modest problem, then.
Why Microsoft Says Xbox Needs a Reset
The clearest warning sign in Sharma and Booty’s note is the money. According to the executives, Microsoft’s gaming division is currently operating at a “3 percent accountability margin,” essentially its profit margin. That figure is down from last year, below the broader games industry average, and far from the 30 percent margins Microsoft has reportedly been seeking across its businesses.
Sharma and Booty framed the weak performance as the result of Xbox becoming “overextended.” The most obvious example is Microsoft’s $69 billion acquisition of Activision, one of the largest deals the video game industry has ever seen. But they said that deal came on top of another $20 billion spent over the last five years on other acquisitions, platform investments, and hardware subsidies.
For all that spending, profit has not followed. Microsoft’s overall gaming revenue is down by nearly $500 million compared with five years ago, according to the executives. That is an awkward result when the company has been spending as if scale alone would solve the problem.
