Asha Sharma, the new CEO of Xbox, is spearheading a significant restructuring of Microsoft's gaming division. Her approach, characterized by "brutal honesty," involves openly addressing the company's financial struggles and making tough decisions. Sharma, who previously worked in AI at Microsoft and had no prior experience in videogames, took the helm in February and inherited a division that had seen a 7% decrease in quarterly gaming revenue, a 33% drop in Xbox hardware revenue, and a 5% decline in content and services, with operating margins 3 to 10 times lower than competitors.
One of the most drastic measures under Sharma's leadership is the planned elimination of 3,200 jobs, representing about 20% of Xbox's staff, with 1,600 already executed and another 1,600 slated for the coming year. She is also divesting from four studios and significantly reducing the number of games produced. This massive reduction in workforce at Xbox contrasts sharply with Microsoft's overall 2% workforce cuts, highlighting the severity of the problems within the gaming division, which, despite investing over $20 billion in content and hardware over the past five years, has seen annual revenue decline by nearly $500 million.
Sharma is redirecting Xbox's strategy away from the previous "Xbox everywhere" approach, which sought to expand the brand beyond its core console, and is instead refocusing resources on the console business, which accounts for 80% of Xbox's revenue. She is also taking direct control over key assets, with studios like Candy Crush and Minecraft now reporting directly to her. Helen Chiang, previously Corporate VP for Minecraft, has been appointed as Xbox's first COO to assist with this new strategy. Sharma acknowledges rising hardware component costs and anticipates "radically different business models" for consoles, moving away from the assumption that premium, high-performance consoles are always the best option.
Sharma’s candid communication, including her mantra "Clarity is kindness," and her direct question to her Chief Strategy Officer, Matthew Ball, asking if the brand was "fixable," underscore her commitment to a transparent and decisive overhaul. Her initial 100 days saw changes to Game Pass prices and Call of Duty availability, and a renewed focus on console exclusives. She plans for a complete "reset" of the business, acknowledging that hiding "hard truths" or repeating past strategies will not lead to success, particularly as the division accounts for only 6% of Microsoft's total revenue despite being an iconic consumer brand.
The ongoing layoffs, with 1,250 yet to be completed, have created anxiety among employees. Sharma's actions, including cuts to marketing budgets and re-examination of the studio portfolio, suggest a leaner, more focused Xbox. This strategic pivot aims to make Xbox a "healthy" business, with the goal of eventually doing "more" once financial stability is achieved. The leadership team, including Sharma, Bond, and Chiang, notably features three women of color guiding this significant brand reset. wsj.com, fortune.com, pk.ign.com, bitgetapp.com
