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Last night, around the same time that reports were suggesting Xbox was in line for major job cuts, Asha Sharma and Matt Booty unveiled a message on the Xbox Wire website that they'd shared with Xbox employees earlier in the day.
The memo talks about how the first 100 days of Xbox involved plenty of successes, such as the significant number of updates, the Game Pass price decrease, the Xbox Player Voice feedback website, and various other positives.
However, it also outlines that the next 100 days are all about resetting the business, and that it'll involve some "surprising" and potentially "even frustrating" realities along the way.
Here's the full transcript of those five realities that will be addressed:
#1: Over 1 billion players choose to play XBOX and our games each year, for a total of 72 billion hours across Console, PC, Mobile, and Streaming (excluding much of China and a few other properties). Our franchises are also among the largest and most beloved globally and are now breaking records in TV and film. Going forward, our competition is attention. There are more great games, TV series, franchises, creators, content formats, apps, etc., than ever before.
#2: We will end this fiscal year at about a 3% accountability margin, down year-over-year. Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.
#3: We are in a hardware component crisis. When I joined as CEO in February, the price we paid for console storage components was over 2x as high as we paid last fall. These costs have since doubled again. And as we plan for the 2027 holiday season, we expect another significant increase, taking us over 5x the prices we paid only two years earlier. Memory costs have followed a broadly similar trajectory. While the entire industry is facing a components crisis, we believe we have been impacted more greatly than many of our peers due to the choices we made over the last half decade. We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix.
#4: We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming, and devices. In the process, we have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content. We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win. At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success. We need to reassess the balance between these and our investment priorities for the next 5 years.
#5: Our current platform infrastructure is not built for the battle ahead. Our systems are overly complex, spanning hundreds of dependencies, which hinders our ability to move fast. We’ve become too reliant on vendors to operate our systems and must become more self-reliant as an engineering culture to build for the future. We must increase the value we ship to players while decreasing the time it takes to do so. Going forward, we’ll evolve and rebuild our stack and look at capabilities across all of XBOX and potential M&A to help us win in hardware, PC, mobile, and streaming.
As you can see, there are some serious areas of the business that are going to be reconsidered here. The 3% accountability margin is something that's been brought up a lot on social media already — a figure that surely has to improve — and you can see how it's mentioned that "annual revenue has declined nearly half a billion" over the past five years excluding Activision Blizzard King.
Bloomberg's Jason Schreier points out that a 3% margin isn't necessarily terrible, but will look that way to Microsoft:
The hardware component crisis has been discussed a lot recently, including by Asha Sharma herself, and it's interesting that they once again bring up the "new business model" that's apparently required for hardware going forward. They also say they're planning for the 2027 holiday season, which might be the target window for Project Helix.
Point number four could be where the job cuts come in, with a reference to Xbox's studio system being "over extended" and franchises that haven't been "adequately funded to compete and win". We'll have to see how that pans out.
And finally, there's the bit about the "overly complex" platform infrastructure. Everything in that fifth reality sounds pretty good to us, but it sounds like it's going to take a long time to fully realise.