Microsoft CEO Satya Nadella on Xbox: ‘We have to turn this into a sustainable business’
Microsoft has spent years subsidizing the Xbox instead of benefiting from it, CEO Satya Nadella admitted this week, as he spoke of the gaming division’s need for a new approach.
His comments came during a recording Wednesday evening of the New York Times’ “Hard Fork” podcast, which was released on Friday. Host Kevin Roose and Casey Newton pressed Nadella on the future of Xbox hours after the division’s leadership signed off on the upcoming reset.
“Nobody can blame Microsoft for not investing in the last 25 years,” Nadella said of the Xbox and games business. “And now we have to turn this into a sustainable business.”
For all the entertainment value the Xbox provided, he said, Microsoft wasn’t making money off that entertainment, and was actually subsidizing it. He added with a laugh, “Actually, there’s more monetization of Xbox games going on at YouTube than at Microsoft.”
Earlier in the day, Xbox CEO Asha Sharma told employees that the division’s high spending and declining revenue would not continue. Sharma, about 100 days into the job, said Xbox will end the fiscal year down about 3% by Microsoft’s internal estimate, after the company spent more than $20 billion in five years or annual revenue fell.
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Bloomberg News reported that the division is planning major job cuts next month.
In the podcast, Nadella described two pressures on the business. One is short-term: rising prices driven by shortages of semiconductors and memory, which are putting pressure on PCs, phones and other consumer electronics, which Microsoft said it will overcome.
One remains constant – the question of what the Xbox business model should be going forward.
“I think we have to find ways to bring games that are economically viable to the customer and to us,” Nadella said when Newton asked if he could offer any kind of “carrot” to gamers, or if consoles and games would just become more expensive.
Nadella did not explain what the new model will look like. Sharma said in his memo that he would spend the next 100 days adopting what he called a new look for the business.
Information reported on Friday that Microsoft has not decided on a restructuring of Xbox – possibly as a wholly owned subsidiary, a joint venture, or a spin off – although it has no immediate plans to do so. The outlet, citing three people with direct knowledge, said Sharma plans to combine layoffs and heavy investment in major franchises such as Hello again It fallsprogram Nadella and CFO Amy Hood signed.
Watch above for a full discussion, focused on artificial intelligence, including the fallout of AI in data centers, the impact of AI on jobs, whether the US government should be involved in AI companies, and how much it buys into the idea that AI is about to automate all jobs.
