    > 150M at 5B revenue is not great

Considered as a raw percentage in a vacuum, sure, I guess, but we're talking about...

- A company which has undertaken a concerted, long-term effort to consolidate the industry under its umbrella (something they themselves call out as a problem in this post), reducing consumer choice

- A company which has captured a significant chunk of the console market. They're one of the big three (alongside Sony and Nintendo), and have been since the early 2000s, arguably, for crying out loud.

At a certain size (typically as measured by market capture) the expectation for growth needs to be reality checked. This is still $150M of pure gravy every single year. Sure, this is going to a corporation, but that's more money than most people could possibly dream of earning in ten lifetimes.

Every year. For a company that's already putting money towards opex in the form of developing new games and new content for existing ones, for a ridiculously broad portfolio.

To be clear: it is Microsoft's and Xbox's prerogative to pursue more profit, but I reserve the right to call this out as absurd under the circumstances.

If you want to make the argument that Xbox has suffered from a lack of focus in the past decade (... or even longer), or that there's been mismanagement (I would say since around the time 343 got created), then those are fair arguments, though I don't think those are justifications, on their own, for cutting thousands in headcount.

Allowing this org to balloon to fourteen levels of management on any vertical is a joke. Allowing the absorption of so much of the game dev industry and still being unhappy with $150M in annual profit after being such an active participant in the oligolpolization of console gaming is just a bit unserious.

▲ spenczar5 an hour ago | parent | next [-]

> This is still $150M of pure gravy every single year.

The issue is rate of return. They are evidently spending $4.85bn on Xbox per year. The US federal interest rate is 3.5% so if you just put that money in US bonds you would get about $175M per year of much purer simpler gravy.

	▲	skeeter2020 28 minutes ago \| parent \| next [-]
		Russ: "Anyway, next thing you know, we IPO, stock triples in a day and AOL gobbles us up. All of a sudden, I'm 22 years young and I'm worth 1.2 billion. Now a couple decades later, I'm worth 1.4. You do the math." Richard: "Okay. Well, that's a gain of $200 million over 20 years. Um, 16.66 repeating. That's less than 1% return. Inflation is, like, 1.7. I think CDs are 2%. So that's less than a CD."
	▲	delecti an hour ago \| parent \| prev \| next [-]
		But the revenue is coming out of the same org. That $5bn revenue only exists because of the $4.85bn expense. That money doesn't exist to put into bonds unless it's coming out of the games org. They can only make their margin percent look better by making their absolute margin $150mm worse.
	▲	hx8 an hour ago \| parent \| prev [-]
		Exactly. The inflation rate is about 3%, so the people at Xbox worked very hard all year to have about the same value they put into it.

▲ chrisfosterelli an hour ago | parent | prev | next [-]

> This is still $150M of pure gravy every single year. Sure, this is going to a corporation, but that's more money than most people could possibly dream of earning in ten lifetimes.

That actually seems... tiny? Xbox is nearly 17,000 employees. That's like $8k in profit per employee. That's worse than big box retailers and like 1/100th of what is common in big tech and (to the letter's point) far worse than their biggest competitor.

Like sure at least you can say they aren't losing money, but Nadella can't be looking at that after just spending 75 billion on Activision Blizzard and be happy with it as the status quo.

EDIT: BTW these numbers you quoted from OP are quarterly, not annual

▲

_verandaguy an hour ago | parent [-]

At some point you end up hitting the law of diminishing returns. I think this is a case of that.

	▲	chrisfosterelli an hour ago \| parent [-]
		I agree that at some point you do, but again I think the fact that Sony Playstation is doing this with larger annual revenue, less studios, AND better margins is an indicator that it isn't the problem here.

▲ WheatMillington an hour ago | parent | prev | next [-]

Remind me never to come to HN for business advice, this is dire reasoning.

▲ blks 29 minutes ago | parent | prev | next [-]

I thought it was 150M per quarter?

▲ xienze an hour ago | parent | prev [-]

> This is still $150M of pure gravy every single year

You're neglecting to consider that any time they acquire a studio or have a flop or two -- poof goes that $150M and probably more. It's not a risk-free venture. Entertainment is all about hits, and misses hurt.

Would you put up $5K to win $150 on a hypothetical roulette wheel that hits 90% of the time? The math's not perfect obviously but Xbox is a somewhat similar situation. Microsoft is putting up nearly $5B a year to make $150M. They'd be better off stuffing the $5B into bonds or something. There is a point where the returns aren't high enough to justify the expenses when risk is taken into consideration.