The future of Microsoft's XBOX division seems to have reached a major tipping point: after the great optimism of the announcements at the XBOX Games Showcase, it didn't take long before the horizon began to show ominous dark clouds, in the form of statements from company executives.

In the last few hours, crucial details have emerged on the company's internal strategies, which highlight the clear need for a profound renewal for the economic sustainability of the brand. The alarm was initially raised by the new CEO of XBOX, Asha Sharma, who in a recent joint internal communication with Matt Booty, informed employees that the current declining revenue and large expenses can no longer continue. About a hundred days after taking office, Sharma revealed that the division will close the fiscal year with a margin of just 3%, a sharp decline from previous margins of about 17%: a direct consequence of the more than $20 billion spent in the last five years, in the face of revenues that did not live up to expectations.

There have also been rumors related to the possibility of separating the XBOX section from Microsoft, to attract new investors / partners, as well as the decision to focus the budget mainly on the big franchises, abandoning the smaller and secondary projects.

Now, to echo this complex situation, the CEO of Microsoft, Satya Nadella, has intervened directly. A guest on the New York Times' "Hard Fork" podcast, Nadella candidly acknowledged how the company has long subsidized XBOX, instead of making a real profit from it. Asked about the future of the division just a few hours after the statements of the XBOX leadership, his words were extremely transparent:

No one can accuse Microsoft of not investing in the last 25 years. And now we have to turn it into a sustainable business.

Nadella pointed out that, despite the enormous entertainment value offered by our favorite ecosystem, the company has failed to monetize it adequately in the long run. He even ironically commented on the matter, letting slip a laugh and a decidedly emblematic statement:

In fact, there's more monetization of XBOX games on YouTube than there is at Microsoft.

Analyzing the causes of this situation, during the interview the CEO identified two main factors of pressure on the business. The first is temporary in nature and is related to the increase in prices resulting from the shortage of semiconductors and memories. This crisis is affecting the entire consumer electronics industry, including PCs and smartphones, but it is an obstacle that Microsoft is confident it can overcome.

The second factor, much more persistent, concerns the identity and structure that XBOX's business model will have to adopt in the future. When asked if there will be incentives for users or if we should simply expect an inevitable increase in the price of consoles and titles, Nadella replied as follows:

I think we have to find ways to distribute games where it's economically relevant to the customer and to us.

Although no specific details have been provided on how this new model will translate in practice, rumors suggest drastic changes on the horizon. The previous rumor signals that major staff cuts are expected next month and that, in the meantime, Sharma will use his next hundred days to thoroughly analyze the business, with the intention of combining the layoffs with much more massive investments in flagship franchises such as Halo and Fallout.

This plan seems to have already been approved by both Nadella and CFO Amy Hood, and could even be a prelude to a future restructuring of XBOX: in fact, options such as a spin-off, a joint venture or the transformation into a wholly owned subsidiary are not excluded, although there are currently no imminent plans in this regard. But let's keep in mind that here we are always in the field of rumors, so nothing is certain.

The interview with Nadella then also ranged over other topics, focusing strongly on artificial intelligence, the impact of the latter in the world of work and the role of the US government. However, for us fans, the focus remains undeniably on the next management moves, waiting to find out how these decisions will shape the offer and the future of XBOX. Stay tuned for more!