Xbox and PC Game Pass might not actually be that profitable for Microsoft

Microsoft and Xbox are going through the wringer at the moment - a total of more than 9,000 workers could be cut from Microsoft, around four per cent of its global 228,000 workforce, and these cuts have already reportedly affected gaming studios, staff and projects.

An expert told indy100 this could be because of Microsoft pushing the use of artificial intelligence, Xbox not focusing on selling hardware as much anymore and the effect of Game Pass.

And on the latter, it turns out Xbox and PC Game Pass might not actually be as profitable for Microsoft as first thought, according to editor-in-chief and co-founder of The Game Business Christopher Dring.

Xbox boss Phil Spencer has previously said Game Pass is profitable and has reiterated this on a number of occasions.

However Dring posted on X / Twitter that when he asked for clarity about this, he "was told no first-party costs are included".

That means although games like Avowed and The Elder Scrolls IV: Oblivion Remastered are available day one on Game Pass, their production costs would not be factored in when determining if Game Pass is making money or not.

Giving more context in an earlier Tweet, Dring said: "So costs associated with the Game Pass business are fees paid to third-parties, marketing, service costs... And by that measure, it's profitable.

"What they don't count is the lost revenue that Xbox's first-party studios are seeing as a result of the service. I have to imagine if first-party studios received similar compensation, that profitability might not be correct."

In a statement shared with indy100 about the cuts, a Microsoft spokesperson said: "We continue to implement organisational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace."

Microsoft said it is making the layoffs to meet business demands, reduce layers, ensure there are fewer managers and allow employees to focus on more meaningful work.

indy100 has contacted Xbox for further comment.

Elsewhere from indy100:

• Microsoft and Xbox layoffs down to three key reasons and could get even worse, thinks gaming expert
• First Xbox Game Pass July titles revealed including day one release

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