Microsoft has set ambitious revenue and profit targets for its Xbox division as it prepares for an upcoming presentation at the Tokyo Game Show.
Facing stiff competition from Sony and Nintendo, Xbox Series X/S sales have fallen behind, prompting Microsoft to expand its revenue streams beyond console sales.
This includes growing its Xbox Game Pass subscription service, raising prices, and releasing Xbox-exclusive games on more popular platforms.
Microsoft’s push for profits has also driven several major acquisitions, such as Bethesda and Activision Blizzard. The latter acquisition has been key in keeping Xbox profitable, according to the company’s latest financial report.
A recent interview has provided more insight into Xbox’s current strategy, with sources revealing that the company is under particularly “challenging” profit goals set by Microsoft.
A profile interview with Xbox president Sarah Bond mentions that Microsoft’s gaming unit is operating under difficult financial targets, according to insiders familiar with Xbox’s operations.
While Bond did not directly comment on these claims, she acknowledged the challenges facing Xbox, stressing that playing it safe would be a mistake. “The opportunity on the other side is way bigger for all of us,” Bond stated.
Although there are no exact figures for Xbox’s financial goals, Microsoft’s $68.7 billion (£56 billion) acquisition of Activision Blizzard has likely raised the company’s expectations, particularly with the financial powerhouse Call of Duty now under Xbox’s umbrella.
This may also explain why Xbox increased the price of Game Pass, with the upcoming Call of Duty: Black Ops 6 being available exclusively on the more expensive Ultimate tier when it launches on October 25.
While it’s unclear if this strategy will increase Xbox Game Pass subscriptions and profits, Xbox is not abandoning the hardware business.
Microsoft has repeatedly hinted at plans for the next generation of consoles, promising a “technological leap” that seems ambitious.
Xbox Gaming CEO Phil Spencer has suggested that a handheld device will be part of the next-gen plans, and Bond has touched on the idea, though in vague terms.
Bond discussed a handheld device as another way to bring an “Xbox-specific experience” to new gamers whose habits have not yet been formed.
She is quoted as saying, “I want people to think no matter who you are, you can come to Xbox and find a game. It’s for you.”
It seems increasingly clear that Xbox is working on a handheld console, though it remains uncertain whether this will be a standalone device or a hybrid like the Nintendo Switch.
Recent rumors suggest Sony may also be developing a handheld console for its next-gen plans, hinting that both companies could be heading in the same direction.
Whether this strategy will lead to Xbox’s next console being successful is still up in the air, with some speculating that answers won’t come until 2026.
Bond has acknowledged the long-term stakes, saying, “I’m making decisions now that we’re going to live with in the next decade,” indicating an awareness of the high stakes involved.
In the near term, Xbox will take the stage at the Tokyo Game Show on Thursday, September 26, at 11 a.m. BST.
The presentation will be streamed across Xbox’s social channels and the event’s official YouTube page.
