After many discussions with regulators, Microsoft recently spent $69 billion to acquire Activision Blizzard, after which it almost immediately eliminated 1,900 jobs in its gaming business. Not good news for anyone, unless you own MSFT stock. In an interview with Polygon about the driving forces behind the layoffs at Microsoft and across the industry, Xbox boss Phil Spencer pointed the finger at, well, really, just capitalism in general.
The problem, according to Spencer, is the “lack of growth” across the video game industry. “When you have an industry that is projected to be smaller next year in terms of players and dollars, and there are a lot of publicly traded companies that are in the industry and they have to show their investors growth, because why If not someone owns a portion of someone’s stock if it’s not going to grow? The side of the business that is then analyzed is the cost side,” Spencer said. “Because if the revenue side is not going to be increased, then the cost side is going to be challenged.”
In other words, if you can’t grow by making more money, then you can “grow” (in terms of earnings, stock price, EBITDA, and all those other metrics that Wall Street types care about) by spending less. The obvious question is: why are you bringing in all these new people if you can’t afford to pay them? Of course, Microsoft can afford to pay those people, but it doesn’t want to, because, that’s right, growth.
(Microsoft, for the record, generated $211 billion in revenue in its fiscal 2023 and more than $88 billion in operating income.)
“I don’t understand [the] “The luxury of not having to manage a growing, profitable business within Microsoft,” Spencer said. “But across the industry…sitting here at GDC, I reflect on friends of mine in the industry who have been displaced and lost their jobs and How fair, I don’t want this industry to be a place where people can’t, with confidence, build a career That’s why I keep coming back to the question: How can this industry grow again?
“For us, as Xbox or any of the teams out there, it’s really the result of an industry that is not growing. It can and will grow again. But you look at this moment right now and the implications have a human impact. And we should all reflect on that and think about it.”
There’s a clear “don’t hate the player” aspect to all of this, but it’s not wrong; If anything, Spencer is being very direct. This is how it works: capitalism capitalize, and if that shark stops swimming, it dies. The formula of constant growth is not good for sustainability, of course, and can sometimes lead to catastrophe, but none of that matters where big monetary decisions are made. And until that changes, it’s not very likely that anything else will change; at least, barring a total extinction of the industry.
Assuming we can avoid that particular outcome (or at least postpone it for a good while), the relentless drive for growth may eventually push Microsoft into unexpected and potentially interesting places. In the same interview with Polygon, Spencer said that the old model of subsidizing the cost of console hardware to make money selling games isn’t really viable anymore, which has him thinking about other ways to power the machine, including incorporating other digital stores. such as Epic Games Store and Itch.io for Xbox.
