For over two decades, there has been a perception that Microsoft maintains the operation of Xbox for purposes other than purely business, as it absorbs losses and finances strategies and actions. This idea has intensified in the current era, as the brand no longer talks about console sales or copies, but rather about millions of players, revealing only specific data. So, is Xbox a business? According to Phil Spencer, yes.
Phil Spencer asserts that Xbox records both profits and losses, as Microsoft would not tolerate an underperforming business
During the second day of the hearing on the Activision Blizzard case, Phil Spencer, the head of Xbox, put an end to the idea that Xbox always operates at a loss, which is absorbed by Microsoft. According to the executive, the gaming division, which encompasses the Xbox ecosystem, functions as an autonomous business that experiences both profits and losses like many others. However, there is a commitment to the company for it to be profitable and to grow. Therefore, the perception that Microsoft tolerates constant losses is erroneous.
Spencer now says it plainly that his division needs to be profitable and suggestions that they could strategically run at a loss is incorrect.
— Stephen Totilo (@stephentotilo) June 23, 2023
As pointed out by Stephen Totilo, a journalist from Axios, Spencer's statement was a response to the Federal Trade Commission's questioning regarding the alleged objective of Microsoft's acquisition of Activision Blizzard: to lose money in the short term in order to defeat PlayStation and gain future profits.
In this regard, the regulator's lawyer challenged the head of Xbox, questioning his claim that Microsoft does not tolerate an underperforming and loss-making model in Xbox, pointing out that they decided to spend $70 billion on an acquisition even though the brand still delivers poor results. In response, Phil Spencer stated that the acquisition of Activision Blizzard is not an "expense" but an "investment," and the plan is to improve the gaming division and its market offerings.
FTC also challenged idea that Microsoft wouldn't tolerate poor financial performance by the gaming team, getting Spencer to acknowledge they're not hitting their targets -- yet still got okay for the $70b Activision bid. Spencer said it was part of a plan to improve the division
— Stephen Totilo (@stephentotilo) June 23, 2023
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