Why Xbox believes it must cut costs and close studios

Investors that put money, or buy shares, in a business want to make money on their investment. And for that to happen the company’s ‘value’ needs to go up. It needs to grow bigger. Growth could be many things, but it typically refers to revenue (the amount of money a company generates) or profit (the amount of money a company makes after costs). And to investors, a loss-making company that is getting bigger every year is more exciting than a profitable business that is going the other way.

This may sound obvious, but we’re about to get into why Xbox just closed three Bethesda studios. And it’s important to keep in mind that focus on growth. Because ultimately it doesn’t matter how rich Microsoft is, or how much profit it’s making, it’s all about getting bigger.

Let’s pop back in time a bit. Xbox as a business has had a rough ride over the past decade. Following the calamitous launch of Xbox One, the company saw its popularity in the console space drop substantially. It’s been stuck firmly in third place behind Nintendo and PlayStation. But despite the fall in popularity, the Xbox business saw its revenue increase as the games industry became more digital. Still, for long-term success, Xbox knew it needed to find new customers if it wanted to compete more strongly. It needed a new plan.