$80 Billion In and Xbox Still Can't Figure Out Money

Somewhere north of $80 billion. That's roughly what Microsoft has poured into gaming over the past decade through acquisitions alone, buying Mojang, ZeniMax, and Activision Blizzard King. And during a live appearance on The New York Times' Hard Fork podcast on June 10, Microsoft CEO Satya Nadella admitted that YouTube makes more money off Xbox games than Microsoft does. Let that sit for a second.

"The challenge we have is we've not been monetizing that entertainment," Nadella said. "In fact, if anything, we've been subsidizing that entertainment. In fact, there's more monetization of Xbox games happening on YouTube than at Microsoft." He stressed that this doesn't mean Xbox should "do things that are unnatural," but that it needs to become "economically sustainable." The comments follow Xbox CEO Asha Sharma's memo last week revealing that the division's accountability margins sit at just 3 percent, a figure so low that the money would literally perform better in an index fund.

I keep coming back to the sheer absurdity of the scale here. Microsoft didn't just dabble in gaming. It bought the company that makes Call of Duty, the company that makes The Elder Scrolls, and the company that makes Minecraft, and it still can't figure out how to turn a meaningful profit. Nadella acknowledged that rising semiconductor and memory costs driven by AI demand are squeezing consumer electronics across the board, but called that "a temporal thing." The permanent question, he said, is "what's the Xbox model going forward?" He offered no answer.

What we got instead was a vague promise that Sharma will use her next 100 days to "take a fresh look" at both hardware and publishing. According to The Information, Microsoft has even considered spinning out or restructuring the Xbox business entirely. When your CEO goes on a podcast and openly admits a video platform monetizes your own games better than you do, the 100-day reset clock feels generous. Microsoft has Candy Crush, Call of Duty, Game Pass, xCloud, and a new console codenamed Helix on the horizon. Every piece is there. After $80 billion, nobody at Microsoft can assemble them into something profitable is staggering.