Monday, July 21, 2014

The reality of Microsoft's layoff of 18,000 employees that console warriors seems to ignore.

It really doesn't matter what side of the console-war that you are on.   Ideally you wouldn't be on either side, but would just appreciate both of the consoles for the great games they both have and will have in the future.  That would be in a perfect world though; obviously we do not live in a perfect world.  When Microsoft announced they were cutting 18,000 jobs the natural instinct of the foolish and irrational people in gaming was to assume Microsoft were in trouble.

The inconvenient fact that most of the job cuts came as a result of Microsoft buying up Nokia didn't really matter in the gaming realm because in the gaming realm anything going on at Microsoft has to be directly related to the success or failure of the Xbox One.  At least that is what some people would like to believe.  The reason people think that way is because gamers have this incorrect and inflated view of what the Xbox One brand is in regards to Microsoft as a whole.  In the grand scheme of things the Xbox brand, despite how awesome it is, is only a small part of the Microsoft portfolio.

Look at the chart to the left.  That is the revenues at Microsoft for fiscal year 2013.  As you can see the division that the Xbox brand is under accounts for 13% of the entire company revenue.  It is important to note that the Xbox brand does not account for all 13% of that on its own though.  

Based on information from Wikipedia the Entertainment and Devices division consists of:

  • Xbox
  • Mobile Phones (Lumia Phones)
  • Windows Surface Tablets
  • Peripherals (Mice, Keyboards, Joysticks, Gamepads Etc.)
Is Xbox One the biggest in the division?  Yes, it presumably is.  My point though is that the Xbox Brand accounts for a very small portion of the companies entire portfolio and that is a fact regardless of how gamers in general feel about it.   The Xbox One brand is far from a make or break venture for Microsoft.

Does that make the brand insignificant though?  Hell no!  Satya Nadella realizes that as well.  Which is why he makes it a point to mention it in the memo that went out last week.  It isn't a major part of the company in terms of financials, but it is a major asset to the company in terms of the whole, let's call it, "Cool factor".

The 18,000 jobs that were eliminated have been well documented at this point to be mostly in part from the Nokia acquisition.  Another well-documented aspect to all of that is that the Nokia purchase is likely to have adverse effects on the Microsoft business. (For those who are doing to dispute this I will provide my SOURCE.)  There are folk who insist on equating the elimination of jobs at Microsoft to the Xbox brand, but the facts really do not point to anything of the sort.  Sure, there were some job cuts that came out of the Xbox side of things.  About 200 if the many reports are to be believed.

"While the Xbox Entertainment Studio closing was sudden, it's not that surprising. Microsoft CEO Satya Nadella talked about redefining the company's core in a recent memo to employees, and while the Xbox division mostly emerged unscathed in the company's round of 18,000 job cuts, it makes sense that a new non-core would be first on the chopping block." ~Techtimes
Gamers and console warriors ignore so many facts to support their silly arguments.  They seem to think that layoffs always mean a company is in major trouble and that is entirely false.  You can see lists and lists of very well off companies who have cut jobs in the last 10 years.   Job cuts do not always mean troubled times.  They often times just come as a result of improvements in manufacturing and redundant jobs.  The latter of which is largely the case in this round of cuts at Microsoft.

When you understand the scope and reality of the situation it makes it all the more silly when you see people linking the job-cuts to the Xbox brand as a whole.  The two are only indirectly related.  Closing down Xbox Entertainment Studios has more to do with dumping something that is not essential than it does with Microsoft being in financial trouble.  Again--as much as gamers would like to think that closing down the studio means Xbox is in trouble that is just not the case.  There were times in the past when the Xbox brand was in a lot tougher spot than it is now and Microsoft stuck with the brand.  I do not think we have anything to worry about right now.  You can ignore all the doomsday bullshit.  The Xbox One is selling just fine and the brand isn't going anywhere.  Developers will not ignore  the Xbox brand because it has 2-3 million less potential customers.

Subscribe to RSS | Youtube 

1 comment:

  1. I'm more concerned about the 18k jobless individuals than spinning it one way or another for console bragging rights.
    You are 100% correct about it not meaning financial problems for MS - but gaming sites need their click bait and fanboys need reasons tout their intelligence for choosing to buy the 'right' hunk of silicon. They're no longer content to just enjoy their console, they have to make anyone who bought the opposition feel bad about their purchase too.
    They are too focused on screwing the other console to realize the used console games market is hurting devs and stifling creativity. DRM would have gotten them Steam like sales. However, used console games sales need to continue but with the dev getting some piece of the action.