Microsoft Gaming has a profit margin problem. Their marching orders are to hit 30%, and right now (we think) they’re sitting at around 12% to 15% range. That means they need to roughly double their margins, a massive ask for a division with 20,000 employees across a dozen studios.

For context, even the most successful studios only hit 40% margins on a great year. CD Projekt Red, a publicly traded company, can clear that mark when they ship a massive IP like The Witcher or Cyberpunk. But CD Projekt Red is around 1,200 employees. Microsoft Gaming is much, much larger so, comparing one focused studio to an entire publishing empire isn’t exactly fair.

So how do you close that gap? You either increase revenue or cut spending. I think the answer starts with fixing Game Pass.

Simplify Game Pass

Here’s my pitch: kill Game Pass Core and the middle tier. Get rid of the confusing lineup of plans and just have one. Your current Game Pass Ultimate becomes “Game Pass” and reduce it to $25/month.

Right now, Game Pass has too many tiers doing too little to differentiate themselves. Core exists to charge people for online multiplayer, which feels increasingly absurd when I’m only playing free-to-play games like Minecraft, Marvel Rivals, or Fortnite. I shouldn’t have to pay $10/month just to play online in games that are free everywhere else.

One plan. One price. Simple.

Fix the New Release Problem

Game Pass’s biggest issue is that day-one releases cannibalize game sales. Every copy someone plays through Game Pass instead of buying is lost revenue and for a division trying to double its margins, that’s a problem.

Here’s what I’d do: new releases still come to Game Pass on day one, but they rotate out after a couple of months. Want to keep playing? Buy the game. Then, after a couple of years, those titles can come back to the Game Pass catalog permanently as part of the back catalog.

This gives subscribers the chance to try new games, which is the whole appeal of the service. But it stops Game Pass from being a reason to never buy anything. Let me discover games through the service, but make me buy the ones I love if I want to keep playing before they hit the archives.

You get the best of both worlds: Game Pass stays exciting with new releases, and you stop bleeding game sales.

Replace xCloud with GeForce Now

Now I don’t know a ton about xCloud, but what I do know is that it’s not as good as GeForce Now. So why not just build GeForce Now into the Xbox ecosystem?

Microsoft doesn’t need to own every piece of the stack. If NVIDIA already has the best cloud gaming solution, partner with them. Integrate it into the Xbox app and console experience. The user doesn’t care whose servers are running the game, they care that it works well.

Make Games Portable Across Platforms

This is the big one. If I buy a game, I should be able to play it on any device I want; so on my Xbox, on PC through the Xbox app, or streamed through GeForce Now gaming. One purchase, play anywhere.

Right now, Steam lets me play my library on basically anything. That’s a huge reason people buy games there instead of the Microsoft Store. If Xbox matched that with true cross-platform ownership, it would actually give people a reason to buy from Microsoft.

Maybe this waits for the next Xbox hardware revision, but tell people now that it’s coming. Set the expectation. Give people a reason to start building their library in the Xbox ecosystem.

The Takeaway

The path to 30% margins isn’t about cutting studios or raising prices. It’s about making the Xbox ecosystem so compelling that people actually want to spend money in it. Simplify Game Pass, stop cannibalizing sales, partner where it makes sense, and make purchases feel valuable by letting people play anywhere.

Microsoft has the studios. They have the IP. They have the infrastructure. They just need to stop overcomplicating things and give gamers a reason to choose Xbox not just subscribe to it.