00:00I think we will start to see radically different business models that we never expected start to
00:04come into orbit later this year. The financial situation at Xbox is really bad. I spoke with
00:10Asha Sharma, who is the new head of Microsoft's Xbox. Sharma told me that Xbox's operating margins
00:16are three to ten times lower than comparable businesses. That's a terrible place for Xbox
00:21to be in. It's getting completely out-competed by PlayStation and even smaller players. Sharma
00:27told me that hardware costs have really gone up. In a healthy Xbox environment, that would be okay,
00:33but in an unhealthy Xbox, they can't survive that, and that's why she's making these changes.
00:37Xbox's turnaround plan is to step away from smaller indie studios that it's worked with,
00:43and Sharma also plans to funnel its content budget towards high-growth areas such as its
00:48Minecraft game. Sharma told me Xbox customers can expect the company to meet players where they are,
00:53so that means being in mobile and PC. It also means bringing back exclusive titles like Gears
00:58of War and financing models like Buy Now and Pay Later for players, so she's taking a completely
01:03comprehensive look at how Xbox can be there better for players. Gamers I've spoken to are cautiously
01:09optimistic. They're happy with some of the moves that Sharma has made, but they also wonder if this
01:14will all eventually lead to a sale or a spin-off, so they're taking a close look at the next
01:19moves
01:19that Sharma makes. For more on my conversation with Sharma, you can check out my article on fortune.com.
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