As expected, Microsoft is also releasing its Xbox teams. It has been widely reported that the company will let go of a large number of employees after the end of its financial year on June 30 as it seeks higher profitability and efficiency in its gaming division. In a memo to employees that was shared publicly, Xbox CEO Asha Sharma confirmed that the division plans to let about 3,200 employees leave over the next year at Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios, with 1,600 job cuts occurring immediately.
Xbox has announced that its four studios will continue under new owners. South of Midnight Developer Compulsion Games and Double Fine Productions will be independent of “their IP, catalog, and pipeline of their next games,” Sharma said. Ninja Theory and Undead Labs “will be entering into terms of joining new ownership with funding to complete and grow. Senua again State of Decay 3.As for Arkane Studios, which was also rumored to be in the filming team, Sharma says “the developer’s management is starting to need to consult with the Works Council to review possible strategic options.”
The changes are part of a resetting of Xbox’s content portfolio, Sharma said. “Since 2018, we have aggressively expanded our studio portfolio while the number of games created each month across the industry now exceeds the previous ten years combined,” he wrote. “Now we get to compete not only with the biggest publishers, but also with small independent studios. It is not possible and desirable to own every big independent studio. We also learned that at home with the best average of 6 years, we are not the best type of age 4. cents for every dollar we invest as we redefine Xbox, we’ll help independent creators succeed by providing open development tools and audiences to realize their vision.
Sharma noted that while Xbox isn’t canceling any first-party games or projects it has publicly announced, the division is shifting some investments “to focus on more important projects.” Mojang and King will now report directly to Sharma, who is flattening the organization by removing other layers of management in the name of efficiency. “Our field teams are 40 percent bigger than at the beginning of this generation, as our players and playing time have decreased,” he wrote. “That difficulty delayed decisions, clouded accountability, and made it difficult to bring in players.”
As part of these changes, Dave McCarthy, the division’s chief executive, is stepping down from Xbox. It is adding Helen Chiang, who has been part of Minecraft’s leadership team for the past decade, as its new COO. Chiang will “unify our businesses under one operating model, ensure we make clear investment decisions, learn from our successes and failures and hold ourselves accountable for results,” Sharma wrote. The new COO will have “end-to-end [profit and loss] responsibility for all content, hardware, platform, and services.”
Sharma was candid about the reasons for the restructuring. “Our business today is not healthy. We operate at 3-10x lower margins than the same platform and publishing businesses,” he wrote. “We entered Gen 9 with a small installation base and a high cost structure. To grow, we bet on Game Pass, multiple platforms and a broad portfolio of content. Although those businesses created a reasonable value, they did not grow as we expected. As that happened, our core business weakened, and we added more teams, more investment and more time, hoping for the best result for Xbox. And now the most difficult industry has to face its history for Xbox.
The department set the stage for layoffs a few weeks ago. Its leaders shared a memo in which they laid out plans to “reset” the sector, suggesting that the current revenue cap is unsustainable. The head of Xbox Game Studios stepped down shortly after the memo was made public, and multiple studios are reportedly in the red tape.
It was originally said that the heads of Ninja Theory, Double Fine and Compulsion Games were negotiating with Xbox in an attempt to take their studios independent and or find new ownership. Otherwise, they were expected to be closed. Undead Labs and Arkane were later reported to be in danger of being shut down or fired.
Ahead of the job cuts, The Communications Workers of America, the union that represents most of Microsoft’s sports industry workers, called on the company to negotiate in good faith “to protect meaningful work.
Microsoft made the sweeping layoffs shortly after announcing it would raise the prices of Xbox computers, due to rising memory and storage costs — something the company is also grappling with as it builds its AI computing capacity. Xbox previously cut 1,600 jobs by early 2024 and hundreds more over the past year.
