"The most significant restructuring in Xbox history": Microsoft sells studios and lays off thousands of employees
Microsoft is cutting around 4,800 jobs worldwide. The gaming division is particularly hard hit. In addition, the company is selling four Xbox studios and announcing far-reaching restructuring measures.
Groundhog Day: Microsoft lays off almost 5000 employees. With 3200 positions cut – around 20 percent of the workforce – the wave of layoffs hits the Xbox division particularly hard. Xbox CEO Asha Sharma speaks in an internal email of the "most significant restructuring in Xbox's history". Sharma had previously announced a "major Xbox reset".
Around half of the affected Xbox employees are losing their jobs today – the rest are to be laid off by the end of the fiscal year (July 2027). Sharma names the following studios affected by the layoffs: Activision, Blizzard, King, Bethesda / ZeniMax, and Mojang.
Sharma writes: "I know how painful this is. The changes affect people who built Xbox with their creativity." She addresses the economic difficulties facing the gaming division: "Our business is not doing well right now. Our profit margins are three to ten times lower than those of comparable platform and publishing companies."
Microsoft emphasizes that no announced first-party games will be canceled – this includes "Fable", "Gears of War: E-Day", "Call of Duty: Modern Warfare 4", and "The Elder Scrolls 6".
Microsoft not only wants to lay off employees but also reduce its portfolio of studios and games: "Today, we compete not only with the biggest publishers but also with numerous independent studios. It is neither possible nor sensible to own every outstanding indie studio."
As a consequence of this realignment, Microsoft is selling four Xbox studios.
- Double Fine: The "Psychonauts" and "Keeper" studio will become independent. Founder Tim Schafer will take over the company again. The studio retains the rights to its games, with the exception of "Psychonauts", which remains with Microsoft. The studio also receives a financial basis to complete previously unannounced titles that are in production.
- Compulsion Games: The "South of Midnight" studio will also become independent. Founder Guillaume Provost will take over the company. The studio retains the rights to all games and also receives a financial basis to release previously unannounced titles that are in production.
- Ninja Theory: The "Hellblade" studio will be sold to an as-yet-unknown party. The "Senua" presented at the Xbox Showcase will be financed and published by the new buyer.
- Undead Labs: The "State of Decay" studio will also be sold to an as-yet-unknown party. The third "State of Decay" part presented at the Xbox Showcase will be financed and published by the new buyer.
It remains unclear what will happen to the French studio Arkane, which is working on an adaptation of Marvel's "Blade". This is due to strict labor laws in France.
Wave of layoffs after wave of layoffs
Most recently, Microsoft caused an earthquake in the gaming industry last July. At that time, over 9000 jobs were cut across Microsoft – the Xbox division was hit hardest then too.
The studio The Initiative, founded in 2018, was closed, and work on a "Perfect Dark" reboot was stopped. Rare's ambitious open-world game "Everwild" was also canceled, as was Bethesda's online role-playing game "Blackbird".
Outlook and hope
As part of the major Xbox Reset, Microsoft also wants to simplify internal processes and introduce flatter hierarchies. Sharma is confident about the coming year: "We will invest more in Xbox this year than ever before, but we will do so more targeted, disciplined, and with clearer priorities to make Xbox the place where the world plays and creates. [...] In 2027, we will be back on a growth trajectory."
She looks even further into the future: "My goal is to make Xbox one of the few companies that entertains more than a billion people daily. [...] History is full of companies that mistook their long existence for inevitability. We will not be among them."
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