In a major setback for the gaming industry, Microsoft’s gaming division, Xbox, has confirmed plans to lay off a total of 3,200 employees over the next year as part of a broad restructuring initiative aimed at improving profitability and operational efficiency following the close of its fiscal year on June 30.
In an official memo sent to employees, Xbox Chief Executive Officer Asha Sharma said the layoffs will affect teams across Activision, Bethesda, Blizzard, King, Mojang, and Xbox Game Studios. As part of the plan, 1,600 employees will be dismissed immediately. The move represents a significant portion of Microsoft's broader workforce reduction of 4,800 employees, or approximately 2.1 percent of its global workforce.
As part of the restructuring, Xbox has also decided to divest ownership of four game studios, with around 350 employees expected to transition to the new owners.
Compulsion Games, the studio behind the popular title South of Midnight, and Double Fine Productions will once again become independent studios, retaining ownership of their intellectual property and game franchises. In a statement posted on X, Compulsion Games confirmed the development and said that supporting its employees throughout the transition remains its top priority.
Meanwhile, Ninja Theory and Undead Labs have signed final agreements to join new ownership groups. Development of their major upcoming projects, Senua and State of Decay 3, will continue under the financial backing of their new owners. However, Xbox has not yet disclosed the identities of the buyers.
Xbox has also begun discussions with the local works council in accordance with French labor laws regarding the future of Arkane Studios, based in Lyon, France. Industry speculation suggests that the studio's highly anticipated Blade game has been delayed and is now targeting a release in late 2027.
In his memo, Asha Sharma openly acknowledged the challenges facing the gaming business, writing, "Our gaming business is not in a good position at the moment. Compared with other platforms and publishing businesses in the industry, our profit margins are three to ten times lower. At the beginning of this console generation, our installed base was relatively small, while production costs were significantly higher. To grow the business, we bet on Game Pass and multi-platform content. Although those initiatives received a positive response, they did not grow at the pace we had expected. At the same time, the entire gaming industry is now facing the biggest hardware crisis in its history. That is why we had no alternative but to reset Xbox."
As part of the leadership reshuffle, Xbox Chief Operating Officer Dave McCarthy is stepping down from his position. He will be succeeded by Helen Chiang, who has spent the past decade leading the team behind the globally successful game Minecraft. As the new COO, Chiang will oversee the profit and loss responsibilities for Xbox’s content, hardware, platform, and services businesses.
Earlier in 2024, Xbox laid off 1,600 employees, following several hundred additional job cuts the previous year. The latest announcement comes shortly after the company increased the prices of its Xbox consoles, citing higher memory and storage component costs, raising fresh concerns among gamers and game developers about the future direction of the business.
//DBTech/BMT/OR//
