Microsoft‘s video game division is facing one of the largest adjustment processes in its history. Xbox will lay off 20% of its employees and lose 4 video game studios following a restructuring led by its new CEO, Asha Sharma. The measure involves the departure of 3,200 workers and the independence of iconic studios, while the future of other key areas remains uncertain.
In a statement, Xbox CEO Asha Sharma described the measure as “the most significant restructuring in the company’s history.”
“Our current business is not healthy,” Sharma explained when justifying the layoff of 3,200 workers, a figure that does not include the hundreds of employees who will leave when their studios become independent companies. The executive assured that the goal is to create a company “bigger, capable of entertaining billions of people a day.”
According to The Verge, the wave of layoffs began on July 6, with the departure of 1,600 people from Xbox Game Studios, Activision, Blizzard Entertainment, King, and Zenimax (owner of Bethesda, id Software, and MachineGames). Another 1,600 employees will lose their jobs during the current fiscal year, which ends in July 2027. The same outlet details that the cuts affect approximately 30% of the workforce of Microsoft‘s video game division.
Double Fine, Compulsion Games, Ninja Theory, and Undead Labs are no longer part of the Xbox ecosystem.
More Read
Four studios are no longer part of Xbox
The organizational adjustment involves the departure of four studios from the Xbox ecosystem. Double Fine Productions (known for titles such as Psychonauts and Brutal Legend) and Compulsion Games (We Happy Few, South of Midnight) are becoming independent studios.
For its part, Ninja Theory (Hellblade: Senua’s Sacrifice, DmC: Devil May Cry) and Undead Labs (State of Decay) have agreed to terms to join a new company, which will provide them with funding to complete and develop Senua and State of Decay 3, as confirmed by sources consulted by Kotaku.
The future of Arkane Studios, responsible for the Dishonored saga and the upcoming Marvel’s Blade, remains undefined. The studio has entered a period of legal consultations required by French law. The layoffs also affect teams such as Obsidian (Pentiment, Grounded, The Outer Worlds), which has reportedly reduced its staff by 25%, as well as the developers of DOOM and The Elder Scrolls Online, where significant cuts are being reported.
More Read
Changes in structure and leadership
As part of the announced “reset,” Asha Sharma modified the division’s organizational chart. From now on, the creators of Minecraft (Mojang) and Candy Crush (King) will report directly to the CEO.
No announced video games have been cancelled, although unrevealed projects could be affected.
Sharma also promoted Helen Chiang to the position of chief operating officer, following twenty years at the company and a career as a leader at Mojang and Xbox Live. The previous chief operating officer, Dave McCarthy, is leaving the role for retirement after 17 years at the company.
In the statement, Sharma acknowledges that recent strategies, such as the expansion of Xbox Game Pass and the release of titles on competing consoles, have not generated the expected growth for the gaming division.
The component crisis, an oversized corporate structure, and a shrinking console base accentuated the pressure on Microsoft. Sharma detailed that the company currently loses 64 cents for every dollar invested in Xbox and that competition comes from both large publishers and independent studios.
A new direction for the coming years
The structural redesign seeks to simplify decision-making and optimize resources. According to the CEO, the platform team grew by 40% since 2020, even though the number of players and playtime decreased. To streamline processes, management layers will be reduced to a maximum of five, and spending on third-party tools and software will be cut by 50%.
More Read
The future of Arkane Studios and other teams remains uncertain following the announcement of layoffs. (Europa Press)
Sharma insisted that none of the video games announced by these studios have been canceled, although she did not confirm whether projects not yet announced remain in development. Regarding the new phase, the executive promised to maintain investment in the division, but with “better focus, more discipline, and more clarity.”
In his words: “The next decade of video games will be bigger, more global, and more creative than any other we have seen so far”.
The CEO closed her letter to the staff with a statement of intent: “These changes are aimed at a more promising future for Xbox, not a smaller one,” and projected that by 2027 the division will return to growth thanks to its franchises and studios. “History is full of companies that mistake longevity for inevitability. We will not be one of them,” concluded Sharma.
