Xbox has announced sweeping cuts as part of its previously announced reset. 3,200 staff are to be laid off – 20% of the Xbox organisation – with 1,600 roles being eliminated today, according to an internal email from Xbox CEO Asha Sharma that was also posted to X.
The announcement also included the divestment of five internal studios: Compulsion Games, Double Fine, Ninja Theory, Undead Labs, and Arkane.
The layoffs are the lion’s share of a wider Microsoft staff reduction of 4,800 people, around 2.2% of its total workforce.
Compulsion Games and Double Fine are being spun out as independent studios under their original ownership, along with their IP, catalog, and “runway for their next games.” Ninja Theory and Undead Labs have entered terms for new ownership and funding to continue development on Senua and State of Decay 3.
Arkane has begun consultation proceedings in France to “review potential strategic options,” in keeping with French employment legislation.
Reductions will be made in other units, including Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios, in line with Sharma’s previously-announced strategy of “shifting investment to focus on higher priority projects.”
Sharma clarified that no publicly announced first-party games are being cancelled as a result of the reset.
The changes come alongside structural changes inside the Xbox organization, with Mojang and King – the most consistently successful arms of the Xbox games empire – now reporting directly to Sharma. Xbox corporate VP of Product Services Dave McCarthey, who had been in the role for eight years, has left the business and Helen Chiang, who previously oversaw Minecraft, has been put into the newly created role of Xbox COO. Sharma said that Chiang’s role “for the first time” would include “end-to-end P&L responsibility across content, hardware, platform, and services.”
The COO position marks a change from the company’s previous structure, which saw many teams, studios and functions operating independently of one another.
Significant changes will be made to the company’s platform organisation, which Sharma described as overly complex, saying that “in some parts of the company, work passes through as many as 14 layers of management.” The organisation will be simplified to reduce management layers to no more than five, with further efficiencies to be delivered by a streamlined codebase, greater use of shared services, and a 50% reduction in spend on external vendors.
“Since 2018, we have aggressively expanded our studio portfolio while the number of games created each month across the industry now outpaces the last ten years combined,” Sharma wrote.
“We now find ourselves competing not only with the largest publishers, but also with smaller independent studios. It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested.
“As we reset Xbox, we will help independent creators succeed by providing open development tools and audiences to realize their vision.
Layoffs had been widely telegraphed as taking place this week, to coincide with Microsoft’s financial year which runs from July 1st. Last week saw dozens of departures from across the organisation as a result of a voluntary redundancy program, the first in the company’s history.
This is a developing story and will be updated.
