Xbox is planning a significant round of job cuts across its business next month, it’s reported, following public comments by new CEO Asha Sharma that she plans on “resetting the business” which is “not in a healthy spot.”
The reporting by Bloomberg has not pinned any figures or percentages on the planned layoffs, but sources familiar with the company’s strategy say that they are expected after the end of Microsoft’s current fiscal year on 30th June. Other cost cutting measures will include slashed marketing budgets and some other areas of the business.
There are now understandable concerns for the future of several Xbox studios that may not have been performing to expectations. Obsidian’s Avowed and The Outer Worlds 2 both underperformed last year, Double Fine’s output has been skewed towards smaller titles since Psychonauts 2, and Compulsion Games’ South of Midnight was well received critically, but hasn’t seemed to make waves commercially.
Sharma’s above comments came at the Bloomberg Tech conference, and on a backdrop of also saying that they needed to reconsider the whole Project Helix business model amidst the current AI chip crisis. And if layoffs are coming, then this adds up to a pretty significant slump after the relative positivity felt towards Xbox through the first six months of her tenure.
There was rebranding with Xbox now marketed as XBOX in all-caps and a renewed logo, she walked back Game Pass Ultimate price rises from last year by removing Call of Duty’s day one status, at the Xbox Summer Showcase saw the confirmation that Gears of War E-Day and Clockwork Revolution will both be full Xbox console exclusives and won’t be coming to PS5.
However, in an email to employees by Sharma and Booty that has since been made public, they make five points about the health of the platfom. In particular they are now at “a 3% accountability margin”, which we take to be the profit margin, and “have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy” while annual revenues have slid by half a billion.
In the Bloomberg tech conference, Sharma did note that “My mandate is not a 30% accountability margin. It’s not enterprise software margins. It’s to be the number one gaming and entertainment company.” This does indicate that she’s operating with more flexibility that Spencer was towards the end of his tenure,
Continuing to outline the state of the business to employees, they said that component prices have skyrocketed, with storage now 5 times what was paid two years ago and memory similarly vastly inflated. To that end, they “need a new business model and partnerships for hardware as we remain committed to Helix.”
There was also talk about how the current studios were all focussed on providing for subscriptions, streaming and devices, at the expense of letting their leading franchises languish, so “investment priorities for the next 5 years” will change.
And the “current platform infrastructure is not built for the battle ahead,” through complexity, reliance on external vendors and more.
It certainly sounds like there are a lot of ways that Xbox needs to be improved, but we hope that, with the company having already spent the last few years making round after round of job cuts, any further losses are kept to a minimum.
