After almost a month of reports, rumour and speculation, Microsoft has revealed the extent of the layoffs and business changes as part of their plan for “resetting Xbox”. Through the next year (FY27 ending in June 2027), the Xbox business will be reduced in size by around 3,200 employees, including 1,600 being made today. Additionally, four studios that are either going independent or found new ownership.
Compulsion Games (We Happy Few, South of Midnight) and Double Fine (Psychonauts, Keeper) are able to go independent, retaining their own IP and game catalogue and able to keep their current projects on the go. Meanwhile, two games and studios featured during the Xbox Showcase in June have also found new homes, as Ninja Theory and Undead Labs have been able to find new ownership and will be able to finish production on Senua and State of Decay 3, respectively.
That foursome had been heavily rumoured to be in negotiations for their future, and it’s great to see them have the chance to survive outside of Xbox. However, it’s maybe not so rosy for Arkane and their game based on Marvel’s Blade. There are greater worker and company protections in France, where the studio is based, and so their management is now “beginning required consultation with its Works Council to review potential strategic options.”
Today’s 1,600 layoffs will hit the remaining teams across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios.
In a wide-ranging note about how these changes are being made, Xbox CEO Asha Sharma acknowledges the business decisions that led them here, saying, “We bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected.”
She also acknowledges that in the end, “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.”
Sharma intends to have a flatter management structure going forward, so that where “in some parts of the company, work passes through as many as 14 layers of management” today, “We will reduce management layers to no more than 5, and where possible, 3.”
As part of that, Mojang and King will now report directly to her, and a new COO position with Xbox veteran Helen Chiang filling the role to better align an overall strategy for the many divisions and studios still owned by Microsoft.
While the scale of these layoffs is still shocking, and we hope those affected are granted healthy compensation packages and able to land on their feet elsewhere, this is thankfully far short of the absolute bloodbath that some had feared. There is still a question mark over Arkane, but the four studios leaving Xbox are going independent or getting new ownership instead of shutting down, and late rumours about Rare and even Obsidian have thankfully been just that.
Source: Xbox
TSBonyman
I was watching Arkane developer playing Dishonered recently, apparently it was their prep work on other IPs (Thief 4 and Blade Runner) that led to Dishonored – and look what a great game that turned out to be. As i said elsewhere, hope there’s a phoenix from the ashes for Arkane and others after this catastrophe.