Significant Xbox layoffs imminent, perhaps another studio closure as well

[iamthemilkman]

Microsoft’s Xbox division will be hit with significant layoffs next month, according to people familiar with Microsoft’s plans.

The company has been preparing for the layoffs internally for weeks, with Xbox CEO Asha Sharma hinting about “making hard choices” last month. Sources suggest the cuts could even involve a studio closure, or changes to the Xbox studio lineup. In a recent Giant Bomb episode, rumors of 1,000 layoffs for Microsoft’s Xbox division were mentioned. Bloomberg also reported today that the cuts would be “major,” and involve budget cuts for marketing and other areas of Microsoft’s Xbox business.

Moments before Bloomberg’s report, Xbox CEO Asha Sharma and chief content officer Matt Booty sent a memo to Xbox staff, warning of an “Xbox reset” over the next 100 days. Sharma and Booty pointed to difficult challenges the business is facing. “Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time,” they wrote. “Going forward, this cannot continue.”

They also noted that “we are in a hardware component crisis,” saying that component costs for the 2027 holiday season are expected to be “over 5x the prices we paid only two years earlier. Memory costs have followed a broadly similar trajectory.” They said that “we need a new business model and partnerships for hardware as we remain committed to Helix.”

Sharma and Xbox strategy chief Matthew Ball have been hinting at “radically different” console business models this week, and the mention of “partnerships for hardware” certainly plays into the idea that other PC OEMs might be able to create Xbox-branded devices based on AMD’s new chips in the future.

But right now, Xbox’s “current platform infrastructure is not built for the battle ahead,” Sharma and Booty wrote, saying that “we’ll evolve and rebuild our stack and look at capabilities across all of XBOX and potential M&A to help us win in hardware, PC, mobile, and streaming.”

Sharma has already made some big decisions since taking over, including making Gears of War: E-Day and Clockwork Revolution Xbox console exclusives.

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[Nebulon_Galaxy]

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I cant read this without 3 other things happening at the same time

Can you please add something like this next time

 

[Lena CE]

I kind of want to do the math on how many studios and employees were acquired during Microsoft's insane studio buyout rush a few years back vs how many studios have been shut down and people laid off since then.

In any case, with Microsoft its gonna get a lot worse before it gets any better. Halo 7 is still a ways off, Forza Motorsport is in a bad place and we're only just now seeing release windows for games they announced 5-6 years ago. They're likely gonna use component shortages to try and push cloud again but in a more appealing way since "This is an Xbox" didn't work for most people. Forza Horizon 6 is just about the only thing they've released all decade that wasn't mostly a dud. Even something like Starfield was successful but not nearly to the extent they'd have expected from a Bethesda game.

 

[Luxfin]

I just want to ask, "What was the point of acquiring these studios if you're just going layoff the workers later anyway?"

 

[hormonemaximum]

I just want to ask, "What was the point of acquiring these studios if you're just going layoff the workers later anyway?"

consolidation + get ahold of intellectual property to speculate on later (get cheaper labor from external studio/smaller teams/outsourced development to work on game under crunch) this happened in the mid 2000's extensively as the PS3 era of consoles went on.

Post automatically merged: Jun 11, 2026

shutter original studio, developers, talent. if IP is successful through speculation + investment, assign a team who's sole purpose is to make that one thing. nearly identical to the process thru which consolidation works in every other industry

 

[dkpopman]

Life must be stressful for those who only do Xbox stuff. They were just up then they're right back to taking losses.

 

[Don Patch]

I kind of want to do the math on how many studios and employees were acquired during Microsoft's insane studio buyout rush a few years back vs how many studios have been shut down and people laid off since then.

In any case, with Microsoft its gonna get a lot worse before it gets any better. Halo 7 is still a ways off, Forza Motorsport is in a bad place and we're only just now seeing release windows for games they announced 5-6 years ago. They're likely gonna use component shortages to try and push cloud again but in a more appealing way since "This is an Xbox" didn't work for most people. Forza Horizon 6 is just about the only thing they've released all decade that wasn't mostly a dud. Even something like Starfield was successful but not nearly to the extent they'd have expected from a Bethesda game.

Yes, and:

It seems like the game-plan has changed from the time they were running amok buying things up and now. It looks like the Disney approach to me; the value is in the I.P.'s, not the studios or people. MS, as well as the lion's share of Western media companies, seem content with sequestering and then selling the entire 20th century (and early 21st century) back to people. And... well, it seems like for the most part peeps are content with buying it.
The M.O. being "It won't make money unless it has already made money".
The overheads on development, R&D, and focus testing all drop like crazy. Fold in machine generated content, and it's "instant money".
MS intends on leasing access to customers with game pass. Or, at the very least, being in charge of the publishing.

So the studios mean next to nothing as long as they have the right to the thing the studio made.
Sad really. Saw this coming from miles away...


(Eek, sorry I typed so much, lol)

 

[Mal]

(Eek, sorry I typed so much, lol)

im sorry but your only option for atonement will be to commit sudoku:

rest in piece

 

[Tsukishima]

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Microsoft always struck me as the company who joined the 'creating a videogame console country club' for the shits and giggles. They're too rich to EVER care about profits or anything that serves the creative art. If they did, it was pure happenstance and the rare moments of striking gold without the conscious thought.

Comes a time where if studios are bought by Microsoft they should KNOW what they're getting into at this point if they accept the deal. Let's stop pretending there's not going to be a second rake to walk into when we've already slammed ourselves hard on the first one.

 

[SamanthaSamantha's icon]

I kind of want to do the math on how many studios and employees were acquired during Microsoft's insane studio buyout rush a few years back vs how many studios have been shut down and people laid off since then.

They seem to be borrowing from EA's (crap) playbook.

And nobody wins when that's a strategy people use.

 

[Kovlak]

consolidation + get ahold of intellectual property to speculate on later (get cheaper labor from external studio/smaller teams/outsourced development to work on game under crunch) this happened in the mid 2000's extensively as the PS3 era of consoles went on.

Post automatically merged: Jun 11, 2026

shutter original studio, developers, talent. if IP is successful through speculation + investment, assign a team who's sole purpose is to make that one thing. nearly identical to the process thru which consolidation works in every other industry

Also put all that intellectual IP on Gamepass. Ca-ching!

The layoffs aren't surprising. Under Bond's leadership Xbox became less profitable, not more. And Sharma had months to turn the ship around. The sad thing is when push comes to shove, the main recourse to make a company more profitable is layoffs. Generally destroying whole areas of the company and knowhow, and making the company lesser.

 

[hormonemaximum]

microsoft is the tool chest that companies overseas are using the software of, including XBOX hardware as cheap distaff equipment to do drone strikes on civilians and using their in-house AI running on microsoft products to coordinate extermination of not just palestinians but as an economic branch of the US involved in war.

Microsoft

Microsoft is perhaps the most complicit tech company in Israel’s illegal apartheid regime and ongoing genocide against 2.3 million Palestinians in Gaza.

bdsmovement.net

they've pushed AI into recent windows updates against consumer wishes and have strangled parts of the gaming industry for years, one of the most evil hardware and tech companies out there.

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www.cnbc.com

most of the tech economy right now is purely speculation (ie: gambling, on a large scale) driven and has been pushing for this for years but i've always seen microsoft as fundamentally being one of the leaders at the head of the pack.

Post automatically merged: Jun 11, 2026

another thing to add is that videogames for the last two decades have really hinged on cheap, exploitable labor. it's why so many games push to crunch, burn out workers and fire them even if the game sells well. it is easier to open the office for another crowd out new college kids and amateur developers looking for a shot to join 'the game industry' than it is to invest in staff. invested staff often start demanding higher wages, overtime pay, benefits, unionization etc. they can also steer and drive development through knowledge.

Post automatically merged: Jun 11, 2026

when you look at the company culture of places like riot, blizzard, etc - these companies are massive shell industries utilizing brand and name recognition to open the doors to easily exploitable workers. the people who 'made' companies like that have long since quit or been fired, even as places like blizzard advertise themselves to new workers coming into the industry as the home of things like WoW or diablo. they're all ship of theseus companies mostly ran by investors.

 

[iamthemilkman]

Compulsion is the most likely studio to get shuttered, IMO. Honestly, it was a weird acquisition for Microsoft. Despite their games always being artisitically interesting, they're pretty mediocre in terms of gameplay. I liked all of their games (Contrast, We Happy Few, South of Midnight), but it seems like their games just don't sell particularly well. I'd assume that We Happy Few was their most successful because it had the most hype.

Hopefully Double Fine's safe, however Keeper and Kiln both flopped hard in sales. It seems like if it's not Psychonauts, their games generate very little interest.

Obsidian's another one that I could see in trouble. Neither Avowed or The Outer Worlds 2 did particularly well. Unlike Double Fine's games, both of those games were likely pretty costly to develop.

I'm sure another factor is where the devs are located and their salaries. A lot of these studios are in places where it's very expensive to live, meaning higher salaries and more costly game development.

I remember people cheering on the acquistions as they were happening, and Microsoft at the time, Phil Spencer in particular, were saying that it would be different this time, however I didn't believe them. I remembered FASA, Lionhead, Ensemble, etc.

 

[KenaiPhoenix]

Didnt I told you guys that this all 'Asha saved Xbox!!!... sorry my bad they rebrand it: XBOX!!!" was nothing more than corpo tactics to maintain whats left of their customers goodwill?

They where always going to do this since its inception and the big reset will be probably what Phil and Bond planned some while ago. And not because they where really smart, but because the board already decided this to happen.

 

[Regular Waterfall]

After that showcase? I'm not surprised...

 

[Psychonara]

Pretty much everyone in the industry is downsizing. Epic laid off tons of employees recently as well. The entire tech industry is in shambles atm because of the memory shortages, the AI bubble, tariffs, and the oil crisis.

As far as I'm aware they're still moving ahead with Project Helix, though they may need to rethink their "most powerful niche high-end console" approach unless they're going to do what Valve recently did with the Steam Deck and just basically cut out the budget options entirely.

 

[Vardalis]

The sad thing is when push comes to shove, the main recourse to make a company more profitable is layoffs. Generally destroying whole areas of the company and knowhow, and making the company lesser.

Yeah, this is always something that I get but also don't get. You're in the business of selling consoles and making games, yet you get rid of the resources which actually make games, almost ensuring the cycle will continue. I know it's a short term cost saving measure to make investor/shareholder reports better, but it's so asinine for long term growth (not that investors/shareholders give a rats).

It's like a kitchen getting rid of a chef because front of house packed and people are walking out due to lack of food cycling out.

 

[iamthemilkman]

French journalists are claiming something big's about to go down. Maybe multiple studios getting shuttered? Maybe the 15% layoff rumor turns out to be true? Either way, sounds real bad if there's any validity to it.

EDIT: Rumors swirling that everyone at Compulsion (Contrast, We Happy Few, South of Midnight) has been let go. No surprise given they were the most likely of the studios rumored to get shuttered.

 

[Vardalis]

EDIT: Rumors swirling that everyone at Compulsion (Contrast, We Happy Few, South of Midnight) has been let go. No surprise given they were the most likely of the studios rumored to get shuttered.

Yeah, no surprise at all. Their output seems to be very limited and I don't imagine South of Midnight doing very well based on me having never heard of it despite being pretty deep in the hobby.

I do remember We Happy Few though. I feel like people were really excited before it came out then it turned out to be a massive letdown. Also something about Kickstarter and then getting bought out by Gearbox?

 

[iamthemilkman]

Yeah, no surprise at all. Their output seems to be very limited and I don't imagine South of Midnight doing very well based on me having never heard of it despite being pretty deep in the hobby.

I do remember We Happy Few though. I feel like people were really excited before it came out then it turned out to be a massive letdown. Also something about Kickstarter and then getting bought out by Gearbox?

We Happy Few was pretty cool, IMO. I played it on the setting that did away with the survival stuff because I hate that shit, I just wanted a cool Bioshock-esque experience.

 

[Vardalis]

We Happy Few was pretty cool, IMO. I played it on the setting that did away with the survival stuff because I hate that shit, I just wanted a cool Bioshock-esque experience.

Completely understandable. I would've probably played it with that stuff on but who knows if that would've contributed to frustration with it.

Maybe I'll pick it up in a big sale someday. It's on a 75% discount right now, but considering what else I could get for that price... Eh. I can wait.

 

[dkpopman]

What's the odds that Xbox drops that OD game they were doing with KojiPro?

 

[Kovlak]

We Happy Few was pretty cool, IMO. I played it on the setting that did away with the survival stuff because I hate that shit, I just wanted a cool Bioshock-esque experience.

Completely understandable. I would've probably played it with that stuff on but who knows if that would've contributed to frustration with it.

Maybe I'll pick it up in a big sale someday. It's on a 75% discount right now, but considering what else I could get for that price... Eh. I can wait.

We Happy Few is an interesting well made game, but it's procedurally generated and the areas are very samey and it's easy to get lost.

 

[Vardalis]

Bit more for the thread. Kind of the same message as the OP but goes a little further talking about 'hard truths' they'll have to 'explore and understand' over the entire Xbox (sorry, XBOX) brand.

 

[Kovlak]

Ninja Theory was such a hot studio after Hellblade: Senua's Sacrifice, only to get stuck in Hell churning souless sequels to that game after Microsoft acquired them. Maybe it deserves to be put to pasture...