Microsoft has begun the largest restructuring in Xbox history, laying off approximately 3,200 staff and divesting at least four game development studios. The move, confirmed by Xbox boss Asha Sharma in an Xbox Wire post, marks a significant shift in strategy as the company aims to streamline operations and focus on profitable franchises.
Layoff Details and Studio Changes
Of the 3,200 Xbox employees affected, 1,600 are being let go immediately, with the remainder leaving over the current financial year. Microsoft as a whole is cutting 4,800 jobs today, with Xbox and the commercial sales division bearing the brunt. The layoffs include around 300 staff at Double Fine, Undead Labs, Ninja Theory, and Arkane Lyon, though these studios are not being closed but rather sold or allowed to go independent.
Ninja Theory, known for Hellblade, has already been sold to an undisclosed buyer; the new owner will be announced next year. Undead Labs, creator of State Of Decay, has also found a buyer, ensuring State Of Decay 3 will eventually release. Double Fine, maker of Psychonauts, will receive 'runway funding' from Microsoft to develop new games and seek investors. Arkane Lyon's fate remains uncertain due to French labour laws, but it is expected to be sold or go independent; the future of Marvel's Blade depends on the outcome.
Strategic Shift Under Asha Sharma
Sharma's post acknowledged that Xbox is not currently profitable and implied that the acquisition spree under former boss Phil Spencer was a mistake. She outlined plans to flatten management structures from up to 14 layers to a minimum of five, or even three. Veteran executive Helen Chiang has been promoted to chief operating officer, overseeing hardware, software, and services, making her second only to Sharma.
Sharma stated, 'These changes are about a bigger future for Xbox, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we’ve seen before.' She also confirmed that no first-party announced games are being cancelled, but the focus will shift to major franchises like Halo, Gears Of War, Forza Horizon, Fallout, and The Elder Scrolls.
Industry and Financial Impact
The divested studios are known for smaller, artistic titles that often underperform financially. Their acquisition during Spencer's buying spree is now seen as a contributing factor to Xbox's struggles. Despite the cuts, Sharma vowed to invest as much in Xbox as ever, but with 'greater focus, greater discipline, and greater clarity.' The goal of reaching 'more than a billion people each day' remains, though it appears increasingly distant.
