Senator Bernie Sanders has publicly criticized Microsoft's recent decisions regarding its Xbox division, specifically citing the substantial layoffs and upcoming price increases for consoles. Sanders contends that these actions serve as evidence that corporate tax breaks do not translate into job creation or benefits for consumers.
Sanders highlighted Microsoft's reported profit of $101 billion in the last fiscal year, coupled with significant tax breaks and high executive compensation, including $96 million for CEO Satya Nadella. He contrasted this with the company's move to raise Xbox console prices by up to $150 and eliminate 3,200 jobs. "Please don’t tell me corporate tax breaks create jobs. It never trickles down," Sanders stated.
Xbox Layoffs and Studio Cuts
Microsoft announced that 3,200 employees within its Xbox division will be laid off during the current financial year, with an initial wave of 1,600 departures. The cuts also extend to studios acquired to bolster the Game Pass service, with four studios being shut down and another potentially facing sale or closure.
These workforce reductions follow a significant price increase for Xbox consoles, which Microsoft attributed to an ongoing "components crisis." The price hikes, effective August 1, will raise the cost of Xbox Series consoles by $100 for 512GB models and $150 for 1TB models. The 2TB model will be discontinued.
Financial Performance and Strategic Challenges
For its fiscal year 2025, Microsoft reported a record net income of $101.8 billion on $281.7 billion in revenue, driven by growth in cloud, AI, and productivity sectors. However, the Xbox business reportedly operates with lower profit margins compared to similar industry segments. According to a memo from Xbox leadership, the division has seen declining revenue over the past five years despite substantial investment, particularly in Game Pass and multi-platform strategies.
Xbox leadership acknowledged that growth expectations for Game Pass and other initiatives were not met, leading to a weakening of the core business. The memo also cited the "most severe hardware crisis in its history" as a factor necessitating a strategic reset for Xbox. Microsoft stated that console storage and memory prices have more than doubled and are expected to increase further, impacting the consumer electronics industry broadly.
Broader Context and Union Response
The Xbox layoffs are part of larger restructuring efforts across Microsoft, which announced plans to cut approximately 4,800 jobs, or 2.1% of its total workforce. This is not the first time Senator Sanders has voiced concerns about the video game industry; in 2022, he and other senators questioned Microsoft's proposed acquisition of Activision Blizzard due to concerns about industry consolidation and its impact on workers.
The Communications Workers of America (CWA), a union representing some Xbox staff, expressed disappointment with Microsoft's actions. CWA President Claude Cummings Jr. stated that despite neutrality agreements, the company has been slow in contract negotiations. He affirmed the union's commitment to fighting for the rights of affected workers, emphasizing that the union represents hundreds of thousands of members.