Xbox has announced significant workforce reductions and studio restructuring as the division aims to address financial challenges. The company plans to lay off 3,200 employees throughout the current fiscal year, with 1,600 cuts beginning immediately.
Asha Sharma, head of Xbox, stated in a company-wide memo that the business is not currently healthy, citing margins significantly lower than comparable platforms and publishing businesses. She explained that while investments in Game Pass, multi-platform releases, and a broader content portfolio created value, they did not meet expected growth targets, weakening the core business and increasing costs.
Several Xbox Game Studios are undergoing changes. Compulsion Games, the developer behind South of Midnight, will spin off to become an independent studio, retaining its intellectual property and game catalog. Similarly, Double Fine Productions is transitioning back to an independent entity, also keeping its IP and existing games.
Discussions are underway for the potential sale of Ninja Theory, though the studio will continue its work on the Senua franchise. Undead Labs, the developer of State of Decay 3, is also in talks to find a new owner while continuing development on its open-world zombie series.
The future of Arkane is under review, with the studio's management consulting its Works Council in France regarding potential strategic options, a process that could be impacted by local labor laws. The status of its upcoming game, Marvel's Blade, remains uncertain.
Beyond the studios, Bethesda and ZeniMax will also see layoffs, with investment priorities shifting towards higher-priority games. Blizzard Entertainment is also facing layoffs and is being directed to focus on key game titles. King and Mojang, described by Sharma as critical platforms with large player bases and significant geographic and demographic reach, will also implement layoffs and will now report directly to Sharma.