Xbox CEO Asha Sharma has outlined a new strategic direction for Microsoft's gaming division in the wake of recent mass layoffs impacting roughly 20% of the Xbox workforce. The company plans to refocus on its core business, including investing more heavily in flagship intellectual properties like Minecraft, and streamlining its studio management structure by removing several layers of leadership. "In order to grow, we made a bunch of bets--and as we did that, we inherently didn't focus on the core business," Sharma stated in an interview. "The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin."
A significant area of renewed focus will be on Xbox hardware itself, which currently accounts for 80% of the division's business. This pivot comes at a challenging time for the industry, with escalating costs and ongoing component shortages. Xbox hardware revenue has reportedly seen a 33% decrease according to Microsoft's latest financial reports, exacerbated by previous price increases on the Xbox Series X|S consoles. The Xbox Series X 1TB model's price has climbed from $500 to $800, while the Xbox Series S has risen from $250 to $500, with further price hikes anticipated. The next-generation console, codenamed Project Helix, is also expected to carry a substantial cost.
To potentially mitigate rising expenses, Microsoft is reportedly exploring options such as foregoing a disc drive in Project Helix. This mirrors industry trends, with rivals like Sony confirming they will cease support for PlayStation discs after 2028, and rumors suggesting the PlayStation 6 may also omit a disc drive. Microsoft is reportedly developing a disc-to-digital feature intended to allow players to transition their physical game libraries to the next generation of Xbox consoles, with support for both Xbox One and Xbox Series X|S titles.
The restructuring has drawn criticism, with one industry expert describing the situation as "catastrophic mismanagement." The significant layoffs have also led to changes within Xbox's studio portfolio. Double Fine and Compulsion are set to become independent studios, Ninja Theory and Undead Labs have been sold, and Arkane Lyon is undergoing a mandatory consultation period to determine its future.