Xbox is reportedly enacting cost-saving measures by terminating contracts with external vendors, a move that precedes anticipated mass layoffs of full-time employees and the potential spin-off of several first-party game studios. Individuals working with Xbox on various services have indicated that their contracts are not being renewed as the company heads into its new fiscal year. Some contractors involved in supporting Xbox's recent summer showcase have already been informed their roles will be cut from next year's budget.
The company's fiscal year concludes on June 30, with widespread layoffs affecting internal staff expected in the coming weeks. Earlier in June, employees at Compulsion Games were notified of the studio's precarious situation, with ongoing negotiations aimed at facilitating a sale or buyout. Similar discussions are reportedly occurring at Double Fine and Ninja Theory.
While details surrounding the broader organizational changes at Xbox remain somewhat unclear, speculation has arisen regarding other studios. A recent rumor suggested Undead Labs, the developer of the State of Decay series, might also be at risk. While this claim could not be corroborated, it has led some to wonder if the studio has increased the sharing of footage from its long-in-development sequel, State of Decay 3, to attract outside investor interest.
Additionally, Xbox's primary public relations agency, Assembly, recently underwent layoffs that included at least one individual working on the Xbox account. However, it was later clarified that these layoffs were part of a wider agency reorganization and not directly tied to Xbox's internal restructuring. Employees at larger studios under the Xbox umbrella, such as Activision Blizzard and Zenimax, are currently uncertain about their potential impact. Unionized Xbox workers are also preparing for upcoming negotiations. Official communications regarding these changes are expected to omit those affected by contract terminations, whose steady work is now disappearing.