Microsoft's Xbox division is reportedly preparing for substantial layoffs and potential studio closures, according to sources cited by Games Beat and reported by Rock Paper Shotgun. The cuts are described by an anonymous insider as "the biggest single cut series for Xbox," a significant statement given the company's previous layoff of approximately 1,900 gaming employees in January 2024.
The studio behind State of Decay, Undead Labs, is allegedly among those facing potential closure. Other prominent studios reportedly impacted include Bethesda, known for The Elder Scrolls and Fallout series, and Blizzard Entertainment, the creators of World of Warcraft and Diablo. These potential closures and layoffs come despite recent reports indicating an executive desire to increase the output of Elder Scrolls and Fallout titles.
Earlier reports had already indicated that other studios like Double Fine, Ninja Theory, and Compulsion Games might be facing closure or sale. The recent unveiling of a trailer for Senua's Saga: Hellblade II at Summer Game Fest was suggested as an effort to generate interest in acquiring Ninja Theory.
This wave of potential cutbacks is partly attributed to overexpansion during the COVID-19 pandemic's boom period. In response to these and previous reductions, many developers within Xbox and Activision Blizzard have pursued unionization. Microsoft signed a neutrality agreement with the Communications Workers of America (CWA) in 2022, which pledged not to interfere with unionization efforts. This agreement was seen by some as a move to secure regulatory approval for the acquisition of Activision Blizzard.
Union members have voiced concerns about the impact of these repeated layoffs. Allison Veneto, a senior editor for franchise development at Blizzard, stated that each round of layoffs results in the loss of valuable talent and institutional knowledge. She added that remaining employees face increased workloads while constantly worrying about their own job security, which detracts from their ability to focus on game development.
Mahreen Fatima, a senior environment artist at Blizzard, highlighted what she perceives as a disparity between the company's financial resources and its treatment of employees. She noted Microsoft's substantial investments in artificial intelligence and the high salaries of executives, contrasting this with the feeling of dispensability among both contract and full-time employees. Fatima also pointed out recent console price increases, suggesting that the company is not financially constrained and is instead choosing not to protect its workforce.
With Microsoft's fiscal year concluding, official announcements regarding the scale of these workforce reductions are expected to coincide with routine financial reporting to investors.