Xbox is implementing substantial layoffs, with CEO Asha Sharma announcing that over 1,600 employees were let go on Monday and a total of more than 3,200 expected throughout the current fiscal year. Microsoft, the parent company, plans to lay off 4,800 employees in total.
Sharma stated in a memo to employees that "Our business today is not healthy," indicating a strategic shift within the company. This round of layoffs impacts various prominent studios and divisions, including Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios. The announcement follows recent reports from earlier in June that suggested major workforce reductions were imminent in July.
Several development studios are facing significant changes. Compulsion Games, the developer behind "South of Midnight," and "Psychonauts" studio Double Fine Productions, will transition to independent studios, retaining their intellectual property and existing game catalogs. Ninja Theory, creators of "Senua's Saga: Hellblade 2," and Undead Labs, known for "State of Decay," will find new ownership with funding secured to complete their respective upcoming games. However, specific details regarding the new owners for these studios have not yet been disclosed. Meanwhile, the leadership at Arkane is reportedly entering consultations regarding "potential strategic options" for the "Blade" studio.
Despite the workforce reductions, Sharma noted that none of Xbox's previously announced first-party games are slated for cancellation. This news comes amidst a period of mixed signals for Xbox, following a recent charm offensive that included initiatives like Player Voice and price adjustments to Game Pass. The company had also touted upcoming console exclusives such as the next "Gears of War" and "Clockwork Revolution," originally slated for 2027.
However, the goodwill generated by these initiatives appears to be diminishing. The layoffs, coupled with impending hardware price increases, are likely to impact player perception. Starting August 1, the Xbox Series S 512 GB model will retail for $499, and the Xbox Series X will cost $799, marking a significant increase from their 2020 launch prices of $299 and $499, respectively. This marks the third hardware price increase for Xbox within the last 13 months.
These developments follow a candid internal memo from Xbox titled "Next 100 Days: Xbox Reset," which acknowledged difficult truths and the need for change. "For some of you, these realities will be surprising and even frustrating to discover," the memo read. "We won’t succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results." The current layoffs and price adjustments appear to be the initial manifestations of this "Xbox Reset" strategy.
