Microsoft's recent restructuring within its Xbox division has created an environment of deep uncertainty and fear among remaining employees, according to a new report detailing testimonies from those affected by the layoffs. The immediate dismissal of 1,600 employees, with another 1,600 slated for cuts by next summer, has left staff in a state of anxiety, unaware of who might be next.
"I don't know how anyone remaining at Xbox Studios can feel safe knowing another 1,600 cuts are coming," one affected source told Game Developer. "And even then, what happens after June 2027? Will we get layoffs in July for the third year in a row?" The report indicates that staff were kept in the dark for weeks about the impending layoffs, leading to speculation and distress. When the announcements were made, they often came via brief, one-way video calls where no questions could be asked. At id Software, some employees learned of their termination only 10 minutes before a meeting, with immediate revocation of their digital access preventing any communication.
The impact on id Software is particularly stark. The studio lost 136 staff members, raising questions about its capacity to develop games and maintain its proprietary id Tech engine. While id insists it retains sufficient personnel, a source suggests that critical expertise for maintaining and evolving the engine has been lost, potentially rendering it obsolete. Furthermore, approximately 90 percent of the team responsible for core AI and gameplay development has been laid off, including a long-serving employee with deep ties to the studio's foundational history.
These cuts extend across Bethesda and ZeniMax Media, affecting even Bethesda Game Studios, the developer of franchises like The Elder Scrolls and Fallout. "Bethesda Game Studios lost a lot of talent this week," a source commented. "Xbox says they want to focus on their core franchises like Fallout and Elder Scrolls but that's going to be harder than ever now."
The widespread layoffs have led to significant concern over the loss of decades of accumulated experience and expertise, knowledge that is exceptionally difficult to replace. "The institutional knowledge that has been lost or will be lost completely as individuals leave the gaming industry altogether is staggering," one person stated. "Those that are left must be scrambling to pick up the pieces."
Microsoft has reportedly shed or is in the process of shedding several studios, including Double Fine, Compulsion Games, Ninja Theory, Undead Labs, and Arkane. The stated strategy appears to be a refocusing on core intellectual properties. However, with its expanded portfolio following acquisitions of Bethesda and Activision Blizzard, Microsoft faces a challenge in managing its numerous franchises and studios. As noted by former PlayStation leader Shawn Layden, Xbox must decide whether to prioritize its role as a publisher or a platform holder, as attempting to be both may prove untenable.