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Xbox CEO Asha Sharma has announced a number of 'painful' changes coming to the company, with thousands of layoffs accompanied by studio closures that reflect the 'unhealthy' state of business for Microsoft's gaming division.
You'd have to be living under a rock for the past 13 years to be unaware of the challenging situation that Xbox has found itself in, as while the introduction of Game Pass has been hailed as a success for consumers, it has failed to manifest a change in fortunes for the company behind it.
Falling considerably behind Sony and PlayStation in the console wars since the PS4 released – in part due to its stance on used games, which now serves as ironic considering the recent news regarding the elimination of physical releases – Xbox attempted to make up for that loss with aggressive acquisitions and consumer-friendly moves.
What that has seemingly resulted in in a business model that's not deemed to be healthy by current leadership, prompting significant changes and cost cutting measures that have been expected for a while.
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Revealing the news in a letter to Team Xbox employees across the world, published to the public in an Xbox Wire blog post, Sharma outlined that the company is "beginning the most significant restructure in Xbox history.
"After careful consideration, I've made the difficult decision to reduce our team by approximately 3,200 throughout FY27," the Xbox CEO continued. "This will include approximately 1,600 role eliminations today, and in addition, four studios will leave Xbox to new management."
While there was plenty of speculation in the past few weeks regarding the studios that Xbox would be letting go, the four that have either been closed or gone independent are Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Lab.
"I know this is painful," Sharma expressed. "These changes will directly affect people who have poured their creativity into building Xbox. Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved Xbox. Today's decisions do not reflect their talent or dedication."
Sharma has indicated that the current margins for Xbox are '3-10x lower' than competing platforms and publishing businesses, which we can only presume are the likes of Nintendo, PlayStation, and perhaps a major player like EA.
She declared that while services like Game Pass have 'created meaningful value', they failed to grow at a sustainable pace and caused Xbox's core business to 'weaken' as a result, with the recent hardware crisis caused by AI proving to be the final nail in the coffin.
It's certainly a tough time to be an Xbox fan, as only recently gamers had to face the brunt of further price increases for consoles — proving to be a worrying sign for the prospective price of Project Helix, the next generation of Xbox consoles which many already expected to be prohibitively expensive.
