Xbox to lay off over 3,200 employees

Earlier in June, Bloomberg reported that Xbox was planning to make major layoffs in July. Subsequent reporting claimed South of Midnight developer Compulsion Games, Keeper studio Double Fine, Senua’s Saga: Hellblade 2 maker Ninja Theory, State of Decay creator Undead Labs, and Blade studio Arkane were all at risk of being shut down by Microsoft.

Now that the calendar has flipped to July, those reports have come to pass: on Monday, Xbox CEO Asha Sharma announced that Xbox is laying off over 1,600 staffers. It plans to lay off over 3,200 in total throughout its new fiscal year. Microsoft, which owns Xbox, is planning to lay off 4,800 employees in total. “Our business today is not healthy,” Sharma stated in a memo sent to Xbox employees.

Compulsion Games and Double Fine Productions will become independent studios “with their IP, catalog, and runway for their next games.” Ninja Theory and Undead Labs will have new owners “with funding” to complete their games Senua and State of Decay 3, respectively. However, the specifics of who will take on those studios have not yet been shared.

Arkane’s leadership “is beginning required consultation with its Works Council to review potential strategic options” as the studio’s fate remains up in the air.

The layoffs also include employees throughout other divisions. Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios are all seeing a reduction in their workforce. Sharma does note none of Xbox’s previously announced first-party games are being canceled because of these layoffs.

The Xbox layoffs come after a brief period of positivity following Sharma taking over. The new CEO’s charm offensive started by getting you to always think about Xbox by announcing initiatives like Player Voice and rebranding as the all-caps XBOX. Players wanted exclusives, and the company responded by touting the next Gears of War and 2027’s Clockwork Revolution would be Xbox console exclusives. Most notably, it lowered the price of Game Pass, but also announced future Call of Duty games wouldn’t be day-and-date releases on the service.

Now, the goodwill Xbox garnered from the first few months under Sharma is evaporating. The layoffs will surely leave a sour taste in players’ mouths, as will the third set of price increases for Xbox hardware in just 13 months. Starting Aug. 1, Xbox Series S 512 GB, the cheapest Xbox, will cost $499 while the most expensive, Xbox Series X, will be $799. These models were priced at $299 and $499 back in 2020.

The layoffs and hardware increases come after Xbox published a dire memo to employees titled “Next 100 Days: Xbox Reset.” It read, “For some of you, these realities will be surprising and even frustrating to discover. We won’t succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results.” A month after its publication, we’re starting to see the harsh reality of what that “Xbox Reset” looks like.