Microsoft is rethinking its gaming business, and one of its first steps is shedding staff.
The tech giant laid off 4,800 employees on Monday, accounting for roughly 2.1% of its global workforce. The cuts, which BI’s Ashley Stewart first reported last week, mostly impact Microsoft’s sales and Xbox business.
Xbox accounted for 1,600 cuts on Monday, with the gaming division aiming to ultimately shed 3,200 jobs during the current fiscal year, which ends in June. That’s 20% of Xbox’s workforce.
New Xbox CEO Asha Sharma didn’t hold back when explaining why it’s taking such drastic measures.
“Our business today is not healthy,” Sharma wrote in the email to staff. “We are operating at margins that are 3—10x lower than comparable platform and publishing businesses.”
Sharma, who was named CEO earlier this year, highlighted the challenges with Xbox’s aggressive expansion of its studio portfolio. She said in a typical year it loses 64 cents for every dollar it invests.
Changes include a newly formed COO role focused on P&L, along with an organizational flattening that’ll ideally have no more than three layers of management. Sharma said teams will have makers, player-coaches and directly responsible individuals, who own key decisions.
“History is full of companies that mistake longevity for inevitability. We will not be one of them,” Sharma wrote.
Things aren’t going well for the wider gaming industry.
BI’s Sarah E. Needleman reports on why Xbox’s challenges are representative of bigger problems plaguing the whole video-game industry.
Sony’s decision to scrap physical PlayStation discs in favor of digital downloads starting in 2028 has led to backlash. Fans and even some legendary game developers raised issue with the decision
Part of the beef with the digital-only switch is a fear that Sony could cut access to games people already purchased. (That exact scenario recently happened with Sony pulling access to more than 500 StudioCanal titles due to licensing agreements.)
There’s also the secondary market. Users wouldn’t be able to resell a game they don’t have a physical copy of.
The memory shortage is also complicating things, with Xbox among the retailers raising prices. Gaming analysts previously told BI’s Ben Shimkus that it’s starting to make games feel more like a luxury hobby than a fun pastime.
The gaming industry could get a major level-up soon: Grand Theft Auto VI.
The massively popular crime-drama series is releasing its first new installment in 13 years this fall in what is expected to be the biggest video game release of all time. GTA VI is the type of game that can pull a lot of people back into gaming, and even convince them to buy a new console to play it.
But the increased attention is coming as the industry navigates a memory shortage and a major console attempts an overhaul.
Ultimately, GTA’s success might not lift the rest of the industry. Big fires burn bright, but they need a lot of oxygen to grow. I talked about some of my concerns on my TikTok a few weeks ago.
Whatever the case I’ll be watching … and playing.
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