GoKawiilXbox is doing a "reset," but can it reboot the business?
Microsoft's gaming brand cut 1,600 employees on Monday, with an additional round of layoffs expected before June 2027, according to an employee memo from Xbox CEO Asha Sharma. The layoffs are part of a massive restructuring by Microsoft, which is cutting about 2.1% of its total workforce, or roughly 4,800 employees.
Approximately 350 people affected are from four gaming studios that Xbox plans to offload to outside management: Compulsion Games, Double Fine, Ninja Theory and Undead Labs, all of which were bought within the last eight years. A fifth, Arkane Studios in France, could also be sold or spun off.
Sharma, who took over Microsoft's gaming division in February, said in her statement that Xbox's business operation is "not healthy," that costs are too high and the customer base too low. She said Game Pass -- a monthly subscription that provides access to Xbox's collection of games -- and the company's in-house portfolio of games has not grown fast enough.
Over the past few months, Sharma seemed to acknowledge Xbox's weaknesses and pushed changes to address them, including lowering the price of the subscription service.
Xbox has had a tumultuous history, rising to dominate earlier console generations before falling to Sony and Nintendo in the last decade. The original Xbox console launched on Nov. 15, 2001, to compete with Sony's PlayStation 2 and the Nintendo GameCube.
While Xbox console sales were at or near No. 1 in the US during the Xbox 360 era in the early 2010s, by the prior and current console generation defined by the Xbox Series X and PS5, Sony's PlayStation is now the global market leader, accounting for nearly half of all sales, with Nintendo's Switch at 27% and Xbox at 23%.
What happened to Xbox
In a video titled "How Things Got So Bad at Xbox," Bloomberg reporter Jason Schreier argues that Xbox's current turmoil is the result of inconsistent strategy, shifting priorities and a late-stage push for profitability after massive spending.
Schreier traces Xbox's decline from a console-first business to a sprawling, internally conflicted organization with hardware, software, subscriptions and studios pulling in different directions, not to mention expensive acquisitions. Microsoft's $68.7 billion purchase of Activision Blizzard in October 2023 -- the largest acquisition ever in the video game industry -- was followed by repeated Xbox layoffs and the cancellation of games.
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