Xbox faces reported layoffs, closures and game cancellations
Microsoft’s gaming division is bracing for cuts after leaders warned staff of an Xbox “reset,” according to multiple reports.
By James Whitfield · Staff Writer
3 min read
Microsoft’s Xbox division is preparing for major job cuts that could reshape its studio roster and game lineup, according to reports from The Verge and Bloomberg. The reports follow a June 10 memo in which Xbox CEO Asha Sharma and chief content officer Matt Booty told employees the business needed a “reset.”
In that memo, Sharma and Booty pointed to pressure from a 3 percent “accountability margin,” higher console component costs tied to shortages in memory and storage, and a studio system they described as “over extended,” according to The Verge. The planned cuts are expected in July, with The Verge reporting they could be announced on July 6.
Studios and games under review
The Verge’s Tom Warren reported June 30 that Microsoft is considering closing at least five studios as part of the cost-cutting effort. The same report said Microsoft is weighing cancellation of Marvel’s Blade, the game in development at Arkane Studios.
The Verge also reported that the layoffs could involve studio closures, spinoffs, mergers and canceled games. Bloomberg has reported that the reductions would be major and would include budget cuts in marketing and other parts of the Xbox business.
Some studio decisions may already be underway. The Verge reported June 15, citing a source, that Xbox is closing Ninja Theory, the studio behind the Hellblade series, while staff were hoping to find a buyer. Bloomberg reported that several Xbox studios, including Compulsion Games and Double Fine, were in active talks about spinning off.
Kotaku reported that Microsoft planned to shut down Compulsion Games, the studio behind South of Midnight, and later noted that studio leadership was in talks with Microsoft. The Verge separately reported continued turmoil at Xbox, including studio closure plans and executive departures.
Outside partners affected
IO Interactive, known for Hitman and 007 First Light, said it is laying off staff after a relationship with an unnamed outside partner on Project Fantasy ended. IO described the project as an online fantasy RPG and said it remains fully committed to finishing it.
Kotaku and Bloomberg reported that Microsoft had been set to publish Project Fantasy. IO did not say how many workers would be affected by its staffing cuts, according to The Verge.
IGN reported that Hideo Kojima’s Xbox horror game OD remains part of Microsoft’s publishing plans. The Verge said Xbox had already dropped a new franchise from IO Interactive, while other games remain under review.
Hardware pressure adds to the reset
The studio review comes as Microsoft is also raising Xbox console prices. Microsoft said 512GB models will rise by $100 on Aug. 1, while 1TB models will increase by $150, according to The Verge.
That would put the Xbox Series S at $499.99, the all-digital Xbox Series X at $749.99 and the disc-drive Series X at $799.99. Microsoft also said it is ending sales of the 2TB Xbox Series X.
Microsoft said in a blog post that storage and memory prices have risen more than 2.5 times and could double again by fall 2027. The company said consoles are under particular pressure because they are usually sold for less than they cost to build.
Xbox strategy chief Matthew Ball told The Game Business that Microsoft is rethinking plans for its next-generation Project Helix console while remaining committed to shipping it. The Verge also reported that Microsoft has considered broader structural options for Xbox, including a wholly owned subsidiary, a joint venture or a possible spinoff, citing The Information.
This story draws on original reporting from The Verge.