September 12th 2024.
It's happened once again. Microsoft has made the difficult decision to lay off hundreds of employees from its Xbox division. This news comes straight from Phil Spencer, a top executive at the company, who has openly acknowledged that today has been another challenging day.
While the frequency of these layoffs and shutdowns has decreased in recent months compared to earlier this year, the crisis in the Western video game industry continues to loom. And it's likely to persist for at least the next 12 months. It's a trend that has affected nearly every major publisher in the West, resulting in the loss of hundreds of jobs despite these companies still raking in huge profits – just not as much as they had hoped for.
Despite Microsoft achieving the monumental feat of becoming a trillion-dollar company this year and spending a whopping $75.4 billion to acquire Activision Blizzard, the layoffs within their own company have not slowed down. In fact, since January, they have let go of a staggering 2,550 employees, with 1,900 of them being laid off at the start of the year and an additional 650 this week.
There are several reasons why Xbox is being forced to let go of so many employees. One of the main factors is that acquisitions often result in redundancies as multiple people end up performing the same tasks. And since the Activision Blizzard deal was the biggest in both Microsoft's and the gaming industry's history, it's no surprise that many jobs were duplicated.
But the issues with Xbox itself cannot be ignored either. Console sales have been declining, and there has been lower than expected uptake on Games Pass. Although Microsoft has not openly discussed it, their shift towards releasing more games on multiple platforms is a clear indication that they are struggling to turn a profit solely on Xbox and PC due to the rising costs of game production.
An email was sent to all Microsoft Gaming employees from Phil Spencer, the head of Xbox, and IGN was able to obtain a copy. In this email, Spencer tries to soften the blow by using vague explanations and generic platitudes. He claims that he has been trying to minimize disruption while also welcoming new teams and allowing them to do their best work.
According to Spencer, most of the job losses will occur in corporate and support functions, but he also hints that some developers will also be affected. He wrote, "With these changes, our corporate and support teams are now better equipped to support our studio teams and business units with scalable programs and resources to meet their needs. Additionally, as part of running the business, other teams may also experience some changes as they adapt to shifting priorities and manage the performance of games. However, no games, devices, or experiences will be canceled, and no studios will be shut down as part of these adjustments today."
He closed the email by acknowledging the difficulty of this decision and stating, "Throughout our team's history, we have had great moments, and we have had challenging ones. Today is one of those challenging days."
The layoffs in January resulted in the closure of several studios, but there was some good news for the team at Tango Gameworks, the developer behind Hi-Fi Rush. They were acquired by Krafton, and about half of the original staff will continue working at the studio.
Once again, Phil Spencer and Microsoft have made headlines with these job cuts. If you have any thoughts on this matter, we encourage you to share them with us. Send us an email, leave a comment below, follow us on Twitter, and sign up for our newsletter.
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