Microsoft reportedly plans to implement major layoffs within its Xbox division as the fiscal year ends on June 30, with experts suggesting these cuts may be the largest single workforce reduction in gaming history. George Broussard, co-founder of 3D Realms, indicated that the scale of the cuts is unprecedented, predicting that “the devastation is going to reverberate like the meteor that took out the dinosaurs” and could lead to lasting unpopularity for Xbox.
Reports, first cited by Bloomberg, state that layoffs will be executed under new CEO Asha Sharma, who characterized the business as “not in a healthy spot” and has called for a “reset.” The layoffs are expected to start after June 30, coinciding with the end of Microsoft’s fiscal year.
Several Xbox studios, including Compulsion Games, Double Fine Productions, and Ninja Theory, are reportedly negotiating to become independent or face closure. Additionally, Undead Labs, known for Developing State of Decay 3, also faces potential closure, as confirmed by multiple sources.
According to sources, the layoffs are driven by Microsoft CFO Amy Hood, who is looking for significant savings to mitigate losses in the gaming division, which currently operates at a profit margin of around 3%. This margin is substantially lower than expected within the gaming sector.
In conjunction with the workforce reductions, Xbox has reportedly frozen negotiations for new third-party Game Pass deals. Developers were informed at the First Playable trade show in Italy that active negotiations had been halted. However, some sources, including Windows Central, suggested that this freeze might be temporary and connected to the fiscal year transition rather than a permanent cessation of third-party funding.
If the upcoming layoffs exceed the 1,900 cuts made in January 2024, this would mark the most substantial workforce reduction in the gaming industry’s history.
