Xbox Plans to Cut 3,200 Jobs, Divesting 5 Studios - News
by William D'Angelo , posted 4 hours ago / 1,469 Views
Xbox CEO Asha Sharma announced it is planning to reduce its team by 3,200 employees with 1,600 planned for today and another 1,600 by the end of current fiscal year, which ends June 30, 2027.
Five first-party studios that have previously been reported at risk of shutting down are being divested or in the process. The reduction in the size of Xbox includes these studios.
Keeper and Kiln developer Double Fine Productions and South of Midnight developer Compulsion Games are returning to independence. Both studios have been given funding by Microsoft in order to help start development on their games while they look for additional financing. Both will retain all their IP and back catalogue.
Hellblade developer Ninja Theory and State of Decay developer Undead Labs have found new owners as they both require higher financial requirements. The deals have yet to be closed. The new owners will get the studios IP and the back catalogue. Both will release new games next year with Senua and State of Decay 3.
Dishonored developer Arkane Lyon is entering the same process as the other studios above as Microsoft hopes it can avoid closure for the team.
When it comes to layoffs at Xbox, the 3,200 planned redundancies will take place across the whole of Xbox. This includes first-party developers. Some studios will barely see any cuts, while others will be hit harder. No details on which studios will be hit the hardest.
The Xbox platform team has been confirmed to be hit hard. This team covers hardware, software services, xCloud, and Xbox Game Pass. Xbox hopes these cut will simplify the business and allow it to move faster.
Xbox is also shifting from a decentralized studio model to a more centralized approach that will focus on its biggest franchises.
Minecraft developer Mojang and Candy Crush developer King will now report directly to Xbox CEO Asha Sharma.
Helen Chiang, who previously ran the Minecraft business, has been promoted to the Chief Operating Officer. The Corporate Vice President of Xbox Product Services Dave McCarthy is retiring after 17 years with Xbox.
Bloomberg's Jason Schreier is reporting ZeniMax will be facing a "significant overhaul and will pivot to focus on its biggest franchises: Fallout, The Elder Scrolls, Doom, Quake and Wolfenstein."
Read the full message from Xbox CEO Asha Sharma below:
Team,
We are beginning the most significant restructure in XBOX history. After careful consideration, I’ve made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include approximately 1,600 role eliminations today, and in addition, four studios will leave XBOX to new management. I recognize that a year-long restructuring creates additional challenges. Unfortunately, it is not possible to make all the necessary changes in a single day, and I wanted to be direct about the scale.
I know this is painful. These changes will directly affect people who have poured their creativity into building XBOX. Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved XBOX. Today’s decisions do not reflect their talent or dedication.
Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected. As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset XBOX.
First, we will reset our content portfolio.
Since 2018, we have aggressively expanded our studio portfolio while the number of games created each month across the industry now outpaces the last ten years combined. We now find ourselves competing not only with the largest publishers, but also with smaller independent studios. It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested. As we reset XBOX, we will help independent creators succeed by providing open development tools and audiences to realize their vision.
Compulsion Games and Double Fine Productions will return to management and transition to independent studios with their IP, catalog, and runway for their next games. Ninja Theory and Undead Labs have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3. In France, Arkane’s management is beginning required consultation with its Works Council to review potential strategic options.
We are also making reductions across other units, and in some cases, shifting investment to focus on higher priority projects. These changes vary in size across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and XBOX Game Studios. None of our first party publicly announced games or projects are being cancelled as part of these reductions.
In addition, Mojang and King will now report directly to me. These two studios have increasingly become platforms and are our largest by monthly active players. They bring critical geographic, demographic, and differentiation to XBOX.
Second, we will reset our platform.
We know that great technology gets better when it gets simpler, not bigger. Today, in some parts of the company, work passes through as many as 14 layers of management. Our platform teams are 40% larger than they were at the start of this generation, even as our player base and playtime have declined. That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players. As we reset XBOX, we will simplify.
We will reduce management layers to no more than 5, and where possible, 3. We will deliver success through a flatter organization that is built around makers (individual contributors focused on building), player-coaches (leaders who remain deeply involved in the work while developing their teams), and directly responsible individuals (DRIs) who own key decisions and outcomes. And we will streamline how we work across our tools, with a cleaner code base, shared services, and 50% reduced vendor spend.
Third, we are resetting how we operate.
As XBOX grew our headcount, we became more fragmented. Teams, studios, and functions often operate independently, and it became harder to work towards a shared goal, make the right tradeoffs, and get things done.
For the first time, we are establishing a Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services. Helen Chiang has been promoted to this role and will report directly to me. Over nearly two decades at XBOX, Helen has helped build some of our most important businesses, from XBOX Live to leading Mojang and the Minecraft franchise. She will bring our businesses together under one operating model, making sure we make clear investment decisions, learn from our successes and failures, and hold ourselves accountable for results.
Thank you, Dave McCarthy, who is retiring after 17 years with XBOX. Dave has played a defining role in building the platform that millions of players rely on every day and has been a trusted partner through many of the biggest moments in XBOX’s history. We wish him all the best.
These changes are about a bigger future for XBOX, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we’ve seen before. This year, we’ll invest as much in XBOX as we ever have, but we’ll invest with greater focus, greater discipline, and greater clarity, all in service of making XBOX where the world plays and creates.
I want XBOX to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect. I know we can achieve this goal. XBOX has many of the most beloved franchises in entertainment history, talented studios around the world, and we will return to growth in 2027.
History is full of companies that mistake longevity for inevitability. We will not be one of them.
Asha
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can follow the author on Bluesky.
More Articles
So... Anyone still thinking that ABK deal was good for the industry!?
What does ABK have to do with this? Sounds like Microsoft is pulling a Sony where they pivot away from dividing resources across a wide variety of projects to focusing on less, bigger projects. This and the Activision merger seem unrelated unless I’m missing something?
I'm glad to hear the studios are not being closed, this could of been worse. Fingers crossed for Arkane, I hope they're able to get support and the Blade game see's the light of day
Same here! Reports were that Xbox leadership was flying around the world looking for buyers. Looks like they found some.
Still sucks 1,600 people are being laid off today, with another 1,600 by the end of June 2027.
Edit: Looks like the 3,200 figure includes the studios being divested. So in reality ~2,500 laid off. That is STILL a lot.
It is just Compulsion and Double Fine going independent. Ninja Theory and Undead Labs have been bought by other companies. Though, we don't know who.
Xbox has given Compulsion and Double Fine some money to keep going, but they do need to find more financing in the future. Double Fine before they were acquired resorted to Kickstarter to help fund Psychonauts 2. So the odds aren't the best. But still better than just being shut down right now.
How confident would you feel if you were a dev at the 2 that went independent? I bet my ass you would be looking for work every night you got home, dont lie. The 2 studios are doomed, MS knows it and was just trying to save face with this stunt.
DF leadership must be approaching retirement age right now or surpassed it and we think they going to want to keep going possibly start from scratch again?
-"The 2 studios are doomed, MS knows it and was just trying to save face with this stunt."
What exactly is your angle here? You're equating the reality of independence - the literal thing they were before agreeing to an acquisition - to them being thrown into a den of starving lions. Everything about Compulsion & Double Fine's separation reads as rather non-controversial: "here's the rights to all IP you've made and some spare change to get you through the summer."
Now their destiny is in their hands, which means courting other publishers with new game pitches. Welcome to every major creative industry in the modern world.
Ouch. The Xbox brand is so tainted that MS may as well get rid of it.
Such a great industry
I've got a new video discussing the layoffs and studio divestitures. https://www.youtube.com/watch?v=MkF5jJC1CH0
I appreciate everyone who watches my videos. The channel has actually started to grow again after years of not gaining subs. I'm not far off 10,000 at this point.
Correct me if wrong but...
They plan to cut 3200 jobs + they are "Divesting" themselves of 5 entire studios ( likely 500~1000 jobs).
This is like:
Nintendo losing +40% of it's working force.
Playstation losing +25% of it's working force.
This looks fucking brutal!!
Supposedly if you count every person that works as part of xbox, it is almost 16,000 people in total.
Now not all of that is game developers working at studios. However even then, if you just go 3200/16000 = you get abit over 20% of the xbox work force total, being let go. I wouldn't be surprised if you counted only the game devs this is like 25-33% of it. The only reason it isn't a bigger %, is because of how big some of these studios are with ABK in the mix. Losing a 1/4th or 1/3rd of your game developers, will likely be something you can "feel" in future.
This is awful but Sony is still planning to kill off physical discs. Sign the petition to stop that here: https://www.change.org/p/don-t-kill-the-disc-tell-sony-to-keep-physical-playstation-games?pubDate=20260702
It has over 130,000 signatures in under 4 days. Dark Souls only needed 100,000 signatures to get it ported to PC. And now the series has sold over 10 million on PC alone!
Over 1600 jobs today.... and another 1600+ in the coming months? That is alot of developers. Good to hear that Compulsion Games and Double Fine Productions managed to regain their freedom.
It was bound to happen, XBOX definitely needs restructuring. Got wayyy too big for how the platform is doing. Sad that bad leadership and strategy made these studios useless for a whole generation and was a part on why this generation has felt empty. This will definitely put brakes on that acquisition trend that was going around.
