Xbox CEO Phil Spencer shared his opinions on the cutbacks with the rest of Microsoft in a message to all workers. The cutbacks have had a significant impact on various firms within Microsoft’s gaming wing, including 343 Industries and Bethesda. Meta, a major company in the video gaming and technology industries, laid off around 11,000 people at the end of 2022, making it the newest in a long line of large layoffs. Spencer seems to be explaining Microsoft’s cutbacks, suggesting they are related to the recent changes at Xbox Game Studios, which have cast aspersions on the continued participation of certain studios with important titles.
During a rough financial quarter that witnessed a fall in Microsoft’s net profitability but a rise in earnings from cloud-based products, CEO Satya Nadella declared massive layoffs in a published blog post. Nadella justified the layoffs by citing Microsoft’s need to diversify its revenue streams in the face of the continuing economic slowdown and to maintain its financial flexibility in the event of future recessions. If impacted employees were given 60 days’ notification, they would get severance pay at or above their country’s minimum standards.
Soon after Nadella’s blog post attempted to tackle the effects of the cutbacks on the Xbox community at large, Spencer sent an email—a copy of which was obtained by Kotaku. He echoed what captains had already informed staff, adding that the layoffs would “position us up for the long-term development of our product and company” while acknowledging the difficulty of the situation. Although he was unable to elaborate at the time, he promised workers that there would be channels for management “to connect and address” any queries they may have.
At least one Xbox Game Studio is undergoing reorganization as a direct result of the redundancies, suggesting that the furloughs had a significant impact on the present health of the companies. The biggest blow appeared to be dealt to 343 Industries, which was told that the promotional crew working on Halo Infinite would be “reorganized,” that Halo Infinite manager Joe Staten would be exiting to return to Xbox Publishing and that 343 Industries would no longer be the primary developer of Halo games but rather represent as a support studio. Several ex-developers vented their frustration with the alterations on social media, pointing to incompetent governance at 343 and Microsoft as the root cause of Halo Infinite’s troubled production.
However, Microsoft’s attempt to purchase Activision-Blizzard may well have run into yet another big barrier in the European Union. Thus, it is unclear how much more the cutbacks may harm Xbox. There was talk before the layoffs that the European Union’s antitrust authority might raise objections to the transaction, which may compound the problems the US Federal Trade Commission has already raised about the planned merger. Regardless of whether or not the transaction is finally authorized, Microsoft has had a terrible start to 2023.
