Microsoft’s Xbox division is undergoing the largest restructuring in its history, with plans to cut 3,200 jobs.
This represents 20% of the company’s workforce as new CEO Asha Sharma takes steps to revive the struggling gaming business.
While writing in a memo on Monday, July 6, Sharma stated that “our business today is not healthy,” citing operating margins three to ten times lower than those of comparable platforms and publishing businesses.
She wrote: “We need to reset Xbox.”
The restructuring consists of the immediate elimination of 1,600 jobs and the rest within a year. Additionally, four studios will leave Xbox: Compulsion Games and Double Fine Productions will become independent studios, maintaining their intellectual property and finances for future projects, while Ninja Theory and Undead Labs are negotiating new owners for the completion of Senua and State of Decay 3. There are also consultations at Arkane Studios in France about possible strategic moves.
The layoffs extend beyond game development, affecting teams at Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios. But Sharma confirmed that no publicly announced games or projects of his own will be cancelled.
According to Sharma, Xbox’s problems arise because the company entered the last generation of consoles with a smaller installed user base and higher costs, along with lower Game Pass and cross-platform growth.
To resolve these issues, Sharma has announced a new organizational structure with no more than five levels of management, reduced supplier costs by 50% and streamlined operations. Helen Chiang has been promoted to Chief Operating Officer with full P&L responsibility for content, hardware, platform and services.
Veteran executive Dave McCarthy is also retiring from his role at Xbox after 17 years.
