Microsoft's gaming division prepares for more layoffs after studio shutdowns
Microsoft's Xbox division is reportedly bracing for further job cuts following the recent closure of three of its studios Tango Gameworks, Arkane Austin, and Alpha Dog Studio. This move is part of a larger cost-reduction strategy currently underway. According to Bloomberg, Xbox has given voluntary severance packages to producers, QA testers, and other ZeniMax staff this week. It is suggested that more layoffs are expected within the Xbox organization.
Gaming community reacts to studio shutdowns
The gaming community has expressed surprise at the recent shutdowns, especially since Xbox had acquired ZeniMax, the parent company of three studios developing popular games like Starfield, Fallout, and Dishonored, for $7.5 billion in 2020. The decision to close three ZeniMax studios was discussed in a town hall meeting where understaffing was identified as a key issue by Xbox president Matt Booty. He likened the situation to "peanut butter on bread," implying that the company's resources were stretched too thin.
ZeniMax Studios's restructuring aims for more focused projects
Jill Braff, head of ZeniMax Studios, supported Booty's statement during the town hall meeting. She suggested that the restructuring would allow ZeniMax to focus more effectively on fewer projects. Braff highlighted the challenge of supporting nine global studios with a lean central team and an ever-increasing workload. Interestingly, Arkane Austin and Tango Gameworks were reportedly seeking new hires and presenting their game concepts to senior management before their closure.
Xbox's performance amid industry contraction and job cuts
The layoffs at Xbox come amidst a broader contraction in the video game industry, following economic changes after a period of rapid expansion during the pandemic. Despite these challenges, Microsoft's gaming division has grown more than any of its rivals through acquisitions of Activision Blizzard and ZeniMax, totaling over $76 billion. In February, Microsoft cut 1,900 positions, primarily at Activision Blizzard.
Xbox Game Pass growth stagnates amid industry changes
Despite the emphasis on the Xbox Game Pass, a subscription service offering access to multiple downloadable games for a monthly fee, it has not seen the significant growth that Xbox boss Phil Spencer may have expected. Mat Piscatella, executive director at Circana, stated that monthly non-mobile video-game subscription spending in the US "has been flat to low single-digit growth" since mid-2021. As console revenue declines, Microsoft has started releasing some of its games on rival platforms.
