Yesterday, July 6, Microsoft officially confirmed rumors about restructuring its gaming division. Head of Xbox, Asha Sharma, published a letter to employees detailing what lies ahead for the team.
State of Decay 3
- Xbox will lay off 3,200 employees, or 20% of its staff, during the fiscal year 2027—by June 30, 2027. Of these, 1,600 will leave the corporation immediately.
- Compulsion Games and Double Fine Productions have regained independence. Both studios have taken their intellectual property and received severance from Microsoft—funding to assist during the search for a publisher or investor.
- Ninja Theory and Undead Labs will also soon depart from Microsoft. Unknown market players have agreed to buy them from the corporation, but who and for what amount remains undisclosed. Despite separating, the studios will continue working on Senua and State of Decay 3 with financial backing from Xbox.
- The future of Arkane Lyon is uncertain. Due to the peculiarities of French labor law, Microsoft cannot make hasty decisions, so it is currently holding consultations. According to sources from The Verge, this process could take several months. The fate of Marvel’s Blade, on which Arkane Lyon is working, is also unclear, but media reports note the game’s development was prolonged and more costly for Microsoft than anticipated.
- Mojang Studios (Minecraft) and King (Candy Crush) will now report directly to Sharma. Their games attract the largest daily active audience, thus requiring a unique management approach. As reported by Game File sources, Sharma believes Microsoft has invested too little in Minecraft—five times less than Roblox has in its platform.
- Microsoft does not plan to cancel any previously announced games. However, it might redirect investments to more priority projects in certain cases.
- The managerial structure of Xbox will be significantly reduced: from 14 management levels to 3-5. At the same time, a new position of Chief Operating Officer will be established, responsible for profits and losses across all areas: content, hardware, platforms, and services. Helen Chiang, the former Vice President of Minecraft franchise development, will assume this role.
- Xbox plans to optimize the work with technical tools and services and cut supplier expenses in half.
- As explained by Sharma, the decision to restructure was made due to Xbox’s dire financial state. The division’s profitability is currently 3-9 times lower than that of comparable platforms and publishing companies. Additionally, the focus on Game Pass, multi-platform capability, and an extensive game portfolio has not fully justified itself—it has helped to make the business more valuable, but the growth was not as strong as desired. Consequently, Xbox has begun losing an average of 64 cents on every dollar invested in games.
- Though Sharma did not share Game Pass metrics, these figures were revealed by The Wall Street Journal. Currently, the subscription audience is 30 million. Recall, in February 2024, there was talk of 34 million subscribers, and later plans were announced to increase them to 100 million by 2030. Nevertheless, Microsoft allegedly does not intend to close the subscription.
- The head of Xbox hopes that the restructuring will help get the business in order. Sharma has also set an extremely ambitious goal for the division—to eventually grow the daily active audience of the entire Xbox ecosystem to one billion people.