Xbox cuts 3,200 staff as four studios to exit Microsoft – Arkane under review

Microsoft has begun the ‘reset’ of its Xbox business, with at least four separate developers, including Ninja Theory and Undead Labs, going independent or being bought by someone else.

It’s been looming for weeks now, but it seems that Microsoft has finally begun their biggest overhaul in Xbox history, just in time for the brand’s 25th anniversary. Microsoft has officially announced that ‘approximately 3,200’ people will leave the company this financial year, with 1,600 being laid off today.

Microsoft as a whole is laying off 4,800 people today, with Xbox and their commercial sales division taking the brunt of it. The layoff numbers are thought to include only a small number of staff (around 300) at Double Fine, Undead Labs, Ninja Theory or Arkane Lyon, as while they will no longer belong to Microsoft they are either being sold off to other companies or allowed to go independent.

The exact fate of Arkane Lyon is unclear as, being French, they have better labour laws than studios in the US (and apparently Ninja Theory in the UK), but the implication is that they will also either be sold off or allowed to go independent. The fate of Marvel’s Blade, which they’re currently working on, depends on how exactly that plays out.

All the developers are known for smaller, more artistic titles that don’t necessarily perform well financially. They were also all bought relatively recently by Xbox, in the buying spree started by former Xbox boss Phil Spencer – which is tacitly being blamed for many of Xbox’s current problems.

Psychonauts maker Double Fine and South Of Midnight developer Compulsion Games will both be ‘returning to management’, with Game File claiming that Microsoft will give Double Fine ‘runway funding’ to start development on new games and find new investors and publishers.

Hellblade developer Ninja Theory has already been sold to a new owner, but apparently they won’t be named until next year. Apart from their games, Ninja Theory also operates a high-end motion capture studio, which would make them appealing to other companies.

Undead Labs’ State Of Decay isn’t normally accused of being avant-garde but their games are the most financially successful of the five studios and a new buyer has apparently been found for them and State Of Decay 3 will be released eventually.

Although Microsoft has avoided going into detail on anything, especially layoff numbers, the basics of today’s news has been confirmed by current Xbox boss Asha Sharma, in an Xbox Wire post.

In it, she repeats previous comment about how the Xbox business is currently not profitable, while implying that the developer acquisition spree that began in 2019 was a mistake.

She also talks about flattening management structures from a current high of 14 to a minimum of five, or even three. That’s presumably where a large proportion of the layoffs are coming from, although veteran Xbox exec Helen Chiang will be promoted to chief operating officer and work across hardware, software, and services – which seems to make her second only to Sharma.

‘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,’ writes Sharma.

‘None of our first party publicly announced games or projects are being cancelled as part of these reductions,’ she adds. However, given her previous comments, this new focus is likely to revolve around existing franchises Halo, Gears Of War, Forza Horizon, Fallout, and The Elder Scrolls.

‘These changes are about a bigger future for Xbox, not a smaller one,’ she concludes. ‘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.’

Surprisingly, she ends with the goal, often spoken of by Phil Spencer, to entertain ‘more than a billion people each day’, something which seems further out of grasp today than at any time in the company’s past.

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