Microsoft has confirmed some recent rumors that they will be following the tech industry with major layoffs, impacting over 10,000 employees. This is equivalent to 5% of their total workforce and extends to all arms of the business, including the gaming sector. Company CEO Satya Nadella has stated that the increased spending over the pandemic has begun to decrease, leading to the necessity of the cuts. As a result of this, the company will be hit with up to $1.2 billion in severance payouts, consolidation and hardware updates.
As mentioned, many of the staff impacted by these changes are in the Xbox branch of the company, including developers from a variety of studios. Here we will explore the extent of this impact on Xbox and their studios, with a look to the future of the brand.
Xbox in the past
Microsoft’s foray into gaming has been a mixed bag since they first unveiled the Xbox in 2001 as a competitor to Sony’s PlayStation 2. Despite birthing one of the most iconic video game franchises of all time in Halo, the console stood no chance against the massive success of the PlayStation 2. In fact, at the time of writing, the PS2 is still the best selling video game console of all time with over 155 million units sold. The Xbox on the other hand sold 24 million, struggling to gain any traction in markets like Japan and Europe.
Despite these humble beginnings, Microsoft were determined to pursue a bigger market share with their next outing. The Xbox 360 was a massive hit, selling over 84 million units and closing the gap between Microsoft and Sony since the PlayStation 3 sold over 87 million. This is even with some issues with exclusive video game titles and the infamous ‘red ring of death’ technical fault that plagued the console.
With a new launching pad consisting of tens of millions of devoted fans, Xbox was in a great position to secure their hold on the industry. Despite this, the Xbox One was a failure by comparison with a misplaced emphasis on entertainment, a big push for Kinect and a lack of exclusive games. The future started to seem uncertain for Xbox and their existence hung in the balance as Microsoft weighed up the existence of the brand.
However, the company made a triumphant return in 2020 with the Xbox Series X and S, boasting that the former is the most powerful console ever made. With 4K graphics, high frame rates and a slew of investment into their gaming studios, CEO Satya Nadella proudly proclaimed that Microsoft were ‘all in on gaming’. With their subscription based gaming service Xbox Game Pass thriving through over 29 million subscribers and a surprise $7.5 billion acquisition of gaming publisher Bethesda, things are finally looking up.
Xbox in the present
Even with all of this success, their flagship Halo franchise is struggling. Suffering from lengthy delays, lots of cut content and lack of support for multiplayer modes, many fans turned their fury toward developer 343 Industries. This studio is reportedly one of the hardest hit by these layoffs, with a former developer taking to Twitter to blame the plight of Halo on poor management from Microsoft.
After all of this turbulence and job cuts, many were speculating that 343 would no longer be in charge of developing future Halo content. This did not go unnoticed, as the studio put out a statement on Twitter to assure fans that 343 Industries would still be leading the way when it comes to Halo and the Master Chief.
343 Industries is not the only Xbox game studio impacted by the layoffs, as Bloomberg reported that The Coalition and Bethesda Game Studios have lost some staff in the process.
It is not all doom and gloom however, since Microsoft’s recent earnings report shed some light on the performance of their gaming arm in Q2. Xbox content & services revenue was down -12% in the quarter, largely as a result of a lack of exclusive games for the period. On top of this, Xbox hardware and Gaming are both down -13%. Despite these decreases, they saw a record growth in terms of Game Pass subscribers, Game streaming hours and monthly active devices. This indicates that with some big gaming releases, Xbox should see much better results in 2023.
Xbox in the future
Speaking of 2023, it is shaping up to be a very interesting one for Microsoft despite the layoffs. The approval of Microsoft’s $68.7 billion acquisition of Activision Blizzard should be determined in 2023, with some hurdles yet to be overcome. If approved, this could give Xbox a major boost through the ownership of iconic game franchises such as Call of Duty, Candy Crush, World of Warcraft and much more. This would add around 10,000 developers and staff to the Xbox family of studios, making up for some of the lost talent through the recent reorganization.
That aside, there are many exclusive Xbox games scheduled for release this year including Bethesda’s ambitious sci-fi RPG, Starfield. Although Starfield is arguably the biggest title of the year for the brand, there are also the likes of Redfall, Forza Motorsport, Minecraft Legends, Stalker 2 and more.
Outside of these AAA releases, there will also be many smaller titles such as the recently shadow-dropped Hi-Fi Rush and several third party Game Pass additions.
Although it is a difficult time for the affected employees in these Microsoft layoffs, the brand is in an incredible position.
With full buy-in from Microsoft, a plethora of exciting game releases, strong Game Pass growth and a potential enormous acquisition, Xbox should continue to excel through their excellent Xbox Series X/S and PC ecosystem in 2023 and beyond.