Microsoft’s Xbox video game division will cut 3,200 jobs and four of its game studios in what CEO Asha Sharma calls “the most significant restructuring in Xbox history.”
Sharma announced the restructuring in a memo to employees on Monday titled “Reset Xbox.” The changes will happen over the next year, with about 1,600 layoffs occurring today, and the rest will be spread out over the next 12 months or so.
“I realize that a year-long restructuring creates additional challenges,” Sharma writes. “Unfortunately, it is not possible to make all the necessary changes in one day, and I wanted to be direct about the scale.”
The cuts are part of larger layoffs at Microsoft, which will total 4,800 jobs, with the tech giant’s business operations hit hard alongside Xbox.
Among the changes: Compulsion Games and Double Fine Productions will be spun off to operate as independent studios, while Ninja Theory and Undead Labs have received funding and will operate under new ownership.
“Our business today is not healthy,” Sharma writes bluntly, noting lower margins and lower-than-expected growth, even as the company increases staff. “And now the industry is facing the most serious hardware crisis in its history,” she added. “We must reset Xbox.”
Some decisions now pass through 14 layers of management, she said. “This complexity has slowed decisions, blurred accountability, and made delivering services to players more difficult. As we reset Xbox, we will simplify,” she wrote. “We will reduce management layers to no more than 5, and where possible, 3.”
Helen Chiang was also appointed the division’s first Chief Operating Officer, taking charge of profit and loss across the division.
“These changes are about a bigger future for Xbox, not a smaller one. The next decade of gaming will be bigger, more global, and more innovative than anything we’ve seen before,” Sharma writes. “This year, we will invest as much in XBOX as we have before, but we will invest with greater focus, greater discipline and greater clarity, all in service of making XBOX where the world plays and creates.”
Amy Coleman, Microsoft’s chief human resources officer, told employees in a memo that while the cuts are not related to replacing employees with artificial intelligence, technology is part of the rationale for making the changes.
“I also want to be direct that the roles being eliminated today will not be replaced by AI. At the same time, what is true is that AI is changing how work gets done,” she wrote. “Some of the tasks we do every day can now be automated, and that means we all need to keep learning, keep building new skills, and keep adapting as the business evolves. Our customers are navigating this same transformation, and they are counting on us to help them through it. We can’t do it well unless we do it ourselves.”
