Microsoft Announces Workforce Reduction and Xbox Restructuring
Microsoft has revealed plans to eliminate 4,800 jobs, representing approximately 2.1% of its total workforce. A significant portion of these layoffs will impact the Xbox division.
Amy Coleman, executive vice president at Microsoft, communicated to employees via a memo that the company must concentrate on sectors that can effectively serve customers amid a "fast-changing industry."
More than 1,600 positions at Xbox will be cut immediately as part of these extensive layoffs.
Asha Sharma, who recently assumed the role of Xbox's chief executive, addressed staff in a note describing the process as "beginning the most significant restructure in Xbox history."
Sharma further indicated in the note, which was shared externally on X, that an additional 1,600 jobs will be eliminated over the next year.
As part of the restructuring, four Xbox game development studios—Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Lab—will be spun off.
"These changes are about a bigger future for Xbox, not a smaller one," Sharma stated.
"History is full of companies that mistake longevity for inevitability. We will not be one of them."
Coleman highlighted evolving customer needs as a rationale for the company-wide reductions.
"Companies don't get to choose whether their industry changes; they only get to choose whether they change with it," she said.
She clarified that while the company will not replace the eliminated roles with artificial intelligence,
"what is true is that AI is changing how work gets done."
Industry Challenges
This announcement arrives during a challenging period for the gaming industry, which continues to experience significant layoffs.
Earlier in 2024, Xbox reduced its workforce by over 2,000 employees and closed four studios acquired before its major purchase of Call of Duty creator Activision-Blizzard.
Just over a year ago, Microsoft disclosed plans to lay off up to 9,000 workers while committing to increased investment in its multi-billion-dollar AI initiatives.
Rising hardware costs have also led companies, including Microsoft, to increase prices for consoles and similar consumer electronics. Many attribute this to AI data centers driving demand beyond supply capabilities.
Sharma acknowledged on Monday that although the layoffs are "painful," a comprehensive "reset" is necessary across Xbox's content portfolio, platform, and operations.
She added that Minecraft developer Mojang and Candy Crush developer King will now report directly to her as part of the restructuring.
Tech firms are attributing significant device and console price increases to AI-related factors.
An Xbox producer has encouraged staff to utilize AI tools to mitigate the impact of job losses.
Meanwhile, PlayStation has announced plans to cease releasing games on physical discs by 2028.
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