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'I need to put us in the best position for long-term growth.'

Chris Kerr, News Editor

February 21, 2024

2 Min Read
Phil Spencer speaking during Microsoft's recent Xbox business update
Image via Xbox

Xbox has been busy. Since the turn of the year, the company has announced 1,900 layoffs across its gaming divisions, including its recently-merged Activision Blizzard business, and detailed a multi-platform push that will eventually bring Xbox Game Studios titles to players beyond its own ecosystem.

When announcing those job cuts internally, Xbox boss Phil Spencer said the company needed to marry a "strategy and an execution plan with a sustainable cost structure" to enable future growth, while also eliminating "overlap" following its purchase of Activision Blizzard.

The suggestion was that Xbox needed to downsize in order to level up. Spencer has now doubled down on that framing during a recent interview with Game File, and explained that his overriding commitment to Microsoft is to ensure Xbox is a profitable business–even if that means laying off employees.

"I need to put us in the best position for long-term growth," said Spencer. "Most of that is about building great products that exceed their expectations and find millions of customers. But honestly, you know, the cost of building the products inclusive of the people who work on them—I need to make sure we have enough of the right people and the right number of people in the right places for us to succeed."

Since Microsoft announced the cuts, there have been reports of layoffs at key Activision Blizzard studios like Toys for Bob, Sledgehammer Games, and Infinity Ward. It also appears that at least one major project in development at Blizzard has been canned (thanks, Bloomberg).

Although Spencer feels the cuts will ultimately enable growth, it should be noted that Microsoft's video game business isn't in decline. Xbox content and services revenue increased by 61 percent during the second quarter of the current fiscal year. Yes, the Activision Blizzard deal was a huge factor in that upswing, but there would have been growth without it.

As noted by Xbox, overall gaming revenue increased by 49 percent to $7.11 billion, with 44 points of net impact attributed to the Activision Blizzard acquisition. Right now, gaming is Microsoft's third-most lucrative product offering, but Spencer says the layoffs were necessary to deliver greater alignment across divisions.

"I'd say [the scale of the cuts] was a combination of us looking across the full portfolio of what was working, which we have to do, and running the business, as well as areas of alignment between Activision, ZeniMax and Xbox," he added, noting that Microsoft's has brought around 15,000 people into its business since buying ZeniMax in 2021.

You can hear more from Spencer by checking out Game File's wide-ranging interview with the Xbox boss.

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About the Author(s)

Chris Kerr

News Editor, GameDeveloper.com

Game Developer news editor Chris Kerr is an award-winning journalist and reporter with over a decade of experience in the game industry. His byline has appeared in notable print and digital publications including Edge, Stuff, Wireframe, International Business Times, and PocketGamer.biz. Throughout his career, Chris has covered major industry events including GDC, PAX Australia, Gamescom, Paris Games Week, and Develop Brighton. He has featured on the judging panel at The Develop Star Awards on multiple occasions and appeared on BBC Radio 5 Live to discuss breaking news.

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