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Report: Xbox bracing for more cuts after studio-hoarder Microsoft claims it's spread too thin

Microsoft has spent billions on studio acquisitions but appears to be crumbling under its own weight.

Chris Kerr, News Editor

May 9, 2024

3 Min Read
The Xbox logo overlaid on a black-and-white image of Hi-Fi Rush
Images via Microsoft

Microsoft, the $3 trillion tech company that recently spent $68.7 billion to acquire sprawling conglomerate Activision Blizzard and prior to that nabbed ZeniMax Media for $7.5 billion, will likely continue cutting jobs within its first-party Xbox Game Studios to become a leaner operation.

That's according to a report from Bloomberg, which claims the company is offering voluntary severance agreements to producers, QA testers, and others at ZeniMax as part of an ongoing cost-cutting program.

Microsoft announced it would be laying off 1,900 workers across its video game divisions earlier this year, with those cuts already impacting workers at Bethesda, Blizzard, Sledgehammer Games, Infinity Ward, and others.

Studio closures within ZeniMax followed those redundancies, with Microsoft closing Redfall developer Arkane Austin, Hi-Fi Rush maker Tango Gameworks, and Mighty Doom studio Alpha Dog Games earlier this week.

A leaked email from Xbox Game Studios boss Matt Booty attributed those closures to a need to "double down" on franchises and "high-impact" titles.

Continuing that conversation in a town hall meeting with ZeniMax workers on Wednesday, Booty reportedly claimed the shutterings are the result of Microsoft spreading itself too thin—like "peanut butter on bread." He reiterated that Arkane Austin wasn't shut down because of the performance of Redfall, which struggled to make an impact after a poor launch.

ZeniMax studio head Jill Braff said the restructuring program will enable the company to spend more time developing fewer projects. "It's hard to support nine studios all across the world with a lean central team with an ever-growing plate of things to do," she said in audio heard by Bloomberg. "I think we were about to topple over."

Microsoft closes award-winning studio but still wants award-winning titles

Bizarrely, The Verge claims Booty also told town hall attendees that Microsoft remains eager to develop "smaller games that give us prestige and awards." Projects, you might say, like those created by Japanese developer Tango Gameworks, which won numerous accolades for its work on Hi-Fi Rush.

In another report, The Verge stated there is uncertainty within Microsoft as to whether Call of Duty should be bundled into its Xbox Game Pass subscription service. The shooter has already bolstered Microsoft's financial performance, and some inside the company are apparently worried that adding the first-party franchise to Game Pass would be counterintuitive.

Notably, that same report also suggests Microsoft could increase the price of Xbox Game Pass Ultimate (the service's premium offering), although nothing is set in stone. Microsoft previously upped the price of Game Pass in July 2023 to "reflect the competitive conditions" in markets around the world.

For those wondering how Microsoft and Xbox have been performing of late, the company's More Personal Computing segment (which houses Xbox) recently delivered $15.6 billion in revenue during Q3. That represented a 17 percent upswing year-on-year.

Xbox content and services revenue increased by 62 percent year-over-year, with Microsoft claiming that surge was driven by the impact of its Activision Blizzard merger. Gaming revenue rose by 51 percent over the same period, but Xbox hardware revenue tumbled by 31 percent due to a "lower volume" of console sales. That decline is expected to continue in to Q4.

Game Developer has reached out to Microsoft for comment on its restructuring plan. 

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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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