"I know that this is difficult news to hear." New Microsoft Gaming layoffs hit: Xbox CEO Phil Spencer announces 650 redundancies in email to staff

What you need to know

• Xbox formed a new org dubbed "Microsoft Gaming" a while back after acquiring Bethesda / Zenimax and Activision-Blizzard-King to incorporate all of its gaming functions. 
• In an email shared with Windows Central this morning, Microsoft Gaming CEO Phil Spencer announced a new round of layoffs, primarily targeting corporate functions like HR, finance, and marketing.
• Spencer emphasized that no devices are being cancelled and no studios are being closed as a result of the layoffs. 
• The email Phil Spencer sent to staff can be read in full below. 

It's another round of Microsoft Gaming layoffs, following on from the brutal 1900 downsizing from earlier in the year. 

In an email shared with Windows Central this morning, Microsoft Gaming CEO Phil Spencer outlined that a further 650 staff would be cut from across the organization, which comprises ZeniMax Media (Fallout, Elder Scrolls), Activision (Call of Duty), Blizzard (Diablo, World of Warcraft), and Xbox Game Studios (Forza, Halo, etc.). 

In the email which can be read further below, Spencer emphasized that no studios are being closed and no devices are being cancelled. Spencer elaborated that the redundancies will fall "mostly" in corporate teams and their supporting functions, namely things like HR, finance, and marketing. 

The full email is as follows. 

"For the past year, our goal has been to minimize disruption while welcoming new teams and enabling them to do their best work. As part of aligning our post-acquisition team structure and managing our business, we have made the decision to eliminate approximately 650 roles across Microsoft Gaming—mostly corporate and supporting functions—to organize our business for long term success.

I know that this is difficult news to hear. We are deeply grateful for the contributions of our colleagues who are learning they are impacted. In the US, we’re supporting them with exit packages that include severance, extended healthcare, and outplacement services to help with their transition; outside the US packages will differ according to location.

With these changes, our corporate and supporting teams and resources are aligned for sustainable future growth, and can better support our studio teams and business units with programs and resources that can scale to meet their needs. Separately, as part of running the business, there are some impacts to other teams as they adapt to shifting priorities and manage the lifecycle and performance of games. No games, devices or experiences are being cancelled and no studios are being closed as part of these adjustments today.

Throughout our team’s history, we have had great moments, and we have had challenging ones. Today is one of the challenging days. I know that going through more changes like this is hard, but even in the most trying times, this team has been able to come together and show one another care and kindness as we work to continue delivering for our players. We appreciate your support as we navigate these changes and we thank you for your compassion and respect for each other.

Phil"

Microsoft Gaming has become a vast organization within Microsoft, following years of acquisitions in efforts to boost its global footprint. Xbox hardware continues to decline year-over-year, but as a division, Xbox is making more money than ever, primarily on the basis of service titles like Fallout 76, Diablo 4, World of Warcraft, and the juggernaut that is Call of Duty. When you remove Activision-Blizzard from the equation,  though, Microsoft would be projecting an overall decline for its gaming division based on its FY24 Q4 statements. 

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More layoffs from Microsoft Gaming

Considering Microsoft is lining up several potentially very successful projects for the coming months, including Starfield: Shattered Space DLC, Call of Duty Black Ops 6, and the Vessel of Hatred expansion to Diablo 4, it's hard to imagine that Xbox is struggling for cash right now. But hey, it could be making even more cash, I guess.

The further round of redundancies will likely add fuel to the U.S. trade regulator FTC's arguments that allowing Microsoft to acquire Activision is ultimately a bad thing. The FTC hasn't yet relented in its lawsuit against Microsoft for its acquisition of Activision Blizzard last year, which set the company back a record-breaking $72 billion dollars in hard cash. 

The video game industry has seen unprecedented layoffs over the past couple of years, as the industry reels from evolving user behavior following the pandemic era. Overall playtime hours and spend are down according to many analysts like Newzoo,    which is forcing publishers to reduce headcounts back down to levels seen before the boom triggered by mandatory lock downs. Microsoft's efforts to consolidate its corporate functions across things like HR, finance, and marketing will likely concentrate the organization there at local headquarters such as Microsoft UK in London and Microsoft's main campus in Redmond, WA. 

Microsoft is known to be working on the next generation of its Xbox console hardware, which has apparently escaped this round of layoffs. Microsoft is also working on a variety of Xbox titles, but has sought to boost margins by controversially putting former exclusives on PlayStation. Microsoft has also raised the prices of Xbox Game Pass recently, despite record company profits.