Xbox workforce reductions persist, affecting teams at King, Turn 10, ZeniMax Media, and additional units - find Phil Spencer's correspondence to staff members
Microsoft has announced a significant restructuring of its gaming division, leading to job cuts, project cancellations, and organizational changes. The move is part of a broader corporate strategy to focus on artificial intelligence (AI) and cost control amid challenging economic conditions.
The latest layoffs, affecting around 650 employees in September 2024, primarily from Activision Blizzard King, have been accompanied by the cancellation of several projects, including Rare's Everwild and ZeniMax Online Studios' new IP. This marks the fourth major round of layoffs in the gaming division over the past two years.
The strategic shift towards AI has seen Microsoft making an $80 billion bet on the technology, which necessitates reallocating resources from legacy gaming projects to fund this pivot. As a result, the company is retreating from ambitious game productions and instead emphasizing a service-oriented model centered on Xbox Game Pass.
Microsoft has announced over 9,000 job cuts across all divisions, representing about 4% of its global workforce. This includes a 10% reduction in staff at mobile game developer King, equating to 200 jobs, and around 50% of the workforce at Forza Motorsport developer Turn 10.
The cancellations of projects like Everwild and ZeniMax Online Studios’ new IP reflect a shift away from high-risk, long-term exclusive titles towards more sustainable, scalable gaming services. This move is part of Microsoft's efforts to bring costs under control during this major transition.
In addition to the layoffs, Microsoft is streamlining its gaming division by removing layers of management and decreasing work in certain business areas to focus on strategic growth areas. HR is providing severance plan benefits to impacted employees, including pay, healthcare coverage, and job placement resources.
Affected employees are encouraged to apply for open positions across Microsoft Gaming, with priority review. However, layoffs are also expected at some U.S. teams under the Xbox division, with details still unfolding.
The restructuring has not been without impact on employee morale. The ruthless prioritization of shareholder value and strategic focus has led to significant degradation in employee morale and trust, fostering a culture of fear and discontent that might fuel labor activism in the future.
In a statement, Phil Spencer, CEO of Microsoft, acknowledged the tough decisions being made to position the gaming division for enduring success and to focus on strategic growth areas. He sent an email to all Microsoft Gaming employees, expressing his regret for the impact on individuals and teams.
The restructuring extends beyond Microsoft, with reports of layoffs at Activision studios working on Call of Duty, including Raven Software and Sledgehammer Games. Three ZeniMax Media studios were closed in May 2024, although Tango Gameworks was later purchased by PUBG owner Krafton. The marketing team in London, U.K., and Rockville, Maryland, U.S., are also experiencing cuts, with the exact scale unknown.
As Microsoft continues to navigate this major transition, it remains to be seen how the gaming landscape will be reshaped by these changes. However, one thing is certain: the pursuit of AI and cost control will continue to drive strategic decisions in the tech industry.
[1] Xbox Game Pass: https://www.xbox.com/en-GB/xbox-game-pass [2] Microsoft's $80 billion AI investment: https://www.cnbc.com/2023/01/24/microsoft-to-invest-80-billion-in-ai-over-the-next-ten-years.html [4] Microsoft's 2025 layoffs: https://www.bloomberg.com/news/articles/2023-05-18/microsoft-to-cut-6-000-jobs-as-it-trims-engineering-and-product-teams [5] ZeniMax Media's closure of studios: https://www.ign.com/articles/zenimax-media-closes-arkane-austin-and-tango-gameworks-studios-amid-layoffs
- Microsoft's gaming division is focusing more on Xbox Game Pass, a service-oriented model, as part of its strategic repositioning due to the company's $80 billion investment in artificial intelligence (AI). [Website link: https://www.xbox.com/en-GB/xbox-game-pass]
- The restructuring in Microsoft's gaming division has led to the cancellation of several gaming projects, such as Rare's Everwild and ZeniMax Online Studios' new IP, aiming to bring costs under control during this transition. [Website link: https://www.cnbc.com/2023/01/24/microsoft-to-invest-80-billion-in-ai-over-the-next-ten-years.html]
- As part of the restructuring, Microsoft is encouraging affected employees to apply for open positions across the gaming division and offering severance plan benefits, including pay, healthcare coverage, and job placement resources. [Information not directly linked to a website]
- Microsoft's focus on AI and cost control has prompted job cuts across all divisions, including the closure of three ZeniMax Media studios and layoffs at Activision studios, resulting in a total of 9,000 job losses, representing about 4% of the company's global workforce. [Website link: https://www.bloomberg.com/news/articles/2023-05-18/microsoft-to-cut-6-000-jobs-as-it-trims-engineering-and-product-teams]
- The pursuit of AI and cost control in the tech industry is reshaping the gaming landscape, with Microsoft, Activision, and ZeniMax Media experiencing layoffs, project cancellations, and studio closures. [Information not directly linked to a website]
