Asha Sharma Slashes Over 3,000 Jobs At Xbox In The Big Reset, States Their Business Is 'Not Healthy'
Compulsion Games, Double Fine, Ninja Theory, and Undead Labs departing from under the Xbox umbrella
"ColonelFancy" Mike Lind
7/7/20263 min read
Double Fine and Compulsion Games return to independent game development
Ninja Theory and Undead Labs will finish announced projects while seeking new publishers
Xbox CEO declares Xbox's business is unhealthy
The culling has begun for Microsoft, as Xbox begins one of its bigger restructurings in its game division. CEO Asha Sharma, who took the position as the gaming division's CEO following the long tenured leadership of Phil Spencer, she has came out of the gate saying a lot of things that caused fans to take notice. Sharma stated back in June that sweeping changes were coming to Xbox, some of that included reducing the price of Game Pass, which plateuaed when it came to subscription numbers, especially after a price hike jumped the cost to $30 a month for Game Pass Ultimate.
The other major changes came in the announcement last week that Xbox will relinquish five of their development studios In an email titled Resetting Xbox to staff on July 6th. This email confirms the jettisoning of 3,200 jobs at Microsoft, including effective immediately 1,600 jobs consolidated in what is expected to be a year-long major restructuring of their business model. Compulsion Games (South of Midnight) and Double Fine Studios (Psychonauts 2, Grim Fandango) will take their IPs and return to developing and publishing their own games. Ninja Theory (The Senua series, DMC: Devil May Cry) and Undead Labs (State of Decay) will seek new ownership to finish development of their respective upcoming games. Arkane Studios will seek consultation, which may place their project Marvel's Blade in uncertainty. According to The Verge, the game is currently running over its budget and is delayed indefinitely.
Senua (credit: Ninja Theory)
"I know this is painful. These changes will directly affect people who have poured their creativity into building XBOX. Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved XBOX" Sharma states. "Today’s decisions do not reflect their talent or dedication. Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.
We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected. As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset XBOX."
Xbox purchased a good handful of talented studios, but following the 2021 purchase of Bethesda ZeniMax for $7.5 billion, and the $69 billion dollar acquisition of Activision Blizzard in 2023, the operating costs began to show its impact on the brand's medium-sized gaming projects. Sure, having big names like Fallout, Overwatch, and Call of Duty will bolster the portfolio for investors, but throwing nearly $80 billion into securing high profile studios places operating costs in the red, expectations for sales will skyrocket, and there ends up being a ton of corporate overseeing that becomes unsustainable. The culling of 3,200 jobs brings the total number of layoffs from Microsoft to 5,200 since 2024, as Xbox lags behind the Nintendo Switch 2 and the PlayStation 5 when it comes to market share.
"Since 2018, we have aggressively expanded our studio portfolio while the number of games created each month across the industry now outpaces the last ten years combined," Sharma continues. "We now find ourselves competing not only with the largest publishers, but also with smaller independent studios. It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested. As we reset XBOX, we will help independent creators succeed by providing open development tools and audiences to realize their vision."
More drastic changes will be hitting this brand. Sharma is certainly aggressive in reshaping Xbox as a staple of gaming. It's still uncertain if they will carve out an identity, something they have had a difficult time doing since leading the market during its Xbox 360 days.
SOURCES: Xbox Wire, The Verge