If it was a bad month for Xbox last month, things just got worse this month. Not only will 1,600 staffers lose their jobs immediately, another 1,600 will suffer the same fate over the next 12 months. That’s according to current Xbox lead Asha Sharma, who shared on X an email she sent to staff to not only start the week, but also the fiscal year of 2027.
In what is both a consequence as well as a silver lining, four studios will also be divested. Compulsion Games and Double Fine Productions will be independent, retaining their IP. Ninja Theory and Undead Labs will be sold to undisclosed buyers. And finally, “Arkane’s management is beginning required consultation with its Works Council to review potential strategic options” in France. No publicly announced games or projects are being cancelled as part of this, and perhaps just as important, no studios were closed.
This comes as part of the Xbox reset that was mentioned last month, though this is just one element out of three. Another is the trimming of management layers, because “in some parts of the company, work passes through as many as 14 layers of management […] That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players”.
Trimming Nine Layers Of Management
To that end, Sharma says that management layers will be reduced to between three and five. This flattening will notably be built around “player-coaches”, or those who “remain deeply involved in the work while developing their teams”, as well as “directly responsible individuals (DRI) who own key decisions and outcomes”.
Sharma says she is also consolidating the previously fragmented teams, studios, and other functions at Xbox that “often operate independently”, making it “harder to work towards a shared goal, make the right tradeoffs, and get things done”. This means instating Helen Chiang, a two-decade veteran, as Chief Operating Officer. Meanwhile, Sharma also announced the retirement of corporate VP of Xbox product services Dave McCarthy.
It’s worth reiterating at this point that the studio restructuring, the flattening of management, and the instatement of a COO are described as steps one, two and three of the Xbox reset. These are steps taken to solve the problem that is the business being in a state that “is not healthy”. And in describing the state of this unhealthy business, Sharma says that “we are operating at margins that are 3-10x lower than comparable platforms and publishing businesses […] 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”.
On one hand, it can be argued that Sharma is merely dealing with the hand she was dealt when she inherited her role from Phil Spencer. And to that end, your mileage may vary when you argue for or against the trimming of bloat that’s a result of decisions made by previous leadership. But the comparisons of profit margins and the growth pace expectations is pretty emblematic of being a Microsoft division, and a sign that there will be more of what happened to come.
On that note, The Verge reports that Microsoft is laying off around 4,800 workers – about 2.1% of its workforce – at the start of its financial year, including the 1,600 from the Xbox division. The report cites and internal memo to employees by Amy Coleman, executive VP and the chief people officer at the Windows company. In the memo, Coleman blames the job losses on a changing tech industry and the “need to adjust resources and roles and shift how we operate”. She also made sure to mention that these job losses “are not being replaced by AI”, but “AI is changing how work gets done”.
(Source: Asha Sharma / X, The Verge)
