Xbox announces major restructuring: 3,200 jobs cut, four studios divested

Microsoft’s Xbox division is undergoing the most significant restructuring in its history, with plans to eliminate 3,200 jobs.

This marks 20% of the company’s workforce as new CEO Asha Sharma moves to revive the struggling gaming business.

While writing in a memo on Monday, July 6, Sharma declared that “our business today is not healthy”, citing operating margins three to ten times lower than comparable platform and publishing businesses.

She wrote: “We must reset Xbox.”

The restructuring consists of 1,600 jobs being cut immediately, followed by the rest within one year. In addition to that, four studios will leave Xbox: Compulsion Games and Double Fine Productions will become independent studios, keeping their intellectual property and finances for future projects, while Ninja Theory and Undead Labs are negotiating new owners for the completion of Senua and State of Decay 3. There are also consultations at Arkane Studios in France about possible strategic moves

The layoffs extend beyond game development, affecting teams across Activision, Bethesda/ ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios. But Sharma confirmed no publicly announced first-party games or projects will be cancelled.

According to Sharma, Xbox's problems arise because the company entered the latest generation of consoles with a lower installed user base and higher costs, along with lower growth from Game Pass and multi-platforms.

In order to resolve these problems, Sharma has announced a new organisational structure with no more than five layers of management, cut down vendor costs by 50%, and simplified operations. Helen Chiang has been promoted to COO with full profit-and-loss accountability for content, hardware, platform, and services.

Long-time executive Dave McCarthy is also retiring from his post at Xbox after 17 years.