Microsoft to cut 4,800 jobs, reshape Xbox business and spin off gaming studios

In a significant restructuring move, Microsoft has announced plans to eliminate 4,800 jobs, which represents approximately 2.1% of its global workforce. This decision is part of a broader strategy to revamp its Xbox gaming division and enhance returns from the substantial investments made in recent years. Of the total job losses, 3,200 will come from the gaming sector, with an immediate impact affecting 1,600 employees. As part of this overhaul, several game development studios owned by Microsoft will be either spun off or placed under strategic review. This marks one of the most substantial changes at Xbox since Microsoft’s $69 billion acquisition of Activision Blizzard. Despite expanding its game offerings, Xbox has struggled to keep pace with competitors like Sony’s PlayStation and Nintendo in the console market. In a notable shift, Microsoft is moving away from a focus on exclusive titles for Xbox and is increasingly making its games available on competing platforms. This strategy aims to broaden its audience and lessen its reliance on hardware sales. Asha Sharma, who recently took over leadership of Xbox, informed staff that four studios would be divested as part of the restructuring. Notably, Compulsion Games, known for South of Midnight, and Double Fine Productions, the creators behind Psychonauts, will gain independence. Additionally, the studios Ninja Theory and Undead Labs will also separate, allowing them to independently pursue franchises like Senua and State of Decay 3. The status of Arkane Studios, famous for the Dishonored series and currently working on a game featuring the Marvel character Blade, remains uncertain, with discussions ongoing with their workers' union in France regarding potential paths forward. This overhaul highlights Microsoft's efforts to streamline a rapidly expanding gaming portfolio that has yet to achieve the anticipated growth in console sales. The layoffs also reflect a broader trend within the technology sector, where companies are under increasing pressure to rationalize their spending, particularly in light of significant investments in artificial intelligence infrastructure. Notably, Microsoft clarified that the recent job cuts are not directly linked to the replacement of roles by artificial intelligence. According to Microsoft Chief People Officer Amy Coleman, the eliminated positions are not being filled by AI technologies. However, she acknowledged that AI is transforming work processes, prompting changes in how tasks are executed.