Xbox, owned by Microsoft, is planning to eliminate 3,200 roles in the next year. The move, which will impact around 20% of the company’s staff, is part of reorganization plans that CEO Asha Sharma shared with employees on Monday.
As part of the reorganization, Xbox will spin off or sell four gaming development studios – Ninja Theory, Undead Labs, Compulsion Games and Double Fine Productions – which employ around 350 people. Those 350 people are part of the first 1600 employees that will be leaving the company this week. Up to another 1,250 employees will be let go in the next year, according to Sharma.
In the memo to staff, Sharma laid out two simple reasons for the reorganization, Game Pass not performing as expected and a “hardware crisis.”
“Our business today is not healthy,” Sharma wrote in the memo. “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.”
To remedy the situation, the memo outlined three areas of focus – the content portfolio, the platform, and operations. The first includes selling the four development studios and reducing staff. The second involves plans to “reduce management layers” to simplify decision making. The third will include streamlining teams.
That streamlining includes a new title at Xbox – Chief Operating Officer. Helen Chiang was promoted to that role and will oversee profit and loss across content, hardware, platform, and services. “She will bring our businesses together under one operating model, making sure we make clear investment decisions, learn from our successes and failures, and hold ourselves accountable for results,” Sharma wrote.
The changes at Xbox are part of broader decisions being made at Microsoft. The parent company has planned to cut around 6,400 employees, according to a report from Bloomberg. “We are still early on this journey, and there will be more changes ahead; other parts of our business will need to make similar changes,” said Chief People Officer Amy Coleman in an earlier memo shared with the outlet.