Xbox’s Messaging Problem

Over the past several years, I’ve talked and written a lot about Xbox. As I’ve said many times, that’s primarily because they are by far the most communicative of the “big three” when compared against Nintendo and PlayStation. Now, I always try to analyze their communication and direction with data and facts as I feel that’s the best approach when discussing major corporations. Today, I want to take a slightly different approach. Not that I won’t be mentioning some data, I mean, that’s simply how my brain works and I can’t help myself. But primarily I want to talk about messaging and more of my gut feeling about what’s going on at Xbox as they restructure.

Just to be clear on what we’re discussing here, yesterday IGN reported an internal communication from Matt Booty, President of Game Content and Studios at Xbox, had been acquired and verified. Within it, he announced the following regarding their Bethesda studios:

• Arkane Austin, developers of Redfall and Prey, would close with “some” members of the studio moving to other teams. All future Redfall development would be canceled.
• Alpha Dog Games, developers of Mighty Doom, would close.
• Tango Gameworks, developers of Hi-Fi Rush, Tokyo Ghostwire, and The Evil Within, would close.
• Roundhouse Studios’ developers will join ZeniMax Online Studios to support Elder Scrolls Online development.
• All other Bethesda studios/teams were unaffected.

And before I talk about this latest round of layoffs impacting the gaming industry, I’ll state the obvious. Xbox isn’t alone here. In February, PlayStation cut over 900 jobs including roles at some of their top studios. The next day, EA announced a cut of 5% of its workforce which equated to nearly 700 people. Embracer Group, Epic, Ubisoft, Riot, and many more have recently let staff go while Xbox had also previously laid off about 1,900 employees earlier this year after the Activision-Blizzard integration. It’s a symptom of the shifting dynamics of the global gaming industry which I’ve written about before. But here’s why this feels a little different on the surface.

Over the past several years we’ve heard from the executive leadership team at Xbox about their acquisitions and their focus on meeting gamers where they want to play. Of course, we all know that Game Pass is a key pillar in that vein. As Xbox has gone out and acquired a wealth of studios and talent including, of course, Bethesda and Activision-Blizzard, they grew to one of the largest game development umbrellas in the world. Despite that, we’ve heard generally the same message as it relates to their studios.

That is, that studios would be supported to utilize their talent to develop games they wanted to make. That, with additional resources and avenues of player engagement, some of the pressure of a title being traditionally “successful” would be lessened. That Game Pass was a new avenue to provide greater freedom to the studios who may have been pigeonholed in the past.

While some of that may still be true to a degree, it seems to me that it’s certainly not true to the extent that Xbox senior leadership messaged and maybe had hoped. Such is the crux of targeted transparency: if the end-goal doesn’t come to pass, you end up looking like a liar. Whether it was intentional or not doesn’t matter. While I don’t think there was anything necessarily nefarious at play here, it’s clear that some lines were walked with messaging that should have been more curated. Which, by the way, is what we see out of the other major players in the industry. As someone who writes about direction and strategy often, I would never argue for less transparency or open communication with the players. But it is the sad reality for most major publishers and why I’ve generally appreciated Xbox’s approach even when things don’t necessarily come to pass as intended.

However, driving further down the messaging road, even the end decisions don’t seem to fit with the plan, at least from the outside looking in. Let’s look at what we know about Xbox’s publishing strategy.

• A broader publishing plan that includes additional devices beyond console and PC.
• A selection of titles, that could grow over time, to be published on other consoles including PlayStation and Switch.
• Increasing the value proposition of Game Pass to continue its growth. Within this was curating new IP to broaden interest in the service and ecosystem.
• Publishing a first-party game every quarter in Game Pass.

All of that requires additional development resources, not less. So clearly Xbox felt that they can accomplish those goals with other resources that have been recently acquired or hired. Whether or not they can remains to be seen, but I think this drives to the bigger question: if those objectives are pillars for Xbox, why close these studios?

Tango had one of the most notable games for Xbox in the past couple of years with Hi-Fi Rush, a game that was celebrated and awarded broadly. Whether or not it met “internal goals”, which has been reported on, seems relatively irrelevant at the moment. Why? Because it hasn’t finished its publishing run.

Hi-Fi Rush was only just published on PlayStation and as we understood it, it was also planned to release on the Switch. If cross-platform development is a focus, and that analysis is still in the early-phase of ROI-estimation, why do you close the development studio before even finishing the game’s publishing run? You don’t even have complete data at this point in time to accurately measure “success” within the parameters of the new strategy. In fact, we just heard from the Xbox leadership team less than two months ago about the broader distribution plan to aid in sales and metrics for specific titles.

Alongside that confusion is the obvious statement: Xbox in Japan. It’s been a topic since Xbox’s inception and we’ve heard time and time again that the team is focused on strengthening their presence within Japan and their bonds with Japanese developers and publishers. In fact, we heard directly from Phil Spencer, Microsoft’s CEO of Gaming, that Xbox players could “expect” more games like Hi-Fi Rush. Tango was clearly a very talented studio and the only first-party, Japanese studio in Xbox’s umbrella. It simply seems directly at odds with the communicated plans.

Commenting on Arkane Austin is challenging because we don’t know how many of the developers are being retained. Though we know Redfall didn’t land as expected or hoped, it also seemed to be a product of mixed development goals. That said, it still had a strong foundation and one that was expected, and sold, to be expanded upon. Now, Xbox is in the place of having to figure out how to provide players with refunds to something they purchased a year ago.

Regardless, it’s still clear that Arkane is an extraordinarily talented studio. I’ll argue all day long that Prey is one the best games of the last decade and their shared work on other Arkane releases is notable. Meanwhile, Arkane is also a studio known for new IPs with unique, explorative gameplay.

Meanwhile, Alpha Dog Games, while not a household name, is a mobile game studio. Mobile is not only one of the pillars Xbox is driving towards in the future but also the largest and fastest growing division of the gaming industry.

As I step back and put on my corporate hat, I can explain these moves by Xbox and the other restructures throughout the gaming industry. I’ve worked in a major corporation for over 25 years now and have been through mergers and restructures directly several times. They are painful every single time, and they leave a lasting impact on the people affected. But I can usually see the top-down view of how we got here even if I don’t personally agree with it.

Xbox has spent upwards of $80 billion investing in growth in the past several years. In doing so, they’ve grown exponentially and no doubt have what they consider to be redundancies. Further down the road, where we seem to be now, is typically re-prioritization and restructuring to hopefully achieve the revised strategic goals. At the end of the day, it’s numbers on a page. And believe me, I realize how cold that sounds. As I said, I’ve lived through it many times in my own career including as recently as last year. It sucks. But it’s also the reality we live in. And as gaming has grown from the geeky, niche hobby we adored decades ago to the massive, global industry it is today, it comes with the territory, I’m afraid.

I guess my question is, does it have to be this way? While I know the heartless answer to my own question, allow me a moment on my soapbox.

Video games are a unique medium. They engage the end-user in ways movies, music, and books cannot. They are fantastically creative. They are social, and have the capability to bring people and communities together across the world to interact in ways other mediums could only dream of. And, as we’ve heard from developers so many times over, it’s almost a miracle that they exist at all given their complexities.

And yet, they do. And they are incredible.

I’m not naive to the realities of the industry or the corporate world. Hell, I’m usually the one speaking to the realities of the situations we’re discussing. But bringing it back to Xbox, I can certainly understand the concept of how it felt different this time. Their demeanor was different. Their stated goals were different. Their conferences, announcements, and even their platforms of delivery were different. We heard directly from studio heads like Tim Schafer about how it was different (as an aside, play Psychonauts 2 please). It actually seemed like there was a major corporation growing their organization that was truly focused on gamers and celebrating the uniqueness of this industry. That it wasn’t purely business.

So, maybe we were naive after all?

Bringing this full circle, I believe that’s why this time feels like such a slight. It’s not unique. It’s not even really surprising. It just seems to go against the message that’s been delivered over the past few years. And that brings it all crashing back down to reality. The hope that Xbox, while still clearly needing to be profitable as a division of Microsoft, would be a little…different. That for once it wouldn’t be solely about the bottom line. That risks would continue to be taken. That creativity would be celebrated, even if it wasn’t the most profitable route.

The gaming industry has changed rapidly in the past decade. From the younger generation not engaging with video games in the same ways, to a handful of live-service games sucking a lot of the air (IE money) out of the room, plans for major publishers are evolving in real-time. Add in the post-COVID downturn and you concoct the recipe for what we’re seeing across all of these companies. Xbox being one of the largest publishers in the world now is feeling all of it. And with unique plays in game and service delivery, they are adjusting as quick as possible to the effect of those realities on their strategy.

I, for one, hope that the messaging from Xbox hasn’t all been for naught. I hope that games like Pentiment and Hi-Fi Rush will still be developed and celebrated alongside the blockbusters and MAU leaders (insert joke about Banjo Threeie here).

More than anything, I hope leaders in this industry take seriously that gamers are a fickle bunch, particularly in today’s age. Earning our trust is a challenge. Losing it is devastating. And creatives are the lifeblood of this industry. There’s a reason major corporations have previously invested billions in gaming only to run away having lost it all. And why so many previously successful publishers have folded (Sierra, THQ, Acclaim, Midway, to name a few).

Time will be the judge as it always is.