XBOX Announces Significant Changes to Staff and Studios

When new XBOX CEO, Asha Sharma, sent a long memo to the entire XBOX team a few weeks ago, I knew it meant some major changes were on the way. We initially discussed this during Bitcast 387, where we estimated between 10-20% of staff being affected in one way or another. As of this morning, we now know the full impact, and that estimate was quite on target. Let’s get into the details.

First things first, Sharma sent an internal memo on the changes that she later shared publicly, just as she did previously. While we may not always appreciate the actual content, this type of transparency is rare and in that sense, I appreciate it as a long-time XBOX fan. You can find the full statement via XBOX Wire here, but here are the core details:

• The overall size of the XBOX division will be reduced by 3,200 roles – 1,600 roles will be eliminated today while the other 1,600 will be accomplished over the course of the next year through spin-offs and additional studio re-alignment.
• Compulsion Games and Double Fine Productions will return to self-management and transition to independent studios with their IP, catalog, and runway for their next games.
• Ninja Theory and Undead Labs have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3.
• In France, Arkane’s management is beginning required consultation with its Works Council to review potential strategic options.
• Additional staff and funding allocations are being made across a range of first-party studios to align more closely with “higher priority” projects.
• No first-party games or prior announcements are being cancelled.
• Mojang and King will now report directly to Sharma. She notes that they support the largest monthly active player bases and, therefore, will have a strong focus.
• XBOX is internally simplifying how they support the platform. She mentions that the support teams have grown by 40% in this generation while overall XBOX playerbase has declined. That is not sustainable.
• XBOX is establishing a Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services. Helen Chiang will fill that role and report directly to Sharma.

In going through the details, there are a few more notable call outs to make:

• XBOX is still moving forward with Project Helix (the next console) as planned. We do not know the details of the console itself, but the plans to release and support it as a primary focus have not changed.
• Game Pass continues to be a multi-billion dollar revenue generator for XBOX and will continue to be offered as a service in the same way as today.
• Total investment in gaming and first-party projects is unchanged and in some cases, as noted above for “core” IPs, it will actually be increased.

As is said, perspective is everything. The gaming industry has felt (and been) extremely turbulent over the past couple of years, and it can feel like an endless onslaught of bad news. So trying to comment on these changes at XBOX with a logical perspective can be tough as, quite frankly, I’m tired of so many people having to pay for the mistakes of the few.

It’s also impossible for the vast majority of us to comprehend the weight of being handed an organization of 20,000+ employees who’s livelihood you’re now responsible for. And, responsible for while beginning in a severely net-negative state.

First and foremost, I appreciate Sharma detailing the problem. Often times in these scenarios we receive nothing more than lawyer-approved, corporate speak in the vein of “To strengthen our future and align with changing market conditions…….blah blah blah.”  Asha speaking to a loss of 67 cents on the dollar, an overly complicated platform support model that grew staff by 40%, poor investment priorities, and much more, is insight we don’t often receive directly as consumers. And it at least provides some perspective into why “reset” level change was necessary.

As for the outcome itself, it’s frustrating to hear how departments within XBOX were expanded at a rate that was unsustainable. And that it has led to a platform-support model that reduced agility and now culminates with a reduction in staff directly of some of those roles. As always, as a fan of this industry and XBOX, I hope more than anything those impacted can find new roles with as little trouble as possible.

The studio news is honestly surprising. It feels all too frequent nowadays where we talk about studios being shut down as a quick solution to reduce expenses. For XBOX to make changes to this level while finding a path forward for all five impacted studios where they are not shut down, continue to own all of their IP, and don’t have to cancel any projects? While I suspect this will largely be overlooked by those aiming to be inflammatory, this is the best outcome we could have hoped for. As I’ve commented on many times, I adore Double Fine and I’m so happy to see them able to return to being independent with the support to do so. And naturally, that applies to the other studios as well.

Finally, I also think this commentary is more significant than some will realize today: “…assigning a Chief Officer to P&L and re-aligning large investments with core IP.”  While we don’t have specifics on the IP or studios this relates to, it’s likely not much of a leap to assume this means a larger focus on IP like Elder Scrolls, Fallout, Halo, etc.  Those IP have been under-served in recent years, and given their value and prominence, I have been hoping for this type of news for some time.

As I’ve said many times, seeing all the turbulence across the industry, particularly at XBOX and PlayStation, has been incredibly frustrating for me. I grew up with both of these platforms and they’re responsible for many of my fondest memories. While I understand the complexities of the industry (as much as I can from the outside looking in anyway), it has been so frustrating to see the arc they’ve taken over the past few years.

My only hope is that both get their houses in order and are better off for it. I hope this is truly a step forward for XBOX and I’m happy, as “happy” as one can be, that there was a path forward where the studios remain open and independence was retained in some form. I don’t want to downplay the significance of that outcome as it’s better for the studios and employees, and likely took a lot of work over the past several weeks by all of those involved. That said, others losing their job due to prior, poor leadership decisions happens yet again, and as many of us have had to say far too often, I sincerely wish those impacted the best.

We’ll have a lot more to say on this during the next Bitcast. Until then.