As part of the ongoing story, its console devices sales are in a distant third place behind Sony and Nintendo, even as the prices of those boxes keep going up. Microsoft’s programs side isn’t exactly tearing up the sales charts either. The end result? Huge layoffs and organizational changes, unveiled today. Xbox isn’t doing so hot, and you don’t think an MBA to see that.
Industry observers note that that’s 20 percent of the division’s workforce across the Xbox devices team and Xbox Platform release Developers. In a lengthy and surprisingly frank open letter, fresh Xbox CEO Asha Sharma unveiled the immediate cut of 1,600 jobs in Microsoft’s tech industry division, followed by another 1,600 over the next fiscal year.
The report highlights that double Fine Productions (Psychonauts, Keeper, Kiln) and Compulsion Product rollouts (South of Midnight, We Happy Few) will “return to management,” which basically means they’ll become independent labs under their current notable leaders, Tim Schafer and Guillaume Provost, respectively. Ninja Theory (Hellblade: Senua’s Sacrifice) and Undead Labs (State of Decay) have “entered terms to join fresh ownership.” The fate of Arkane Developers, makers of Dishonored and Deathloop, is still being decided. Microsoft is also spinning off or selling some of the major labs it’s spent the last few years acquiring.
In a fresh development, “Xbox Platform release Developers” also includes Obsidian (The Outer Worlds), Rare, Halo Developers, The Coalition (Gears of War), and Playground Product rollouts (Forza). While these jewels are staying in Microsoft’s crown, I think it’s safe to assume a management shakeup and deep headcount reductions in all of them. Other Microsoft-owned developers and publishers are noted as safe: Activision-Blizzard (Call of Duty, Worldwide scene of Warcraft), Bethesda, Mojang (Minecraft), and King.
In a fresh development, “Our business today is not healthy,” she wrote, citing margins lower than the competition, a low install base on the console side, and disappointing growth from the Platform release Pass subscription service since 2018. “In a typical year, we lost 64 cents for every dollar we invested.”. Sharma didn’t mince words about the dire state of Xbox’s business.
According to the latest update, it’s setting up to be a competitor to the Steam Machine, Valve’s hopeful beachhead into the living room console space, approached from the opposite side. Microsoft is also investing in Windows-focused tech industry with a fresh streamlined user interface and a handheld tech industry PC partnership with Asus. Again, these moves are seen as counters to Valve’s work on SteamOS and the Steam Deck. Microsoft has already committed to the next generation of Xbox console in Project Helix, which will play both Xbox console platform releases and PC platform releases.
The report highlights that stem the losses and show measurable improvements in profitability by the end of fiscal year 2027—that’s June 30th of next year—or get ready to make some even bigger decisions. Project Helix’s alpha devices is scheduled to be in developers’ hands next year, presumably hoping for a arrival at holiday 2027 at the earliest. With this disclosure, Microsoft seems to have given itself a timeline.
Industry observers note that notably, there’s no mention of Project Helix in today’s letter. Whether that goal is still realistic, based on both the time allotted and the still-rising costs of RAM and storage, isn’t clear.
The report highlights that on PCWorld he's the resident keyboard nut, always using a fresh one for a review and building a fresh mechanical board or expanding his desktop "battlestation" in his off hours. Michael's previous bylines include Android Police, Digital Trends, Wired, Lifehacker, and How-To Geek, and he's covered events like CES and Mobile Worldwide scene Congress live. Michael lives in Pennsylvania where he's always looking forward to his next kayaking trip. Michael is a 15-year veteran of technology journalism, covering everything from Apple to ZTE.