Microsoft’s latest round of layoffs is just a symptom of a much larger issue concerning labor rights and abuses, which could and should change the direction of the international games industry.
These layoffs, announced Thursday morning, affect roughly 1,900 people or 9% of the Xbox company network. At time of writing, most of the cut positions appear to be at Microsoft’s newly-acquired subsidiary Activision Blizzard, although the core Xbox division and Zenimax Media have both absorbed some of the impact.
In addition, Blizzard president Mike Ybarra and original co-founder Allen Adham have both departed from the company, and Blizzard has ceased production on Odyssey, a survival game which had been in internal development at the company’s California headquarters for the last six years.
Some sources, such as Windows Central’s Jez Corden, indicate that Microsoft has dismissed the entirety of the internal customer support teams at Activision Blizzard, as well as sharply reduced the size of its teams that were dedicated to Xbox retail support.
Notably, the Communications Workers of America, the union that represents several of the quality-assurance departments under the Xbox Game Studios umbrella, has reported that none of its workers have been affected by Thursday’s layoffs.
The center cannot hold
The picture from outside of Microsoft at the moment is that today’s layoffs are part of a larger reorganization of the company network. Now that Activision Blizzard is officially an Xbox studio, Microsoft has taken steps to bring it more in line with Xbox best practices.
In an internal memo by Xbox head Phil Spencer that was obtained by The Verge, Spencer identifies today’s layoffs as part of a process by which “we’ve set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth.”
This was to be expected. Activision Blizzard’s labor practices have been in question since the moment Microsoft announced the acquisition, so some form of major reorganization was always going to be on the cards.
Just the same, that’s still 1,900 lost jobs at a $3 trillion company, which fits into a broader pattern of layoffs from last year that’s continued into 2024. Microsoft/Xbox now joins a list of gaming companies that have implemented major cuts this month, which includes Twitch, Discord, Riot Games (League of Legends), Behaviour Interactive (Dead by Daylight), Thunderful, and Unity.
As per a roundup by Kotaku, Microsoft’s layoffs are the single largest contribution to a lineup of nearly 6,000 dismissals so far in 2024. If this trend continues, the games industry will match or exceed 2023’s record-setting layoffs by the middle of February.
This is all part of what’s argued to be an ongoing market correction. According to a Q3 report by Seattle-based analytics firm Pitchbook, overall VC investment in gaming has slowed by more than half. A Games Industry report by Christopher Dring argues that we hit an overall saturation point for video games in 2023, accompanied by high interest rates and lowered capital. We’ve been riding a wave of pandemic spending for the last three years, and now businesses in the gaming sphere are being forced to revert back to the old normal.
Even so, it’s hard to ignore the signs of stress fracture in the overall industry. Even under ideal circumstances, the video game industry is famous for churning through developers. Burnout, hire-and-fire cycles, and now the looming possibility of automation have contributed to a consistent, industry-wide talent shortage. Many of the developers who get laid off aren’t going to go get another gaming job; they’ll leave the business in favor of something less volatile.
Last year’s layoffs were already bad enough to generate a new wave of calls for and interest in efforts to unionize video game development. If publishers continue to dismiss workers at their current pace, expect to see a lot more union reps at this year’s Game Developers Conference in March. Sooner or later, something here has got to give.
The end of physical Xbox media?
As noted above, one of the confirmed impacts of Microsoft layoffs is a cutback in the number of employees devoted to Xbox retail relations. While this reportedly wasn’t a total elimination of the team, it does follow up on a number of rumors from earlier this month that many brick-and-mortar stores will cut back or eliminate their stocks of physical Xbox discs.
These rumors, to be fair, have been in circulation for the last few years. I’ve had a lot of conversations with industry insiders who predict that the next Xbox won’t have physical hardware at all. You’d do everything on your phone, tablet, or smart TV via Xbox Cloud Gaming. Microsoft famously wanted to abandon physical media entirely with the Xbox One in 2013, but abandoned the idea after substantial consumer backlash.
However, Microsoft inadvertently contradicted that back in June, during its court hearing against the Federal Trade Commission. The next Xbox is tentatively scheduled to arrive in 2028, and according to Xbox’s Sarah Bond, the Xbox Cloud Gaming project currently runs at a loss.
As a result, Microsoft seems to be exploring other options. It hasn’t abandoned the cloud, but according to the Xbox leaks from September, it’s currently researching a hybrid approach that would make use of similar technology to the 2021 Microsoft Flight Simulator. The 2028 Xbox wouldn’t be a cloud device or powered by AI, but instead, would use both at once.
Another leak from the same report suggested that Microsoft will release a new model of its Xbox Series X|S later this year. The new Series X, codenamed “Brooklin,” may ship without a disc drive, but would feature improved download speeds, power draw, and internal storage.
If Microsoft is phasing out physical media for the current Xbox, it would make sense to reorganize its team around the new needs of the overall project. It’s not a confirmation or a denial, but considering what we’ve heard so far, it’s in line with what’s rumored to be coming next.
