Xbox planning more cuts after studio closures: report

Xbox is planning even more cuts following its closure of multiple Bethesda Softworks studios on May 8th, according to Bloomberg.

In a new report, Bloomberg‘s ever-reliable Jason Schreier unpacked Xbox’s sudden move to shutter Tango Gameworks (Hi-Fi Rush), Arkane Austin (Dishonored) and Halifax’s Alpha Dog Games (Mighty Doom), as well as fold Roundhouse Studios into ZeniMax Online Studios (The Elder Scrolls Online).

Per Bloomberg, the closures are part of a “widespread cost-cutting initiative that still isn’t finished.” Mat Piscatella, executive director of analytics firm Circana, told Bloomberg that video game subscription spending has seen “flat to low single-digit growth” in the U.S. since mid-2021, which has heavily impacted Xbox’s all-in bet on Xbox Game Pass. Overall Xbox revenue is also down.

As part of its continued cost-cutting efforts, Bloomberg notes that Xbox has also begun offering voluntary severance agreements to producers, quality assurance testers and other staff at ZeniMax, the parent company of Bethesda Softworks.

However, Bloomberg reports that cuts at other Xbox divisions are also on the way. In January, Microsoft cut nearly 2,000 jobs across its Xbox portfolio, primarily Activision Blizzard, which it had just acquired for $69 billion USD (about $94.6 billion CAD). The company acquired ZeniMax for $7.5 billion USD (approximately $10 billion CAD) in 2021.

Bloomberg‘s report also unpacks a town hall that Xbox Game Studios boss Matt Booty had with staff on the morning of May 8th. While he didn’t explain exactly why the studios in question were axed, he did elaborate on the general thought process behind the closures.

Speaking broadly, Booty said ZeniMax’s studios had been spread too thin — likening this to “peanut butter on bread” and that leaders felt understaffed. As a result, studios were closed to free up resources.

“It’s hard to support nine studios all across the world with a lean central team with an ever-growing plate of things to do,” Jill Braff, head ZeniMax studios, also said in the town hall, per Bloomberg. “I think we were about to topple over,” she added.

Of course, this begs the question of why a company that feels overwhelmed by the number of studios it owns would continue to acquire even more of them, just as it did just months ago with Activision Blizzard. Indeed, even before Bethesda’s studios came under the Xbox umbrella, the company was having difficulties releasing first-party titles, with some of them, like The Initiative’s Perfect Dark reboot and Rare’s Everwild, having been announced years ago without any major progress updates to this day.

What’s more, the closures have been particularly upsetting in the industry because they affected teams that had been releasing games — and successful ones, at that. In particular, people lamented the loss of Tango Gameworks, whose Hi-Fi Rush was released last year to significant acclaim and was, according to Xbox marketing boss Aaron Greenberg, “a breakout hit for us and our players in all key measurements and expectations.” Despite all of that, Microsoft shuttered the team anyway.

According to Bloomberg, Tango had even been pitching a Hi-Fi Rush sequel before its shutdown. Likewise, Arkane Austin was looking to return to its immersive sim roots, such as through a new entry in its beloved Dishonored games, following the failure of its Redfall game last year. That said, Bloomberg notes both Booty and Braff suggested that both teams being in that early period of pitching projects and looking to hire new staff was a key factor behind their closures.

Going forward, it remains to be seen what other talent at Xbox might be on the chopping block. While Xbox’s layoffs are part of a sad larger trend in the gaming industry (around 20,000 since last year), the fact that they come from one of the world’s most valuable companies makes them feel particularly impactful.

Source: Xbox