As Summer Game Fest draws to a close, it’s a great time to reflect. Not just about the cool games we saw announced (and there were a bunch), but also about an industry that, in recent years, has reached exciting new creative and artistic heights alongside deeply depressing lows in the form of layoffs, cancellations, and studio closures. Xbox reveals its introspection in broad daylight.
New CEO Asha Sharma and chief content officer Matt Booty penned a public memo to the gaming company’s employees to mark the first 100 days of Sharma’s tenure at the helm of Xbox. The takeaway is pretty dark.
For starters, the simple math of Xbox revenue doesn’t equate to success. “Excluding Activision Blizzard King, over the past five years we have spent more than $20 billion in ongoing investments in our content, platform, and hardware subsidies, but our annual revenue has declined by nearly half a billion over that time,” executives say. “In the future, this cannot continue.” They also recognize the impact of RAMaggedon: “We are currently unable to make as many consoles as gamers want to buy, and we need a new business model and partnerships for hardware while remaining committed to Helix.” (Helix, in this case, is Project Helix, the code name for the new Xbox console.)
Then there’s the kicker, a further admission that Xbox still can’t sustain the many studios it acquired in the late 2010s in an effort to expand its first-party game ambitions. “We found ourselves overextended as we executed changing strategies in a landscape of more readily available content,” the pair said, noting elsewhere that with so many good games, not to mention the plethora of other forms of entertainment available, “Going forward, our competition is attention.”
Although the memo does not say that layoffs are coming, a report from the Bloomberg emphasized the probability of what is communicated between the lines. Sources told the publication that substantial cuts were on the horizon for Xbox. Although the article provides no details on their scope, the layoffs are expected to begin in July, after Microsoft’s fiscal year ends on June 30.
It’s a brutal situation for Xbox, which has already seen several thousand job cuts in 2024 and again in 2025. And even if the company has to cut its workforce once again and drop promising new games this summer, it still won’t be an instant solution to its problems. It took several years of questionable decisions to dig the hole that Xbox currently finds itself in. It will take several years with a patient and sustainable approach, and probably not a little luck, for the company to pull through. This doesn’t cast a shadow over Sharma or his predecessor Phil Spencer. That’s just the nature of being a cog in a giant business machine like Microsoft, where the goals of creating amazing video games and video game hardware are often not aligned with the goal of making investors and shareholders happy.
