Xbox is losing 64 cents on every dollar it invests, CEO Asha Sharma said.
Microsoft is laying off 4,800 roles at the company – including 3,200 in its Xbox gaming division – as the company seeks to cut costs and shrink its organizational structure in response to AI and a changing landscape.
Xbox has faced some financial difficulties in recent years, driven by rising memory prices that have affected the entire industry, but its effects have been exacerbated by poor decision-making in the division.
The latest round will reportedly affect around 20 percent of Xbox’s workforce, and comes after the division is understood to have been hit hard by a major round of job cuts last year. Some of Microsoft’s approximately 3,500 employees in Dublin and Belfast were affected by the round.
“We operate at three to 10 times lower margins than the same platform and publishing businesses,” said Xbox CEO Asha Sharma.
“It is our core business [has] We are fragile, and we add more teams, more investment and more time, hoping for a better result. And now the industry is facing the biggest hardware crisis in its history. “
According to Microsoft’s statements, the company is cutting about 2.1pc of its workforce across all commercial and Xbox divisions. The sports department began the redundancies with a total of 1,600 job cuts yesterday (6 July).
The company is also shedding additional burdens by turning Enforcer Games and Double Fine Productions back into independent studios. Ninja Theory and Undead Labs, on the other hand, “have entered into terms of joining the new ownership”, and Arkane is starting to consult “to review possible strategic options”.
Sharma said that Xbox is competing with big and small studios, independent studios that are churning out more games every month at a faster pace than ever before.
“It’s impossible and not desirable to own every large independent studio. We’ve also learned that it’s not the best home for every type of studio,” he added.
Revenue at Xbox has fallen by around $500m over the past five years, despite the division pouring more than $20bn into games content, platform and hardware support during that time. In a typical year, Xbox lost 64 cents on every dollar it invested, the company admitted.
The division is now scaling back investments to focus on the most important projects across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios. However, no first-team fixtures have been publicly announced as being cancelled.
Xbox also shed layers of management that “slowed down decisions, blurred accountability, and made it difficult to bring in players”, Sharma wrote. “We will bring success through lean organization.”
The layoffs come despite revenue at parent company Microsoft rising 18pc to almost $83bn in the last quarter. Xbox and services revenue fell 5pc. Shares in the company were down about 1pc yesterday, making little profit in after-hours trading.
Another Microsoft business LinkedIn also faced a round of layoffs in May. It is not clear how many of its 17,500 employees have been affected by the move, but LinkedIn disputed the 5pc figure reported by Reuters. At the time reports suggested that 78 Irish jobs were at risk.
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