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Asha Sharma, the new CEO of Xbox, had previously spoken about the need to “reset” Microsoft’s gaming division, but now an official announcement has been made. Today, she revealed exactly what these changes will mean for the company, its employees, and its studios. According to a post on the Microsoft blog, the company is embarking on “the most extensive restructuring in Xbox history,” which will affect 3,200 employees.
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About 1,600 Xbox employees will be laid off today, and the same number will be laid off during Microsoft’s 2027 fiscal year. “I realize that this restructuring, which will last a full year, creates additional challenges,” said the CEO of Xbox. “Unfortunately, it’s not possible to make all the necessary changes in a single day, and I wanted to be honest about the scale of these changes.”
Five studios within Xbox Game Studios will be spun off as independent companies or sold. These include Compulsion Games, Ninja Theory, Undead Labs, Double Fine, and Arkane. Contrary to many previous reports, it appears that these studios will not be shut down.
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Compulsion Games (South of Midnight) and Double Fine Productions (Psychonauts) will once again become independent companies; they “will transition into independent studios with their own intellectual property, catalog, and resources to develop future games.” Meanwhile, Ninja Theory and Undead Labs have signed agreements to transfer to a new owner, whose name has not yet been disclosed. The terms of the deal include funding to complete their upcoming projects, Senua’s Saga and State of Decay. Arkane Studios, which is working on the Dishonored project, is also leaving Xbox and is currently undergoing mandatory consultations with its works council in France.
Asha Sharma also reported that Bethesda, Blizzard, Activision, and other studios are refocusing on creating “higher-priority projects.” In addition, the Mojang and King teams will now report directly to her, as they have the company’s largest active player bases. None of our games or projects that the company has officially announced previously will be canceled as part of the cutbacks.
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“It’s impossible and undesirable to own all the leading independent studios,” the CEO explained. “We’ve also realized that we aren’t the best fit for every type of studio. On average, we were losing 64 cents for every dollar invested. As part of the Xbox relaunch, we’ll help independent creators succeed by providing them with open development tools and an audience so they can bring their visions to life.”
According to her, Xbox is currently operating at a profit margin up to 10 times lower than that of comparable platforms and publishers. Its strategic initiatives – including Game Pass, multiplatform support, and content portfolio expansion – have progressed at a slower pace than expected.
In addition, the restructuring will change Xbox’s management system. According to Sharma, decision-making currently involves up to 14 levels of management, which creates unnecessary complexity, so the plan is to reduce this to 3–5 levels. The focus will be on developers, hands-on leaders, and employees who are directly accountable for results. In addition, Xbox is introducing the role of Chief Operating Officer, which will be filled by Helen Chiang. She will be responsible for the profits and losses of Xbox’s content, hardware, platform, and services divisions.
Concluding the announcement, Asha Sharma stated that Microsoft will invest as much in Xbox this year as it has in the past, but will do so with greater focus, discipline, and clarity.
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