Microsoft will cut some 3,200 jobs from its Xbox videogames division as it restructures the struggling business.
The company will lay off 1,600 people this week and 1,600 more during the rest of the fiscal year that began this month, Xbox Chief Executive Asha Sharma said in a memo to staff Monday. Those cuts represent about one-fifth of the division’s total head count.
In addition, Microsoft is selling or spinning off four game development studios and exploring strategic options for a fifth—moves that will take more than 350 additional people off its payroll.
“Our business today is not healthy,” Sharma wrote in her memo. “We must reset XBOX.”
The videogame industry has been pummeled by layoffs for the past couple of years after many companies, including Microsoft, expanded aggressively in response to a surge of business during the pandemic. That boom halted when the world reopened.
New chief, new ways
Xbox revenue fell 5% in the quarter ended in March from a year ago. Its profit margin in the fiscal year that ended in June was 3%, a decline from the prior year.
Microsoft CEO Satya Nadella picked Sharma, a former chief operating officer of Instacart, to run Xbox in February despite her lack of experience in videogames. She has quickly begun making drastic changes.
Sharma is cutting the number of games Microsoft publishes and is investing more in its most popular franchises, including Minecraft, Candy Crush and Fallout. She reduced the price of Game Pass, which lost subscribers following a hike last year, and stopped putting new “Call of Duty” games on the service so gamers would have to buy them.
Microsoft has raised prices for its Xbox console due to the worldwide squeeze on memory chips caused by artificial intelligence industry demand, which has also affected competitors Sony and Nintendo.
Xbox also operates a digital game store for Windows PCs. As the company makes fewer games of its own, Sharma is trying to make Microsoft a more attractive distributor for the growing universe of independent game developers.