Microsoft has officially announced a massive round of layoffs affecting 4,800 employees. However, the brunt of the cuts has fallen on the Xbox gaming division, where 3,200 people are affected. This decision is part of a radical "streamlining" process initiated by the new Xbox CEO, Aphsha Sharma.

"Flat" Structure Instead of Bureaucracy

Management explains these harsh measures as a necessity to combat excessive headcount bloat and complex bureaucracy. According to Sharma, previously, decision-making in Xbox required approval through 14 levels of management. The new structure is intended to be significantly flatter, limited to a maximum of three to five management levels.

The layoff process in the gaming sector, where approximately 20% of the staff is affected, will take place in two stages:

  • Half of the 3,200 workers will be dismissed immediately.
  • The remainder will leave their positions during a transition period until the end of 2027.

Parallel to changes in the gaming business, Microsoft is cutting another 1,600 jobs in the commercial segment unrelated to game development.

The End of the Studio Acquisition Era

Alongside personnel changes, Microsoft has announced the complete winding down of its multi-year strategy of acquiring independent developers, which started back in 2018. Xbox management has acknowledged this practice as a financial mistake, as in a typical year, the company lost 64 cents for every invested dollar.

However, major assets such as Mojang (creators of Minecraft) and King (developers of Candy Crush) remain in the corporation's portfolio. They will come under the direct supervision of the head of Xbox, retaining their status as key divisions.

Shift in Focus: From Experiments to Giant Franchises

Despite the colossal cuts, Xbox has assured that none of the publicly announced internal projects will be cancelled. However, strategic priorities are changing: the focus is shifting to large, proven franchises such as Call of Duty, Fallout, and Halo.

Lesser-known and experimental games, which previously filled the Xbox Game Pass subscription, will lose funding priority. Management acknowledges that the previous bet on rapid subscriber growth for the service did not meet expectations, resulting in business profitability being 3–10 times lower than that of competitors in the market.

The Role of Artificial Intelligence

In the context of discussing changes in the company's work processes, the development of artificial intelligence technologies was mentioned. However, Microsoft separately emphasized that the current mass layoffs are not related to the direct replacement of people with neural networks. This decision is dictated solely by the need to optimize the structure and improve business efficiency.