Xbox Leaders Acknowledge Financial Struggles, Hint at Layoffs

As Summer Game Fest draws to a close, it's a fitting time for reflection. Not just on the cool games we saw announced (and there were a bunch), but also on an industry that, in recent years, has reached thrilling new creative and artistic highs alongside deeply depressing lows in the form of layoffs, cancelations and studio closures. Xbox is putting its introspection out in the open.

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 leading Xbox. The takeaways are pretty grim.

For starters, the simple math of Xbox's revenue isn't adding up to success. "Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time," the execs state. "Going forward, this cannot continue." They also acknowledge the impact of RAMaggedon: "We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix." (Helix, in this case, is Project Helix, the codename for Xbox's new console.)

Then there's the kicker, a renewed admission that Xbox still can't support the many studios it acquired in the late 2010s in an effort to grow its first-party game ambitions. "We have found ourselves over extended as we executed on 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."

While the memo stops short of saying that layoffs are coming, a report from Bloomberg emphasized the likelihood of what's being communicated between the lines. Sources have told the publication that substantial cuts are on the horizon for Xbox. Although the piece doesn't offer any specifics about their scope, the expectation is that layoffs will begin in July, following the end of Microsoft's fiscal year on June 30.