Xbox CEO Asha Sharma and Xbox Game Studios head Matt Booty just sent an email out to all Xbox employees with a clear, yet terrifying message: “this cannot continue.”
Shared publicly via Xbox Wire, the email paints a picture of a broken division, bogged down by the weight of both years of unsuccessful investments and unchecked excess, and battered by the winds of outside economic forces. Sharma, now having been in charge for 100 days, has made it clear that what she is spearheading is indeed going to be a hard reset, complete with hard decisions that will make or break the division and ripple out through the lives of its thousands of employees.
Sharma and Booty outline a number of harsh “realities” that they say the company will need to navigate in the 100 days to come. The current fiscal year, ending June 30, will see Xbox at about a 3-percent profit margin—that’s wildly low. The company has spent $20 billion on studio investments in five years, not including its $69 billion purchase of Activision Blizzard King, and its annual revenue has in turn declined nearly half a billion. The company is currently paying 4x as much for components as it did last fall, and it expects to be paying even more by holiday 2027.
The email calls the company’s massive studio system “over extended,” saying the company tried too hard to juggle too many different platform strategies and has “not adequately funded” its studios to be competitive. And it says that its platform infrastructure is “overly complex,” not “self-reliant,” and “not built for the battle ahead.”
Yeah. I’d say they’re right. This cannot continue.
This email is a brutal indictment of the series of decisions and events that led Xbox to where it is today. It condemns just about every strategy the company has attempted over the last decade and change, from its relentless gobbling-up of a huge chunk of the industry’s dwindling AA space only to fail to adequately support most of it, to its endless flip-flopping between a focus on consoles to an emphasis on subscription services to turning everything into an Xbox. Its spending, it seems, has been out of control, and it has little to show for it. Sharma and Booty are claiming to be the ones to fix it, though it’s worth noting that Booty himself was part of the team that oversaw it almost a decade.
I don’t doubt that this is going to be a challenging transition for Sharma, Booty, and everyone on their team. And I genuinely hope they succeed. I really do. Not because I care about Microsoft the corporation or its profit margins, but because I think the devs working for Xbox make cool things, many of which I’d like to play one day, and I want these talented, creative people to be able to keep making cool art for all of us to enjoy.
But that’s just it, right? That’s the bit that’s missing here from Sharma and Booty’s message. Not present anywhere here is a whisper of who, ultimately, is going to be facing these harsh realities. I’m sure Sharma and Booty have challenging jobs, trying to sort all this out. But what we learned just moments ago is that Xbox is, as a part of this reset, heading for mass layoffs. Of course it is. We’ve known this was coming for months. Any time an executive changeover happens, any time a new leader says it’s time for a “reset,” this is what happens. They make a bunch of changes to the corporate structure, for financial good or ill, and tens, or hundreds, or thousands of people lose their livelihoods. Some will suffer permanent setbacks in their lives as a result of this. Some will leave the game industry forever. Some will lose health coverage at critical times, or be unable to pay mortgages, or lose visa support at a time when the U.S. specifically is making it harder than ever to live here if you don’t look a certain way.
Sharma and Booty don’t name names in this email as to whose fault this all is, despite the pretty extreme finger-pointing that seems to be bubbling under the surface here. But I don’t think it ultimately matters which specific executive(s) anyone blames this on, whether it’s the past administration’s decisions or those of the current one, whether it’s the Xbox division itself or its highly-profitable parent Microsoft. It’s all of them. It’s the whole thing. The whole damn system that has led to the wanton flinging around of millions and billions of dollars just to own intellectual property and manage or mismanage teams of creatives. This industry is about to screw over another big group of individuals who didn’t do anything to deserve it, and there doesn’t seem to be anything that can stop it. Ubisoft laid off hundreds just earlier today. Over 20,000 game devs have been laid off in the last two and a half years, more layoffs are on the way, and the hits keep coming, all because no one seems to be interested in managing this industry sustainably, because sustainable doesn’t mean “massively profitable for shareholders.”
This cannot continue. I just don’t know when it’s going to finally stop.
