{"id":756089,"date":"2026-07-11T05:37:13","date_gmt":"2026-07-11T05:37:13","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/756089\/"},"modified":"2026-07-11T05:37:13","modified_gmt":"2026-07-11T05:37:13","slug":"what-xboxs-layoffs-massive-reboot-say-about-the-gaming-industry","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/756089\/","title":{"rendered":"What Xbox’s layoffs, massive reboot say about the gaming industry"},"content":{"rendered":"

Autumn Mitchell has been an avid gamer since she was gifted a Super Nintendo at 5 years old.<\/p>\n

\u201c\u200aI played Donkey Kong Country, and I was absolutely obsessed,\u201d she said. \u201cVideo games have been a refuge for me. They have been a place to escape and to fantasize and to dream.\u201d<\/p>\n

Then, about five years ago, a new dream came true. Mitchell was hired by Microsoft subsidiary ZeniMax to test video games.<\/p>\n

\u201c\u200aI scored the dream job\u2026and just absolutely loved it, the people, the industry, the work itself is really dynamic and challenging, and it’s always changing \u2014 just really fulfilling stuff.\u201d<\/p>\n

But this week, that dream came to an end. Mitchell was one of thousands Microsoft laid off as part of a big reset of its gaming division. Between layoffs and spun out studios, Microsoft plans to reduce Xbox by 3,200 jobs over the next fiscal year. The company is calling it \u201cthe most significant restructuring in Xbox history.\u201d<\/p>\n

RELATED: Microsoft cuts 4,800 jobs, including many at Xbox in a \u2018reset\u2019 of its gaming division<\/a><\/p>\n

\u201c\u200aI would say it’s like having the wind knocked out of you and you never really get your breath back,\u201d Mitchell said.<\/p>\n

She\u2019s not optimistic she\u2019ll find another job in gaming. The industry has always had boom and bust cycles. Studios staff up to build a new game, but there can be a long lag time until the next one. Often there\u2019s not enough money to bridge the gap.<\/p>\n

But experts say this moment is different. Gaming companies are fighting social media, AI, and so many other drags on users’ attention.<\/p>\n

\u201cThe more our time gets divided up, the less time we have to spend on gaming, and therefore, the less money we’re inclined to spend on gaming,\u201d said Gil Luria, head of technology research at the investment bank brokerage D.A. Davidson.<\/p>\n

Microsoft says the number of game players and playing hours are down. And Xbox has been spending billions on studio acquisitions, some of which were flops. In a memo to employees, Microsoft said the business has become unhealthy, with profit margins three to ten times lower than competitors.<\/p>\n

KUOW asked Microsoft President Brad Smith about the prospect of layoffs in an interview last week, and he said even though these decisions aren\u2019t easy, \u201cYou do have to remain healthy in order to be successful, even to just stick around from decade to decade to decade.\u201d<\/p>\n

If the gaming industry was facing an uphill fight before, soaring hardware costs turned it into an epic battle.<\/p>\n

\u201cThe current layoffs are an unfortunate mix of both internal inefficiencies and\u2026this apocalyptic degree of hardware prices going up because of the AI frenzy,\u201d said Joost van Dreunen, a professor at New York University who teaches the business of video games.<\/p>\n

According to van Dreunen, a combination of tariffs, increased fuel prices, and \u2014 most importantly \u2014surging demand for chips is eating into Xbox\u2019s margins.<\/p>\n

RELATED: Microsoft’s climate-warming emissions surge 25%, driven by AI<\/a><\/p>\n

\u201c\u200aAnd that’s a scenario in which the easiest answer is to just cut jobs, as unfortunate as that is for everybody involved,\u201d he said.<\/p>\n

Some rank-and-file Xbox employees, like Mitchell, think leadership\u2019s efforts to course correct are misguided. They believe turning things around will require listening to the people making these games, not firing them.<\/p>\n

Christopher Hays has been working on games like Doom and Rage for id Software for 16 years. It was acquired by Xbox in 2021. Hays hasn\u2019t been laid off yet, though he worries he could be. He thinks the problem is comparing Xbox with higher margin parts of Microsoft\u2019s business, like software and AI.<\/p>\n

\u201c\u200aGaming makes a lot of money,\u201d he said.<\/p>\n

But not AI money.<\/p>\n

\u201cMost of the time when there’s a lot of money lost, it’s people in power chasing a trend\u2026and then ignoring developers who actually know the industry, are gamers themselves, and know what people want.\u201d<\/p>\n

Hays would like to see Xbox spun out of Microsoft. Some gaming experts say that may ultimately be where all of this is headed.<\/p>\n

\u201c\u200aThat’s where I see the future for Xbox in the next two years,\u201d van Dreunen said. \u201cWe’ll hear in the next 12 to 24 months if that’s going to be a reality. But a breakup of Xbox into smaller subcomponents and a sell-off of some of those, I think is a likely future.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Autumn Mitchell has been an avid gamer since she was gifted a Super Nintendo at 5 years old.…\n","protected":false},"author":2,"featured_media":756090,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[74],"class_list":["post-756089","post","type-post","status-publish","format-standard","has-post-thumbnail","category-technology","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/756089","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=756089"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/756089\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/756090"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=756089"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=756089"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=756089"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}