Microsoft to cut 650 more gaming jobs [Update]

It's the second big round of cuts at the Xbox-maker this year following its purchase of Activision Blizzard

Xbox Series X. Image: Microsoft

Microsoft will lay off approximately 650 people from its gaming team, the company’s head of gaming, Phil Spencer, told employees in an email to team members this morning.

Spencer framed them in the context of Microsoft’s October 2023 $69 billion purchase of Activision Blizzard.

“As part of aligning our post-acquisition team structure and managing our business, we have made the decision to eliminate approximately 650 roles across Microsoft Gaming—mostly corporate and supporting functions—to organize our business for long term success,” Spencer wrote.

The majority of the cuts will impact people in those corporate and support roles at Activision Blizzard, according to a source familiar with the matter.

This is the second round of major cuts at Microsoft’s gaming division this year. In January, the company said it would be laying off 1,900 workers across Xbox, ZeniMax/Bethesda and, most heavily, Activision Blizzard. 

Those cuts also included the cancellation of at least one game project at Blizzard.

This time around, “no games, devices or experiences” will be cut, per Spencer’s note.

None of the business unit leaders at Xbox or its affiliated gaming teams will be cut either, according the a source familiar.

Throughout the last two years, game companies that had expanded greatly after the pandemic-lockdown-driven industry boom have enacted deep cuts. Sony’s PlayStation team, which bought more than a half dozen studios since 2021, announced in February the layoff of 900 workers, with more cuts at its Bungie studios announced over the summer. That ended years of expanding headcount at PlayStation. Riot, which said to have doubled its workforce since 2019, announced the cut of more than 500 workers in January.

In February, Spencer told Game File that the 1,900 cuts were needed to keep Microsoft’s gaming team on track with goals set by the overall company.

“I have a commitment to the company on the Xbox business being a profitable and growing part of Microsoft,” he said at the time. “And I need to put us in the best position for long-term growth. Most of that is about building great products that exceed their expectations and find millions of customers. But honestly, you know, the cost of building the products inclusive of the people who work on them—I need to make sure we have enough of the right people and the right number of people in the right places for us to succeed.”

Microsoft’s financial outlook for its next fiscal quarter ending September 30 assumes revenue growth for its gaming team in the mid-30% range, with 40% coming from Activision Blizzard (which also encompasses the mobile gaming operation at King). That suggests that, without factoring in ABK, Microsoft would expect its gaming revenue to be down.

Microsoft’s overall operating income for the year ending June 30, 2024 was $109 billion, up from the year before.

The company has several major game releases ahead this fall, including Activision’s Call of Duty: Black Ops 6, which is expected to be one of the biggest games of the year.

The full text of Spencer’s letter from this morning is below

Subject: Changes to Microsoft Gaming

For the past year, our goal has been to minimize disruption while welcoming new teams and enabling them to do their best work. As part of aligning our post-acquisition team structure and managing our business, we have made the decision to eliminate approximately 650 roles across Microsoft Gaming—mostly corporate and supporting functions—to organize our business for long term success.

I know that this is difficult news to hear. We are deeply grateful for the contributions of our colleagues who are learning they are impacted. In the US, we’re supporting them with exit packages that include severance, extended healthcare, and outplacement services to help with their transition; outside the US packages will differ according to location.

With these changes, our corporate and supporting teams and resources are aligned for sustainable future growth, and can better support our studio teams and business units with programs and resources that can scale to meet their needs. Separately, as part of running the business, there are some impacts to other teams as they adapt to shifting priorities and manage the lifecycle and performance of games. No games, devices or experiences are being cancelled and no studios are being closed as part of these adjustments today.

Throughout our team’s history, we have had great moments, and we have had challenging ones. Today is one of the challenging days. I know that going through more changes like this is hard, but even in the most trying times, this team has been able to come together and show one another care and kindness as we work to continue delivering for our players. We appreciate your support as we navigate these changes and we thank you for your compassion and respect for each other.

Phil

Update - 5:15pm, Sept. 12 - While the majority of the layoffs were in Activision Blizzard corporate and support roles, a source familiar with the matter tells Game File that there are also cuts involving teams of two Activision Blizzard mobile games. Some layoffs are impacting the Warcraft Rumble team, which will continue to be available but is moving from launch to live-ops. Others will impact workers on Call of Duty Warzone Mobile, one of two Call of Duty mobile titles. That game will also continue, but its team is being scaled down. The Mobile version of Warzone launched in March, after Activision announced it had 50 million pre-registrations. These cuts, according to the source, were not tied to the merger and were what Spencer was referring to when he mentioned needing to “adapt to shifting priorities and manage the lifecycle and performance of games.” Mobile has been a priority for Microsoft and was cited by Spencer and others as a major reason to buy ABK. But, across the industry, game publishers have been pulling back from mobile games tied to even the biggest franchises, as they find the market harder to thrive in than expected.