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Microsoft lays off another 650 employees from its video game workforce, Xbox boss Phil Spencer sends memo to employees

Microsoft is laying off another 650 employees from its gaming business, according to a memo that Xbox boss Phil Spencer sent to employees today, September 12, and which IGN has obtained.

In the memo, Spencer said the positions are primarily corporate and support roles and were created “to position our business for long-term success.” He clarified that no games, devices or experiences will be canceled and no studios will be closed as part of these cuts.

These latest layoffs mean that Microsoft has laid off 2,550 employees from its gaming business since acquiring Activision Blizzard for $69 billion in 2023. In his memo below, Spencer makes it clear that the cuts are related to the acquisition.

Xbox boss Phil Spencer speaks at gamescom 2024. Image credit: Microsoft.

Phil Spencer’s email to employees is reproduced in full below:

Over the past year, our goal has been to minimize disruption, onboard new teams, and enable them to do their best work. As part of the re-engineering of our team structure following the acquisition and management of our business, we have decided to eliminate approximately 650 positions at Microsoft Gaming – primarily corporate and support roles – to position our business for long-term success.

I know this is difficult news. We are deeply grateful for the contributions of our colleagues who learn they are impacted. In the U.S., we are supporting them with severance packages that include severance pay, extended health insurance and outplacement services to help them make the transition. Outside the U.S., packages vary by location.

With these changes, our corporate and support teams and resources are positioned for sustainable future growth and can better support our studio teams and business units with programs and resources that adapt to their needs. That said, as part of running the business, there is some impact to other teams as they adapt to changing priorities and manage the lifecycle and performance of games. As part of these adjustments, no games, devices, or experiences are being canceled today, and no studios are being closed.

Throughout our team's history, there have been great moments, but also challenging ones. Today is one of those challenging days. I know it's hard to go through more changes like this, but even in the most difficult times, this team has managed to stick together and show care and kindness to one another as we work to continue to provide the best for our players. We appreciate your support as we navigate these changes, and thank you for your compassion and respect for one another.

Phil

These cuts follow Microsoft's already horrendous 1,900 game layoffs earlier this year, and continue the video game industry's difficult period. As part of these cuts, Microsoft has shut down Hi-Fi Rush developer Tango Gameworks and Redfall developer Arkane Austin. In June, Spencer told IGN, “I have to run and grow a sustainable business within the company, and that means sometimes I have to make tough decisions that, quite frankly, I don't like, but that someone else has to make.”

While Spencer insists that Microsoft's video game franchise is “going from strength to strength” and the number of Xbox console players “is at an all-time high this year,” the gaming company is now bringing a number of its games to rival platforms, including the PlayStation 5.

Xbox hardware sales were down sharply again in Microsoft's fourth quarter, the last financial quarter we have numbers for, while gaming content sales soared again thanks to the company's acquisition of Activision Blizzard. Gaming revenues overall seem to be doing more than well year-over-year, even setting quarterly records, but that was largely due to the boost from Activision Blizzard (last year the company wasn't there to make money, now it is, so the numbers are up). Gaming revenues were up 44% year-over-year, but with a 48-point net effect from the acquisition, suggesting that Xbox's non-Activision Blizzard business isn't doing as well as it did last year. Xbox content and services revenues fared better, up 61% year-over-year, with a 58-point net effect from the acquisition.

Overall, Microsoft's More Personal Computing division (which includes Xbox and other segments such as Windows) generated revenue of $15.9 billion in the fourth quarter, an increase of 14% year over year.

That is definitely the case: At Microsoft, too, we are faced with high expectations regarding the performance we have to deliver to the company.

In August, Spencer said that Xbox's multiplatform offensive was, among other things, about bringing more money into Microsoft's gaming business. After Microsoft took over the “Call of Duty” maker Activision Blizzard, the company was now under pressure to deliver results.

“And we run a business,” Spencer said. “It's definitely true that at Microsoft, the bar is high for us in terms of what we have to give back to the company. Because we get a level of support from the company that is just incredible and what we can do.”

“So I'm looking at how we can make our games as strong as possible. Our platform continues to grow, on consoles, on PCs and in the cloud. It's just going to be a strategy that works for us.”

Microsoft will launch Activision's Call of Duty: Black Ops 6 in October as the first mainline Call of Duty game, which will be available from day one through the Game Pass subscription service. There are strong rumors that an Xbox handheld is being prepared for release, and plans have been announced for a release on next-gen Xbox consoles. Indiana Jones and the Great Circle is coming to PC and Xbox this December, with a PS5 release to follow soon after.

Image credit: Microsoft.

Wesley is IGN's UK News Editor. You can find him on Twitter at @wyp100. You can contact Wesley at [email protected] or confidentially at [email protected].

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