Morgan Goin felt the news land like a punch. The senior encounter designer at Xbox-owned ZeniMax Online Studios (ZOS) had known cuts were coming – reports of a “bloodbath” at Microsoft’s gaming division had been circulating for weeks after new chief executive Asha Sharma released a memo saying she planned to “reset the business”. But the scale was staggering: about 3,200 workers – an estimated 20% of the console-maker’s staff – were being let go. Half were dismissed immediately, the remaining 1,600 over the next 12 months.
“We knew something was going to happen to somebody, but not who or how much,” Goin told the BBC. Her work on popular fantasy role-playing game The Elder Scrolls Online was not enough to save her job.
“Xbox axes 3,200 jobs in 'painful' reset; developers describe a 'deafening silence' before the cuts.”
Xbox leadership has insisted the “painful” cuts across its sprawling network of studios are necessary for future success. The strategy is to pour more resources into its biggest blockbuster series – such as Fallout, whose image accompanied the announcement – to get new instalments out faster. But former employees say the layoffs have eliminated decades of talent and experience, and question whether the company can deliver on its promise of “a bigger future”.
Layoffs have become routine across the video game industry since 2022, with estimates suggesting nearly 58,000 roles cut worldwide. Much of this stems from over-hiring and aggressive expansion around 2020, when the Covid-19 pandemic sparked a boom in player numbers and spending. During that period Xbox snapped up multiple studios, including ZeniMax/Bethesda and Call of Duty maker Activision Blizzard for $69bn (£56bn) in 2023. While video games remain profitable, production costs have skyrocketed, and cost-of-living crises, shifting customer habits and rising hardware costs blamed on massive investment in AI have all squeezed the market.
When Sharma’s memo landed in early June, some staff began to worry. “People are reading in between the lines,” said Autumn Mitchell, a former senior quality assurance tester at ZeniMax. “Does it mean me? Does it mean them? Does it mean my project? Does it mean my studio?” Mitchell is one of four Xbox developers who spoke to BBC Newsbeat, all members of studio unions affiliated with the Communication Workers of America (CWA). They say requests for information were met with a “deafening silence” in the weeks between the memo and the cuts.
The question now is whether stripping out so many experienced workers will help Xbox reach its goals – or leave it too gutted to deliver.