The sudden closure of several video game studios in Microsoft's Xbox division was the result of an extensive cost-cutting plan that had not yet been completed.
Xbox this week began offering voluntary severance agreements to producers, quality assurance testers and other staff at ZeniMax, which it acquired for $7.5 billion in 2020, according to people familiar with the company's plans. Other stakeholders across the Xbox organization have been told further layoffs are in the works.
An Xbox spokesperson declined to comment.
Employees were shocked Tuesday when three Xbox subsidiaries unexpectedly closed and a fourth was absorbed. The closures also include Tokyo-based Tango Gameworks, which released a critically acclaimed action game last year. hifi rush. According to people involved who spoke on condition of anonymity to discuss non-public information, plans are underway for a sequel to Tango.
During a town hall with ZeniMax staff Wednesday morning, Xbox president Matt Booty praised: hifi rush However, the company declined to say why it closed the development studio behind it, according to three people present.
Booty spoke more broadly about the closures, saying the company's studios were too spread out like “peanut butter on bread” and that leaders across the division were feeling understaffed. They decided to close these studios to free up resources elsewhere, he said.
Booty added that Arkane Austin, a subsidiary that had long developed games such as: preywhich had nothing to do with performance in new multiplayer games. red falla critical and commercial fiasco.
Before its closure, Arkane aimed to return to its roots by proposing a new single-player “immersive sim” game. dishonor According to sources, the series.
Jill Braff, director of ZeniMax Studios, said at City Hall that she hopes the reorganization will allow the department to grow. fall out and doom, you can focus on fewer projects. “It's hard to support nine studios around the world with a lean, central team that has an ever-increasing amount of work to do,” she said, according to audio of the meeting reviewed by Bloomberg.
“I think we almost flipped,” she added.
Tango and Arkane both released games last year and were looking to hire additional staff to pitch new projects, but Booty and Braff suggested that was a major factor in the closure. Tango founder and studio head Shinji Mikami retired last year.
These job cuts at Xbox come as the video game industry shrinks further due to economic changes following a period of rapid growth during the pandemic. Recently, Microsoft's gaming division expanded beyond its competitors by acquiring ZeniMax and Activision Blizzard for a total of more than $76 billion. Microsoft cut 1,900 jobs in February, mainly at Activision Blizzard.
Activision Blizzard's major acquisition has increased scrutiny from Microsoft executives on the Xbox division, people familiar with the matter said.
In recent years, Xbox has become deeply invested in Xbox Game Pass, a subscription service that gives you unlimited access to hundreds of downloadable games for a monthly fee. To give the service new appeal, Xbox has acquired dozens of studios, including companies known for making smaller games, such as San Francisco-based Double Fine.
While most game publishers are looking to make big moves with games that cost hundreds of millions of dollars, Xbox has promised to support less expansive and creative titles, including: hifi rush The budget is small and sales expectations are low. It doesn't matter if your game sells tens of millions of copies, as long as you help strengthen the Game Pass library.
But Game Pass hasn't seen the huge growth that Xbox chief Phil Spencer might have expected.
Matt Piscatella, executive director of analytics firm Circana, said monthly non-mobile video game subscription spending in the U.S. has “continued to experience flat to low single-digit growth” since mid-2021.
“Our data shows that Game Pass spending actually experienced a period of strong growth from late 2019 to early 2021, and has since stabilized,” Piscatella said. “At least for now, purchasing games, add-on content, and even free-to-play models remain the highly preferred means of acquiring video games for U.S. consumers.”
There's no indication that Xbox plans to do away with the Game Pass model, but there are hints that its big bet isn't paying off. In the most recent quarter, Xbox content and services revenue increased 62%, but as Nico Partners analyst Daniel Ahmad pointed out last month, all of this growth was due to Xbox acquisitions. was. activision blizzard. He said on social media that without the deal's revenue, Xbox gaming revenue would have been down about 5% year-over-year “due to no growth in software and services and significantly lower hardware revenue.” It pointed out.
As console revenues have declined, the company has recently begun releasing some games on competing platforms. “My biggest concern about the industry is the lack of growth,” Spencer said in a March interview with gaming site Polygon.
