Xbox Layoffs Breakdown

Xbox Layoffs Breakdown

The 1900 Staff being laid off from Xbox are not an example of removing duplicate staff. As reports roll in from the last 24 hours, we're seeing studios gutted as Xbox make their mark on Activision Blizzard in particular.

Conor Caulfield

1900 Staff are being laid off from Xbox across Activision, Blizzard, Zenimax and More - and they have been finding out who is safe, and who is not, for the last 24 hours.
As the reports come in we can begin to see the scope of the damage being done to these development teams, because despite what Microsoft claimed - this is not a reduction of duplicated roles.

Instead across almost every active development team at Activision and Blizzard, people are being let go - and the voids they leave behind will impact the ongoing development of every game in the portfolio.
Beyond even that though, Xbox’s short-sightedness is seeing them eliminate key player facing positions, such as QA, Customer Support and Community management take big hits too.

We’re going to go through everything we’ve seen so far, explain why all this matters - and try to have sympathy for the people whose lives have been upended right as Microsoft hit’s a $3trillion stock valuation cap.

  • Let’s start by framing the way people are going to be impacted by these layoffs - for most of Activision Blizzard - the last 24 hours has been hell.
    • In some cases, staff may still not know whether they have roles!
  • Others are beginning to think about what they’ll have to do to make sure their severance pay works - dealing with the potential situation of unemployment and job hunting in a market that’s already seen nearly 6000 additions in the last month, and 16,000 in the last year.
    • Let alone dealing with the fact they may have moved states to work in Activision or Blizzard.
  • But you know who is seemingly optimistic about the future?
  • Mike Ybarra - the ex-president of Blizzard who left yesterday.
  • Because for him - he’s excited about spending time with family, travelling the world and looking out for “hyper-growth opportunities with great teams”.
  • Now let’s look at what everybody else is being left to deal with while he sails off into the sunset.

The Layoffs and Xbox’s Position

  • On November 23rd 2023, Xbox CEO Phil Spencer turned up on the Blizzcon stage to address a roaring audience of Blizzard fans - talking about his time as a fan of their games, and his plans for the future:
"We're going to empower our new colleagues in a culture of trust, inclusion, and collaboration to continue what they do best: redefining existing genres, creating new, never before seen experiences, and uniting players globally in new ways.”
  • After months of struggling to get the deal across the line, Xbox had Activision Blizzard.
  • What followed was a set of campus tours, the departure of Bobby Kotick and key executives and the beginning steps of bringing the two sets of companies together.
  • Activision Blizzard had already been conducting what are referred to as “Soft” layoffs - with their return to office policy being seen as a core element.
  • This was to effectively prepare the company for the merger, downsizing so that when Microsoft took over, the balance sheet for staff costs would be more amenable.
    • It was understood there would be overlap - this was something critics of the merger had been clear about beforehand.
    • Duplicated roles would likely be eliminated, with the work of multiple people falling on the remaining teams.
  • This didn’t necessarily happen when Zenimax was purchased - the board was dissolved, but we didn’t see this mass reduction in active staff.
    • Because what we’re seeing from the 1900 strong layoffs across not just Activision Blizzard, but core Xbox studios who have delivered key games - is that this is not just a case of duplicated roles being reduced.
  • The Memo from Phil Spencer seen by The Verge stated the reasoning for these cuts was otherwise.
Together, we’ve set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth.
  • Developers across studios in Activision Blizzard working on live games are being cut, support staff across physical game production, and community management at Xbox is being gutted.
  • And It will impact the games you play

Why does this matter to Players?

  • Activision Blizzard and Microsoft were both profitable.
    • These layoffs are not about saving the company from bankruptcy now they’ve merged.
  • This is not about underperformance.
    • The paycut taken by Satoru Iwata at Nintendo is often taken as the guiding example of how management should lead in those - except Japanese law is that you can’t really perform layoffs anyway unless all other measures are taken to prevent bankruptcy, including cost reductions.
  • Based on what we’re seeing from the reported layoffs, this is not all duplication of roles.
    • Instead these are decisions taken for the profit margin of Xbox - and which are primarily impacting the actual developers of the games you like.
  • They might sometimes make decisions about their games that you don’t like - but those are decisions set by leadership at individual teams, following mandates laid down by the management at these companies.
    • Impacted by production schedules and timings and incentives they have minimal control over - but still trying to deliver for players.
  • But these are the people who know how to make these games.
    • And it’s important to remember that games are made by people.
    • They have skills and knowledge and a passion for these titles.
    • With everything that’s gone on at Activision Blizzard the last few years, they would have left if they didn’t care.
  • Now the knowledge, skills and passion they had are gone.
    • And the remaining staff are going to have to deal with the additional work left behind, as well as the trauma of watching their co-workers get axed.
  • Staff were excited about the prospect of a future without Bobby Kotick - one where they might see some respect.
  • Blizzard staff are claiming that prior to this happening - they were assured by leadership that the merger would not result in mass layoffs.
  • Evidently that was untrue.
  • And now a fraction of the people who maintained those studios will be expected to maintain the same cadence of development going forwards.
  • That means content will take a hit.
    • In some teams, entire sub teams are being gutted - meaning whatever they were working on will either disappear or have the slack picked up by others already busy with maintaining their games.
  • But the biggest hit is to what Blizzard wanted to do next.

The Survival Game

Microsoft Cancels New Blizzard Video Game After Six Years of Development
The long-in-the-works title Odyssey is a casualty amid broader cuts
  • Per a report from Jason Schreier at Bloomberg - the Survival Game was in a rocky state.
    • In development for six years, since 2017.
    • Was potentially targeting 2026, staff thought this was ambitious
    • Originally prototyped on Unreal Engine, was switched because Blizz Execs wanted 100 player large scale maps.
    • Instead used Internal Synapse engine - intended for Mobile games and to be something akin to EA’s Frostbite.
    • But this didn’t have functionality that the team needed, so they would prototype in Unreal even content the team “knew would have to be discarded later”.
  • Implication from the reporting is that unless your project is inside an existing franchise it doesn’t get to continue going forwards
  • Contrast this with how Blizzard have handled project closures in the past.
    • The most prominent example was the team and work on Project Titan - a project that would be used as the core for what would become Overwatch.
  • Presumably in an attempt to call back to this, the framing for the Survival Game in particular was that the leadership at Blizzard would be doing something similar:
“move some of the people on the team to one of several exciting new projects Blizzard has in the early stages of development.”
  • The impression being given by the developers who were on that team is that very few, if any, of them remain with Blizzard.
  • Which means for some, a six year development cycle has resulted in no credited work - in an industry where Blizzard themselves ask for shipped titles as part of their Job Application process.
  • The Survival Game was always a potential casualty of the merger.
  • A long shot project that Microsoft already has one version of in Grounded.
    • It probably would have been perfect on game pass - but the cost of getting it out the door was going to be a risk.
  • What’s making less sense are the rest of the reports we’re seeing - where the scythe has gone through every team and aspect of Activision Blizzard.

Blizzard’s Game Developers

  • Reports have come in from developers across Blizzard.
  • Overwatch seems to have been particularly affected - with animators, designers and encounter designers reporting they’ve been impacted by the layoffs.
    • Specifically, the team working on the PvE content for the game seems to have reported losses - this would likely include seasonal events as well as the paid invasion event
    • Reminder that that team on the latter especially seemed to be hamstrung by the way their work would be sold - and with trying to implement anything after the massive redesign OW2 went through before launch.
  • This is a pattern that seems to hold for Diablo 4 too - with the team reporting losses for environmental artists, animators and more.
  • In both D4 and OW2 - they are seemingly good revenue generators.
    • Only five days after launch, D4’s Boxed Sales outstripped the estimated figures for Baldur’s Gate 3 last year, while OW2 might have seen a decline over time, but reportedly had $225m in revenue by March of last year.
  • But both teams were gearing up for huge efforts this year in Overwatch’s redesign of monetisation and core gameplay, while Diablo 4 is preparing for it’s first expansion.
    • Now those teams are taking cuts before they have the chance to actually see how those go.
  • Where we’ve seen fewer departures (so far) is on Warcraft, both in Rumble and World.
    • It could be that this team is seen as a safer bet - with Warcraft stabilising in recent years while representing a safe project.
    • But we also know that the teams there have been slowly losing staff and consolidating around key departures anyway - including through the soft layoffs of the RTO policy.
  • But equally - QA and Community management across the entirety of Blizzard appears to have been impacted.
    • And all of this is a pattern we’re seeing at Activision too.

Activision’s Game Developers

  • A lot of people make Call of Duty - a constant production line across multiple studios that collaborates to make one game every year.
  • It’s a tough process - and one that will now be significantly harder due to sweeping layoffs across the company.
  • Every Studio has been impacted under Activision.
  • Per reporting from Insider Gaming, Sledgehammer games had already planned to downsize their office as a result of a shift to remote working - now they’ve also had around 30% layoffs.
Sledgehammer Games is Going Back Remote as It Finds a New Office - Insider Gaming
Sledgehammer Games will be closing its main office in California to relocate to a smaller office space, Insider Gaming has learned.
  • Toy’s for Bob has been estimated to have lost 30+ staff from their remaining complement of around 85 - the studio had already been impacted by being heavily dependent on contractor work.
  • In particular - across both Activision and Blizzard, QA departments are reportedly being particularly hit hard.
  • This plays into something that seemingly is becoming clear from the extent of these layoffs - Xbox are not interested in paying for premium levels of support.
  • That’s where they seem to have made cuts to physical games production, to and to the community support teams across both Zenimax and Bethesda for their live service titles.

The Extra Factors

  • This is from Jez Corden of Windowscentral - reporting that the plan going forward is outsourcing on the community management angle.
    • Especially for a game like WoW entering it’s 20th year, the idea of a solid customer support team who have experience is essential.
  • Instead - these will likely be cheaply offloaded to an offshore centre where someone will read from a script if the customer is lucky, and be an AI chatbot if they’re not.
    • But the name of the game is cost effectiveness - and that’s cheaper than quality.
  • The decision to shift on Physical Games production represents this too.
    • We know that digital games are the way the audience and industry is trending.
    • Xbox is supposedly (per the FTC leaks) getting a digital only Series X refresh some point later this year.
    • If that’s happening, there’s simply less need to have physical disks produced for the new SKU - so might as well take this opportunity to remove the staff working on that.
  • The audience experience of owning a physical disc is a line item on a balance sheet and it is losing out.
  • Another place we can see the same ethos?
  • This was - like the survival game - always going to be a point of concern.
  • Blizzard wasn’t just going to delete immediately following the merger - it’s the way that millions of people interact with their products.
    • But there was always a question - why would Xbox need both the Xbox Game Store and
  • Now we’re seeing layoffs from the teams at Blizzard that manage that - presumably also while the legacy games and account management those teams oversee are being prepared to have titles placed on gamepass.
  • But maybe the most widespread and obvious element of what we’ve seen here is that Community Management has been gutted in the wake of these layoffs
  • Again - the move is towards outsourcing.
    • Staff are being replaced with cheaper options - regardless of the relationships, knowledge and intangible benefits that will be lost.
  • The claim is that this is for “alignment with Microsoft” and they might mean that.
    • But it represents a shift from the policy before the layoffs - where in particular we can see the impact of the layoffs on Zenimax.
  • As one of the Fallout 76 community’s beloved CMs is being laid off too - presumably to also bring that company in alignment with Microsoft policy.
  • These are short-sighted decisions - nowhere better exemplified than above.
  • A good CM can forge a community out of a game as maligned as Fallout 76, one that is genuinely in mourning for her departure.
  • And that's something that will never show up on a balance sheet - right up until players start to leave as a result.
  • Because that’s what this is all about.
  • Not protecting the company from going under.
    • But protecting the bottom line by simple, inconsiderate measures.
  • This was Overwatch Senior Designer Jorge Murillo’s last words to his team as his Slack access was deactivated.
  • And they really did.