The narrative around these cuts is all wrong and overblown imo. The title, for instance, while accurate, doesn't give the full context: Microsoft has made 26k job cuts. It's closed entire businesses in India, for instance. Some of those cuts relate to Xbox, primarily as redirect funds to invest into AI.
Microsoft is just one company doing this.
But people have turned it into "Xbox job cuts" and a reflection of the entire Xbox division over the last decade, conveniently ignoring the fact that they literally invested 80b into it a few years ago, and despite poor sales, committed more hardware next gen.
I think the real story here is despite Microsoft's insane levels of investment into a platform that isn't growing, it is not shielding it from company wide cuts.
This take completely ignores the fact that many of the businesses within the Xbox division are:
- Fairly recently acquired publishers
- All of whom have been largely competent at running their operations before the MSFT M&A
- Most of which have been insanely profitable
None of which have been protected by the MSFT top brass' "cut 4% across every part of the org, every business, every dept." - which is how I deeply suspect all this came about.
It's insane because the Xbox top brass don't even seem to understand their market and their business enough to understand how damaging these kinds of nonsense, arbitrary sweeping cuts are to content businesses in a sector like this.
They cancelled projects with nearly decades of sunk costs with no scope for recoup, leaving gaping holes in their future release portfolios they will not be able to fill now, that will hugely impact profitability in subsequent years, and they will
still need to spin up new projects and new teams and invest hundreds of millions of dollars for subsequent years to try to shore up future earnings, but now with 5-8 year lead times starting from scratch, with nothing in between once their current crop of titles in-flight are out the door.
The PR around this is terrifying. Even 3rd party studio publishing contracts got impacted.
Devs will and are fleeing the company and they will loose a ton of talent as a result. This means that even if titles were cancelled due to eroded quality, even the salvaged titles will have quality materially eroded due to failed trust and confidence.
The whole org has demonstrated there is no backbone going all the way up to Phil Spencer, who was happy to e.g. cut hundreds of jobs from a company he spent $76B acquiring, shortly after telling them that their autonomy would be preserved.
This will also impact independents, who now understand that MSFT cannot be trusted to honour its publishing commitments, that they're happy to pull the plug from funding your game and your studio, not because the relationship isn't working or the quality of the game isn't there, but because their top brass who are completely divorced from your sector and neither understand it nor care, have decided they want to divert more investment into AI.
& all of this is set within the backdrop of a company (Xbox) proclaiming they want to transition from a hardware business to a software & content business, whilst at the same time systematically demonstrating that they aren't committed to software either, by not preserving and investing
more into content (which is what you're supposed to do when you know you're going to lose billions in hardware revenue over the next 10 years; you need to make up the shortfall somewhere), but instead making vast, deep and poorly managed, considered, articulated and executed cuts comprehensively.
This seems like a wholly incompetent, complete disaster stroke from all angles IMHO.
EDIT:
The irony is all of these execs will be patting themselves on the back for a job well done, completely naive to their failings here and even ignoring the gaming media shitstorm surrounding them because their delusions of "this will help us deliver more efficiently" has been shared by wall st muggles, none of whom understand the sector either, and thus have rallied the share price as a result of these changes.
In a creative industry like games, if you're top priority is to optimise for efficiency (because you want to shore up your balance sheet profits to make yourself look good to shareholders, payback big dividends and line your pockets with bonus awards) then you'll quickly realise that the bottom line looking stronger will not automatically correlate with a stronger top line, because talent matters. When you're firing long tenured, highly talented devs from your teams in a bid to "save costs", the quality of your titles will suffer severely and materially, in ways that seem obvious to us but are completely alien to the business bean counters who simply assume "devs are fungible right? You just need to go to uni and get a few years of experience under your belt and you can do the job same as the next guy". This mentality carries for Office 365 but it really doesn't for Forza or Halo.
The problem is all the publisher heads know this.
Phil should know this. & he should have been pushing back to Satya & co. To make clear how this works; I.e. "sure we can make these cuts! Here we've modelled out the impact though across our studios and release calendar going out to 2030. This is what profitability will look like YoY with and without the cuts. As you can see it will be a disaster. If you're happy for us to proceed then just let me know.."
HeisenbergFX4
says Microsoft to kill Game Pass
