Xbox CEO Asha Sharma and Xbox Game Studios head Matt Booty just sent an email to all Xbox employees with a clear but terrifying message: “this cannot continue.”
Shared publicly via Xbox Wirethe email paints a picture of a broken division, mired by the weight of two years of failed investments and unchecked excess, and battered by the winds of external economic forces. Sharma, who has now been in charge for 100 days, has made it clear that what she is leading will indeed be a hard reset, complete with tough decisions that will make or break the division and ripple through the lives of its thousands of employees.
Sharma and Booty outline a number of harsh “realities” they say the company will face in the next 100 days. The current financial year, which ends on June 30, will see Xbox achieve a profit margin of around 3%, which is extremely low. The company spent $20 billion on studio investments in five years, not including its $69 billion purchase of Activision Blizzard King, and its annual revenue in turn fell by almost half a billion. The company is currently paying 4 times more for components than it did last fall, and it expects to pay even more by the 2027 holiday season.
The email calls the company’s massive studio system “overextended,” saying the company has tried too hard to juggle too many different platform strategies and has “not adequately funded” its studios to be competitive. And it claims its platform infrastructure is “too complex,” not “autonomous,” and “not designed for the battle ahead.”
Yeah. I would say they are right. This cannot continue.
This email is a brutal indictment of the series of decisions and events that led Xbox to where it is today. It condemns just about every strategy the company has attempted over the past decade and change, from its relentless gobbling up of much of the industry’s shrinking AA space to failing to adequately support most of it, to its endless flip-flopping between a focus on consoles and an emphasis on subscription services to turning it all into Xbox. It seems his spending is out of control and there isn’t much to gain from it. Sharma and Booty claim to be the ones who solved the problem, although it should be noted that Booty himself was part of the team that oversaw it for almost a decade.
I have no doubt that this will be a difficult transition for Sharma, Booty and everyone on their team. And I sincerely hope they succeed. Really. Not because I care about Microsoft, the company, or its profit margins, but because I think the developers working for Xbox are making cool things, that I’d like to play one day, and I want these talented, creative people to be able to continue creating cool works of art for all of us to enjoy.
But that’s just it, right? This is the element that is missing here in Sharma and Booty’s message. Not present anywhere, here is a whisper of WHOUltimately, we will face these harsh realities. I’m sure Sharma and Booty have a tough job trying to sort all this out. But what we learned a few moments ago is that Xbox, as part of this reset, Towards massive layoffs. Of course yes. We knew this was going to happen for months. Every time a change in leadership happens, every time a new leader says it’s time for a “reset,” this is what happens. They make a whole host of changes to the business structure, for better or worse, and dozens, if not hundreds, or even thousands of people lose their livelihoods. Some will experience permanent setbacks in their lives because of this. Some will leave the video game industry permanently. Some will lose health coverage at critical times, or be unable to pay their mortgage, or lose visa assistance at a time when the United States is making it harder than ever to live here if you don’t look a certain way.
Sharma and Booty don’t name names in this email as to who is at fault for any of this, despite the pretty extreme accusations that seem to be bubbling beneath the surface here. But I don’t think it ultimately matters which specific leader(s) we blame for this, whether it’s the decisions of the previous administration or those of the current one, whether it’s the Xbox division itself or its highly profitable parent company, Microsoft. That’s all. That’s all. This whole damn system that has led to millions and billions of dollars being wasted just for the sake of owning intellectual property and managing or mismanaging teams of creatives. This industry is about to screw over another large group of individuals who have done nothing to deserve it, and nothing seems to be able to stop it. Ubisoft hundreds of people were laid off earlier today. Over 20,000 game developers have been laid off in the last two and a half years, more layoffs are underway, and the hits keep coming, all because no one seems interested in running this industry sustainably, because sustainable doesn’t mean “massively profitable for shareholders.”
This cannot continue. I just don’t know when it will finally stop.
