Xbox claims mass layoffs were the outcome of a ‘concerning’ lack of industry growth

Microsoft’s head of gaming has said the company’s decision to cut 1,900 jobs was ultimately the result of a lack of growth in the industry.

In January, Microsoft announced plans to lay off roughly 8% of the 22,000 people employed across Xbox, Bethesda and Activision Blizzard.

The company completed its acquisition of Activision Blizzard in October 2023, in the process taking ownership of franchises including Call of Duty, World of Warcraft, Diablo and Overwatch.

In a message sent to staff when the job cuts were announced, Spencer said the decision was taken after Microsoft and Activision’s leadership teams “set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth”.

Reflecting on the layoffs in a new interview with Polygon, Spencer said a lack of industry growth was forcing publicly traded companies across the industry to cut costs.

Game developer Farhan Noor, who has been tracking job cuts dating back to the start of 2022 on videogameslayoffs.com, estimates that around 10,500 games industry employees were laid off last year. And less than four months into 2024, some 8,000 planned jobs cuts are already thought to have been confirmed.

“I’ll say the thing that has me most concerned for the industry is the lack of growth,” Spencer said. “And when you have an industry that is projected to be smaller next year in terms of players and dollars, and you get a lot of publicly traded companies that are in the industry that have to show their investors growth — because why else does somebody own a share of someone’s stock if it’s not going to grow? — the side of the business that then gets scrutinized is the cost side. Because if you’re not going to grow the revenue side, then the cost side becomes challenged.

“We’re a business,” he continued. “I’ve said over and over. I don’t get any luxury of not having to run a profitable growing business inside of Microsoft. And we are that today. But just across the industry — you mentioned it, and in sitting here at GDC, I reflect on friends of mine in the industry that have been displaced and lost their jobs and how just, I don’t want this industry to be a place where people can’t, with confidence, build a career.

“So that’s why I keep pivoting back to: How does this industry get back to growth? But to your question, for us as Xbox or any of the teams that are out there, it is really an outcome of an industry that’s not growing. It can grow and it will grow again. But you see this time right now and the implications have human impact. And we should all reflect on that and think about it.”

According to research firm Newzoo (via GamesIndustry.biz), the global games market generated an estimated $184 billion in 2023, representing a 0.6% increase over 2022, which itself was down 5% year-on-year.

It expects the games market to generate revenues of $189.3 billion in 2024, and for the figure to grow to $205.7 billion in 2026.

Elsewhere in the Polygon interview, Spencer said ballooning game budgets and Gen Z consumer behaviour were driving factors in the company’s decision to bring more Xbox games to PlayStation and Nintendo consoles.