Xbox: A Mess, Moving Back To Exclusivity Deals, & The Layoffs Microsoft Promised Wouldn’t Happen

from the chaos dept

There’s something going on over in Microsoft’s Xbox division and it isn’t good. Don’t take my word on that. Apparently the bosses over there are circulating an email to staff talking about how properly fucked everyone is if something doesn’t change soon.

Xbox CEO Asha Sharma and Xbox Game Studios head Matt Booty just sent an email out to all Xbox employees with a clear, yet terrifying message: “this cannot continue.”

Shared publicly via Xbox Wire, the email paints a picture of a broken division, bogged down by the weight of both years of unsuccessful investments and unchecked excess, and battered by the winds of outside economic forces. Sharma, now having been in charge for 100 days, has made it clear that what she is spearheading is indeed going to be a hard reset, complete with hard decisions that will make or break the division and ripple out through the lives of its thousands of employees.

The letter itself attempts to paint a rosy picture at the outset, but then lays out the challenges. The Xbox division has a 3% margin, which is laughably low. The crises in pricing and availability of computer component parts is out of control and likely to get much worse, thanks in no small part to the bumbling buffoons who currently run the country. Complex internal and vendor relationships have led to communication issues and speed-to-market deficiencies throughout the division. Pretty much everyone agrees that there are mass layoffs coming to the Xbox division as a result of the above. And then there’s this:

 We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming, and devices. In the process, we have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content. We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win. At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success. We need to reassess the balance between these and our investment priorities for the next 5 years.

There are two, separate things being stated here. Let’s take them in order, because both are important.

The expansion of the studio system being a problem is absolutely hysterical. Xbox does indeed have a hefty portfolio of studios operating under its ownership. More than half of those studios came over to Microsoft in the Zenimax and Activision Blizzard acquisitions. Both acquisitions came with regulatory challenges, the latter being far more involved from the FTC. Both acquisitions also got past regulators in the courts specifically by being positioned as vertical acquisitions rather than horizontal acquisitions, meaning that there wouldn’t be “efficiency layoffs” as a result of bringing them on board, and that the acquisition would lead to lower prices, better games, and faster development for the gaming public.

Here is the Xbox people themselves saying that it isn’t working and that the sprawl of the studio system itself is having a negative effect on game production.

Oh, and about those layoffs that wouldn’t happen? They began happening in January of ’24, leading the FTC to point out to the court that it had been lied to. Then came the Zenimax studio layoffs in May of ’24 and more Xbox layoffs in July of ’25. All while the current, new Xbox bosses complain that they are overextended in terms of their studio sprawl? Cool.

Then there’s the second half of the quote, in which it appears that the Xbox strategy will return once more to a strategy built in part of stupid, dumbass console exclusives to try to entice people to buy Xbox devices. Matt Booty, Xbox Chief Content Officer, elaborated on this recently in an interview.

“[We] want people to have a reason to get on board with Xbox,” Booty said. “We want them to have a reason to buy an Xbox reason to be an Xbox fan. At the same time we want to reward all our players that have been with us for a long time. We know that exclusives are important. That’s why we got Gears coming in 2026, Clockwork in 2027.”

He continued, “We also want to be clear, our big multiplayer games, live service, games are going to continue to be multiplatform. If we’ve promised something to players already, we’re going to honor that promise, right? And then we’re going to really, I think Asha said it, we’re going to make the right decision, not the fast decision.”

The Xbox team has never been able to get its story straight on console exclusives. But when you’re clearly running in third place in a console war that consists of 3 consoles, and you’re not particularly competitive at that, trying to coerce your way into console success by holding games hostage to your platform is a recipe for destroying gaming franchises and still losing the console wars.

There’s a very good reason that the trend over the past decade or so has been one of less exclusivity, not more. Getting games out there, particularly when you’re directly publishing a bunch of games because of that same studio sprawl we talked about earlier, is the most important thing for the bottom line. Xbox should want all the games it publishes itself to be on every platform everywhere, in order to maximize sales. Spending money on third-party exclusives makes little sense, either, particularly when you clearly have a console series in decline.

I imagine it must be a very uncomfortable time to be an Xbox employee. And that’s too bad. I have no doubt there are a ton of good people working there and at their studios. But I’m not going to pretend to be surprised that Xbox overall as a platform is not doing well, considering all the lies, the acquisitions that probably shouldn’t have been allowed, and the chaos in messaging that has come out of that group.

Of course, that discomfort apparently applies directly to some of the top execs who reported directly to Booty, who have started to get out before the situation gets even worse.

Filed Under: asha sharma, exlusives, layoffs, matt booty, xbox

Companies: microsoft