Xbox Faces Major Setbacks: Game Cancellations and Studio Closures

On July 2nd, Microsoft disclosed significant layoffs that would impact around 9,000 employees, severely affecting the Xbox division. Among the casualties were the Perfect Dark project by The Initiative, leading to the studio's closure. Additionally, Rare's Everwild, unveiled in 2019, was also shelved, and Forza Motorsport's creator, Turn 10 Studios, is set to see over 70 staff reductions.

Phil Spencer, CEO of Microsoft Gaming, addressed employees in a memo stating, "To secure our future prosperity, we must be selective and focus on our most promising areas. We aim to safeguard flourishing projects and prioritize efforts where there is significant potential. Our concentrated strategy is designed to ensure the delivery of outstanding gaming experiences for generations."

There were whispers that Phil Spencer might retire following the release of the next Xbox generation. However, Microsoft has assured The Verge that Spencer remains committed to his role as Xbox chief for the foreseeable future.

Key Developments

In a wave of dismissals, Microsoft has announced job reductions totaling up to 9,100, representing about 4% of its global workforce. The Xbox division, known for its pivotal role in Microsoft's gaming sector, is particularly affected, though specific departmental impacts remain undisclosed.

Phil Spencer emphasized in a communication to the team, "To ensure our continued success, we will be winding down or minimizing activities in certain areas and following Microsoft's broader strategy of streamlining to boost agility and effectiveness."

Reports indicate that today, approximately 9,000 employees received pink slips from Microsoft. Sources reveal that nearly half of the Xbox user research team has been let go. This team plays a vital role in overseeing the quality of Xbox games, platforms, and developer tools.

Despite the rumors, Microsoft reinforced their stance saying, "Phil is not stepping down anytime soon," as confirmed by Kari Perez, head of Xbox communications. This clarification comes after speculative comments suggesting that Spencer would resign post the launch of the next-gen Xbox, possibly making way for Sarah Bond as head of Microsoft Gaming.

As part of the organizational restructuring, Microsoft has decided to cancel games like Perfect Dark and Everwild, as shared by Xbox's game content and studio president, Matt Booty, in an internal communication.

These revisions coincide with broader layoffs impacting the Xbox unit, with Turn 10 Studios, known for Forza, experiencing significant workforce reductions.

Further discussions between Microsoft HR and affected employees confirmed that Turn 10 Studios would see over 70 staff departures, with a substantial portion of the team being released. Nevertheless, some personnel will remain to maintain operations.