Xbox CEO Asha Sharma sent an email to employees as the company on Monday announced plans to cut around 3,200 jobs during FY27, including 1,600 layoffs to take place with immediate effect.
Microsoft-owned Xbox announced the largest restructuring plan in its history, which will also see four studios moving out of the company to new management as part of the overhaul.
In the email to employees, Sharma acknowledged that the decision was painful and said the changes would directly affect people who had poured their creativity and passion into building Xbox.
“Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved XBOX. Today's decisions do not reflect their talent or dedication,” Sharma wrote.
Also Read: Microsoft Layoffs: 4,800 Jobs Slashed Across Sales And Xbox, Says Report
Why Xbox is Restructuring?
According to the CEO, Xbox has been operating with profit margins 3x to 10x lower than its peers. She also said that Xbox entered the Gen 9 arena with a very high-cost structure but a marginal install base.
The business created significant value through Game Pass, multi-platform content, and other broader portfolio; however, it did not match the expectations of the management.
“We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested. As we reset XBOX, we will help independent creators succeed by providing open development tools and audiences to realize their vision,” Sharma wrote in the email.
She also wrote that the gaming industry as a whole has been facing one of the worst hardware downturns in its history, which is further affecting the business.
Also Read: Xbox Plans Significant Layoffs as New CEO Plans Overhaul
Apart from this, the company said they were operating with a 40% larger employee base even when the player base and playtime have significantly declined over the years. Due to overstaffing and multiple layers of management, the company's operations slowed down, and thus the company needed a thorough reset.
“We know that great technology gets better when it gets simpler, not bigger. Today, in some parts of the company, work passes through as many as 14 layers of management. Our platform teams are 40% larger than they were at the start of this generation, even as our player base and playtime have declined. That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players. As we reset XBOX, we will simplify.” Sharma wrote.
From a current 14 layers of management, the company is planning to reduce it to 5 layers, making the work process streamlined and quick. This is expected to reduce 50% of vendor spend as well.
'Resetting How We Operate'
Teams, studios, and functions often operate independently, and it became harder to work towards a shared goal, make the right tradeoffs, and get things done, said the CEO, adding, "For the first time, we are establishing a Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services."
However, Sharma noted that this year, they invest as much in XBOX as they ever have, but they invest with greater focus, greater discipline, and greater clarity.
"I want XBOX to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect. I know we can achieve this goal. XBOX has many of the most beloved franchises in entertainment history, talented studios around the world, and we will return to growth in 2027."
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