XBox is resetting the business, aiming to cut about 3 200 jobs and reduce the number of studios over the next year.
Around half of the staff cuts will be from XBox staff, with the balance from four studios which will leave to run under new management.
In a letter to staff, XBox chief executive Asha Sharma says the business today is not healthy, operating at margins between 3x and 10x lower than comparable companies.
“To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content,” Sharma says. “While those businesses have created meaningful value, they did not grow at the pace we expected. As that happened, our core business weakened, and we added more teams, more investment and more time, hoping for a better outcome.
“And now the industry is facing the most severe hardware crisis in its history. We must reset XBox.”
The content portfolio will be overhauled by reducing the number of studios, helping independent creators by providing open development tools and audiences, and focusing on high-value platform business units.
There will also be changs to the platform, reducing management layers and streamlining work, with a cleaner code base, shared services and 50% reduced vendor spend.
XBox will change how it operates. A new chief operating officer, Helen Chiang, will bring all the diverse businesses together under one operating model.
“These changes are about a bigger future for XBox, not a smaller one, Sharma says. “This year, we’ll invest as much in XBos as we ever have, but we’ll invest with greater focus, greater discipline, and greater clarity, all in service of making XBox where the world plays and creates.”