Microsoft has declared layoffs with 650 employees in its Xbox business unit as part of a larger restructuring. These layoffs, mainly affecting corporate and supporting functions, came after Microsoft acquired Activision Blizzard for $69 billion which has been one of the largest acquisitions in the gaming industry.

Phil Spencer, chairman and CEO of Microsoft Gaming, explained the decision in a memo, saying that the Activision deal would lead to the streamlining of the company’s operations. Regardless of these job cuts, Spencer assured the employees that no game or studio would be affected because of the changes.

Microsoft restructures for long-term growth 

This is the third round of layoffs in Microsoft’s gaming division this year. Earlier in January, the company made a mass-scale layoff that involved nearly 2,000 employees across both Xbox and Activision Blizzard. In May, due to cost management and business strategy alignment after the Activision acquisition, Microsoft closed Alpha Dog and Tango Gameworks and some other gaming studios.

Spencer insisted that these cuts are meant to sustainably prepare the company for long-term success. He noted that although the layoffs were aimed at non-creative positions, it was still a very hard decision and he acknowledged and appreciated the efforts of the employees who were laid off. In the United States, Microsoft is providing severance pay as well as extended healthcare and outplacement services to mitigate the impact on those affected. Outside the United States, exit packages are expected to depend on the location.

Xbox faces job cuts as gaming industry reduces workforce

Microsoft is not the only company that has instituted large-scale layoffs among its workforce within the gaming industry. The Xbox layoffs occur along with other gaming giants like Sony, Twitch, and Unity who over the last 12 months have also announced job cuts. In February, Sony’s PlayStation division reduced its workforce by 900 employees and other gaming companies have followed suit in efforts to manage costs during economic uncertainty.

In his memo, Spencer emphasized that no major projects or teams are being put on hold due to these cuts. However, he accepted that some internal teams might encounter more challenges as they adapt to shifts in priorities and game lifecycle management. The current round of layoffs is viewed as an aspect of the more extensive cost restructuring aimed at making the Microsoft group’s gaming investments, including the massive acquisition of Activision, more viable.

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