What bugs me isn’t restructuring down a 14-layer org… it’s that these companies don’t ever seem to be able to process the fact that this industry is like Hollywood: (1) you lose a lot on a lot of projects, and (2) you have tentpoles hold up the core business, (3) in order to finance the gambles that become future tentpoles.
It’s a three-legged stool, it doesn’t work without any one of them.
But because no one has a big-picture theory of the business cycle, their stools are always falling over and they’re always blaming the other two legs instead of asking why they didn’t invest in the third.
Stephen, you linked to your 2024 interview with Phil Spencer recently, and sheesh. The optimism he projected! What a contrast from now.
Sharma seems to have a very practical head on her shoulders, and from the sounds of things a fresh broom is definitely needed at Xbox HQ to do some corporate restructuring, a topic that doesn't particularly interest me beyond my selfish interest in wanting to see a brand I've always had a soft spot for, succeed.
Actually, what I keep thinking is such a shame is that for all of Spencer's ambitious bets, none of them paid out like they probably should have. And I don't think that's his fault! In isolation all of them were sensibly targeted to address gamer and Xbox-owner pain points:
* The studio acquisitions were meant to address Xbox not having enough first-party and exclusive titles.
* Game Pass addresses complaints about games being too expensive, about the volume of slop that floods places Steam, and new customers having libraries on other platforms. "Get an Xbox and have an instant library!"
* The Series X was specifically designed to be (on paper) more powerful than the PS5 after the underpowered Xbone couldn't keep up with the PS4. And the Series S was both an attempt to offer a low price entry point *and* a hedge against a component supply chain that Microsoft were predicting wouldn't be getting cheaper.
* Xbox games started appearing on PC as well because they're all money for Microsoft, and Play Anywhere gave them a really solid selling point vs Steam, which is very very hard to compete with.
In short: Spencer's leadership tried very hard to overcome some built-in competitive disadvantages, and gamers and general consumers alike just didn't reward them for it. One day someone smarter than me will figure out why that was exactly, but at the end of the day it probably just comes down to Sony's PS4 era being so damn good that nothing was going to dent it short of 343 delivering Halo Infinite on time for launch and not bungling the ongoing support.
I think it’s one of those things where his gambles needed more time to pay off.
Like, management always treats this industry like it’s an annual business cycle, but really AA/AAA games take 5-10 years to make. Just because the customers are fickle and indeed can have annual trends, doesn’t mean you dump the entire strategy after just two years.
I’m sick of these companies just chasing trend after trend. It turns every new game into shitty copies of the most recent hit. They never actually innovate on gameplay, and real innovations get thrown by the wayside. Indies never get any real capital thrown their way in order to make their own innovations, and in the rare instances where they do, it gets pulled back before they can even publish their next big swing.
There's also the fact that COVID was hugely, hugely disruptive to all studios and publishers and it had flow-on effects for years that still haven't been totally shaken off. Jason Schreier put up some good breakdowns on his new YouTube channel:
But. There is a tendency in these discussion to always send blame towards the executives and the corporate mothership, and I think that lets the developers and gamers themselves off the hook too easily.
Spencer's course-corrections for Xbox started in earnest around 2016, as I recall. That was when Gears 4 launched as a Play Anywhere title, marking the beginning of their joint PC-Xbox strategy, and the Xbox One S came out. Game Pass and the Xbox One X launched the year after that, then the Series consoles launched with an unprecedented backward-compatible library, and a promise that you wouldn't pay twice for cross-gen games.
I think it's reasonable to say that Xbox platform leadership did a pretty damn good job positioning themselves as a more gamer-friendly, consumer-friendly choice than Sony or Nintendo. And gamers responded by... buying three times as many PlayStations as Xboxes.
After all that, it was really down to the developers. And frankly they just didn't deliver:
* 343's spectacularly troubled, delayed development and post-launch support for Halo Infinite was a gigantic mess, and probably the biggest missed opportunity of the generation for Xbox.
* The Coalition are only now delivering a new Gears Of War title, seven years after Gears 5.
* Starfield arrived with a lot of hype and in remarkably good shape for a Bethesda game, but it just didn't hit.
* None of their indy/AA acquisitions delivered system-selling hits.
There's an argument to be made that if Spencer and co. had taken all their acquisitions completely exclusive, or not launched Game Pass, they'd be in better shape now. Maybe! Maybe in a world where you could only get Doom, Indiana Jones, Diablo, The Outer Worlds, Grounded, Forza etc on Xbox/Windows for a full-price sale, they would have sold more Series consoles. But that would have run counter to the consumer- and gamer-friendly ethos they were trying to cultivate, and it would have been leaving big money on the table. There's every possibility they'd be even worse off.
Spencer firmly believed the console market could be expanded and there was room for everybody to be successful. He might yet be proven right in the long term, but over the course of a decade the console market remained pretty static. 60%-ish of gamers only buy, on average, two games a year. As it stands, it just seems like there simply isn't space for Xbox to sell as many games as it needs to, to justify the size that Spencer grew it to.
Very disappointing , but thank the blood gods that some of those studios will get out from under Microsoft. I imagine it’s tough for them but better than the alternative of being shut down.
Stephen, in your opinion, is it correct to draw a straight line from today's layoffs all the way back to the Xbox One reveal debacle?
I can't help but think Don Mattrick's disastrous leadership set Xbox on a downward trajectory from which it could not recover. Xbox went from being neck-and-neck with PlayStation to a distant second and now third place in console market share. It has basically no exclusives if you consider the availability of its first-party games on PC, PlayStation, and Nintendo.
I cannot think of a compelling reason to buy an Xbox in 2026, or in any year for at least the last decade.
Asha Sharma is correct that the hardware crisis and market conditions have really hurt Xbox, but it is competing from a severely weakened position compared to its major platform competitors. None of them has made cuts like this yet.
It really sucks when anyone loses their job, let alone 20% of a group. But 14 layers of management is pretty wild. The studio divesture is not surprising. Phil and co made some bad calls and unfortunately people have to pay for it now.
What bugs me isn’t restructuring down a 14-layer org… it’s that these companies don’t ever seem to be able to process the fact that this industry is like Hollywood: (1) you lose a lot on a lot of projects, and (2) you have tentpoles hold up the core business, (3) in order to finance the gambles that become future tentpoles.
It’s a three-legged stool, it doesn’t work without any one of them.
But because no one has a big-picture theory of the business cycle, their stools are always falling over and they’re always blaming the other two legs instead of asking why they didn’t invest in the third.
Stephen, you linked to your 2024 interview with Phil Spencer recently, and sheesh. The optimism he projected! What a contrast from now.
Sharma seems to have a very practical head on her shoulders, and from the sounds of things a fresh broom is definitely needed at Xbox HQ to do some corporate restructuring, a topic that doesn't particularly interest me beyond my selfish interest in wanting to see a brand I've always had a soft spot for, succeed.
Actually, what I keep thinking is such a shame is that for all of Spencer's ambitious bets, none of them paid out like they probably should have. And I don't think that's his fault! In isolation all of them were sensibly targeted to address gamer and Xbox-owner pain points:
* The studio acquisitions were meant to address Xbox not having enough first-party and exclusive titles.
* Game Pass addresses complaints about games being too expensive, about the volume of slop that floods places Steam, and new customers having libraries on other platforms. "Get an Xbox and have an instant library!"
* The Series X was specifically designed to be (on paper) more powerful than the PS5 after the underpowered Xbone couldn't keep up with the PS4. And the Series S was both an attempt to offer a low price entry point *and* a hedge against a component supply chain that Microsoft were predicting wouldn't be getting cheaper.
* Xbox games started appearing on PC as well because they're all money for Microsoft, and Play Anywhere gave them a really solid selling point vs Steam, which is very very hard to compete with.
In short: Spencer's leadership tried very hard to overcome some built-in competitive disadvantages, and gamers and general consumers alike just didn't reward them for it. One day someone smarter than me will figure out why that was exactly, but at the end of the day it probably just comes down to Sony's PS4 era being so damn good that nothing was going to dent it short of 343 delivering Halo Infinite on time for launch and not bungling the ongoing support.
I think it’s one of those things where his gambles needed more time to pay off.
Like, management always treats this industry like it’s an annual business cycle, but really AA/AAA games take 5-10 years to make. Just because the customers are fickle and indeed can have annual trends, doesn’t mean you dump the entire strategy after just two years.
I’m sick of these companies just chasing trend after trend. It turns every new game into shitty copies of the most recent hit. They never actually innovate on gameplay, and real innovations get thrown by the wayside. Indies never get any real capital thrown their way in order to make their own innovations, and in the rare instances where they do, it gets pulled back before they can even publish their next big swing.
There's also the fact that COVID was hugely, hugely disruptive to all studios and publishers and it had flow-on effects for years that still haven't been totally shaken off. Jason Schreier put up some good breakdowns on his new YouTube channel:
Why Video Games Cost So Much To Make: https://www.youtube.com/watch?v=nvhmBqRjtBQ
Why Games Now Take 6+ Years To Make: https://www.youtube.com/watch?v=lwJqPvDA4Yw
But. There is a tendency in these discussion to always send blame towards the executives and the corporate mothership, and I think that lets the developers and gamers themselves off the hook too easily.
Spencer's course-corrections for Xbox started in earnest around 2016, as I recall. That was when Gears 4 launched as a Play Anywhere title, marking the beginning of their joint PC-Xbox strategy, and the Xbox One S came out. Game Pass and the Xbox One X launched the year after that, then the Series consoles launched with an unprecedented backward-compatible library, and a promise that you wouldn't pay twice for cross-gen games.
I think it's reasonable to say that Xbox platform leadership did a pretty damn good job positioning themselves as a more gamer-friendly, consumer-friendly choice than Sony or Nintendo. And gamers responded by... buying three times as many PlayStations as Xboxes.
After all that, it was really down to the developers. And frankly they just didn't deliver:
* 343's spectacularly troubled, delayed development and post-launch support for Halo Infinite was a gigantic mess, and probably the biggest missed opportunity of the generation for Xbox.
* The Coalition are only now delivering a new Gears Of War title, seven years after Gears 5.
* Starfield arrived with a lot of hype and in remarkably good shape for a Bethesda game, but it just didn't hit.
* None of their indy/AA acquisitions delivered system-selling hits.
There's an argument to be made that if Spencer and co. had taken all their acquisitions completely exclusive, or not launched Game Pass, they'd be in better shape now. Maybe! Maybe in a world where you could only get Doom, Indiana Jones, Diablo, The Outer Worlds, Grounded, Forza etc on Xbox/Windows for a full-price sale, they would have sold more Series consoles. But that would have run counter to the consumer- and gamer-friendly ethos they were trying to cultivate, and it would have been leaving big money on the table. There's every possibility they'd be even worse off.
Spencer firmly believed the console market could be expanded and there was room for everybody to be successful. He might yet be proven right in the long term, but over the course of a decade the console market remained pretty static. 60%-ish of gamers only buy, on average, two games a year. As it stands, it just seems like there simply isn't space for Xbox to sell as many games as it needs to, to justify the size that Spencer grew it to.
Very disappointing , but thank the blood gods that some of those studios will get out from under Microsoft. I imagine it’s tough for them but better than the alternative of being shut down.
Stephen, in your opinion, is it correct to draw a straight line from today's layoffs all the way back to the Xbox One reveal debacle?
I can't help but think Don Mattrick's disastrous leadership set Xbox on a downward trajectory from which it could not recover. Xbox went from being neck-and-neck with PlayStation to a distant second and now third place in console market share. It has basically no exclusives if you consider the availability of its first-party games on PC, PlayStation, and Nintendo.
I cannot think of a compelling reason to buy an Xbox in 2026, or in any year for at least the last decade.
Asha Sharma is correct that the hardware crisis and market conditions have really hurt Xbox, but it is competing from a severely weakened position compared to its major platform competitors. None of them has made cuts like this yet.
It really sucks when anyone loses their job, let alone 20% of a group. But 14 layers of management is pretty wild. The studio divesture is not surprising. Phil and co made some bad calls and unfortunately people have to pay for it now.