Xbox layoffs: What's next for the video game giant?

That was how game developer Morgan Goin felt when she found out she was being laid off from her job at Xbox-owned ZeniMax Online Studios (ZOS) last week.

The senior encounter designer, who worked on popular fantasy role-playing game The Elder Scrolls Online, had known job cuts were coming.

For weeks, reports warning of a "bloodbath", external at Microsoft's video game studios had been circulating after the division's new chief executive, Asha Sharma, released a memo saying she planned to "reset the business", external.

"We knew something was going to happen to somebody, but not who or how much," says Goin.

About a month later, workers learned about 3,200 of them - an estimated 20% of the console-maker's staff - were being let go. Half immediately, with the remaining 1,600 over the next 12 months.

Xbox leadership has insisted the "painful" cuts across its sprawling network of studios are necessary to equip it for future success, as it pivots focus to its biggest blockbuster titles.

The plan is to put more resources into its most popular series in the hope of getting new instalments out to fans sooner.

But former employees say the cuts have eliminated decades of talent and experience, and question whether the company will be able to achieve its aim of "a bigger future".

Layoffs in the video game industry have been commonplace since 2022, with estimates suggesting nearly 58,000 roles have been cut , externalworldwide.

Much of this is down to over-hiring and aggressive expansion around 2020, when the Covid-19 pandemic sparked a massive boom in player numbers and spending.

During this period, Xbox bought up multiple studios and publishers.

Among its biggest purchases were ZeniMax/Bethesda, owner of the hugely popular The Elder Scrolls and Fallout series, and Call of Duty maker Activision Blizzard, which it purchased for $69bn (£56bn) in 2023.

Video games remain profitable, but the cost of producing them has skyrocketed.

Cost-of-living crises, customer habits and rising hardware costs blamed on massive investment in AI have all had an effect on the market.

When Sharma's memo landed in early June, some staff, including Autumn Mitchell, started to worry.

"People are reading in between the lines'," says the former senior quality assurance tester at ZeniMax.

"Does it mean me? Does it mean them? Does it mean my project? Does it mean my studio?"

Mitchell is one of four Xbox developers BBC Newsbeat spoke to who lost their jobs in the latest cuts.

All of them are members of studio unions affiliated with the Communication Workers of America union (CWA).

They say requests for information were met with a "deafening silence" in the weeks between Sharma's original memo and the eventual layoffs.

"What we were left with was just a lot of uncertainty for about a month," says Goin, who sits on ZOS' bargaining committee - a panel of union members that represents workers at the studio.

Simon Prefontaine, a game designer at Bethesda Game Studios' Montreal office, says his studio works on "core franchises" such as Fallout and The Elder Scrolls.

"We're expecting maybe a few of us might get hit, we're probably pretty safe," he says.

"We did not expect the scale of layoffs that we have here.

Andrew Willis was a producer at ID software, the hugely influential studio that produced legendary series Wolfenstein, Doom and Quake.

Revelations, a major expansion for last year's Doom: The Dark Ages, was released a day after Willis found out he was among nearly 100 staff being laid off.

He claims some worked between 12 to 17 hours a day "over multiple months" to get the downloadable update out of the door.

Willis says he thought the work might protect the relatively small studio - which employed about 200 people at its Texas HQ - from the feared cuts.

"I did not think that they would cut the studio in half," he says.

Willis and other ex-ID staff who've posted online further claim most of those laid off were technical staff who'd mastered the studio's proprietary ID Tech engine - a collection of tools and software used to build its games since 1996.

Willis describes it as a "cultural institution" revered in the industry for its abilities, but with a steep learning curve that requires experience to operate properly.

"They basically just threw it into the trash can at this point," he says.

The studio has insisted, external it still has “the crew to build the games and tech we’re known for“, despite its reduced size.

Xbox told the BBC it had "dozens of people working on ID Tech across multiple locations", and said reports the Texas team had been effectively wiped out were "inaccurate". It did not provide a response to claims about extended work hours.

At ZOS, Goin estimates some disciplines have been reduced to a quarter of what they were before.

She says it will severely limit the team's ability to create new content for The Elder Scrolls Online - a game that relies on regular updates to keep players engaged.

"We're not going to be able to put out the amount of content at the speed that we were… or anything approaching that," she says.

An official statement posted on behalf of the studio on Reddit, external said previously shared roadmaps, or future content plans, would be "shifting".

"While we'd love to share concrete details today, stepping back to get our plans straight will let us come back to you with a clear timeline," it said.

An email to staff from Bethesda boss Jill Braff, first published by gaming website IGN , externaland verified by Newsbeat, said the publisher planned to focus on its "strongest franchises", in line with Xbox's new strategy.

Sharma's focus on blockbuster series is a pivot away from former chief executive Phil Spencer's big bet on Game Pass, a Netflix-style subscription service.

Reports suggest it failed to attract as many customers as Microsoft wanted, and Sharma has said attempts to release a broad range of games on the service left the company "over-extended".

Jez Corden, executive editor of website Windows Central, says the comments are seen by some as an attempt to address "long-standing" complaints from fans over a lack of new releases in some of Xbox's biggest series.

The brand's most ardent supporters "have a lot of faith that she can deliver on some of these promises longer-term", he says, but there's "still a ton of scepticism" outside the fanbase.

Industry veteran Fernando Rizo, co-host of the Business of Video Games podcast, agrees the Xbox layoffs were "brutal, awful", but says it's fair to question why some of those big games haven't materialised.

"Elder Scrolls 6, the sequel to Skyrim, which is one of the most popular PC games of all time, that's been in development for a decade at this point," he says.

"There is value in having deadlines. There is value in having edges of the box you can't go past," he says.

The future remains uncertain for Xbox and its developers.

Bosses insist the greater focus on key titles will help to better position the brand, but with 1,600 cuts still to be announced, ex-workers are concerned about the impact on morale among remaining staff.

"Those who remain know that one day they will be on the chopping block," says Prefontaine.

CWA-affiliated unions within Xbox plan to hold rallies outside six Microsoft locations later, as they hope to begin a process known as "effects bargaining".

This is where severance payments and opportunities for laid-off staff to shift into open roles are discussed, and arguments put forward for some to be reinstated.

Goin says they hope to provide some hope for those affected "during the most stressful time of their lives".

She's worked in video games for 11 years, experienced three rounds of layoffs, and says her career has already outlasted many who enter the industry and "burn out".

"I should not be the exception," she says.

"I would like for people to have lifelong careers that are sustainable, and I want to experience the art made by those folks."

Newsbeat has approached Xbox for response to criticisms of the cuts and communications with staff in the weeks before they were announced.

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