Microsoft is selling four Xbox studios as part of its core gaming business

team,

We are embarking on the most important redesign in XBOX history. After much consideration, I have made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include the elimination of approximately 1,600 titles today, and in addition, four studios will leave XBOX to new management. I realize that the year-round renovation brings with it some challenges. Unfortunately, it is not possible to make all the changes in one day, and I wanted to speak directly to the scale.

I know this is painful. These changes will directly affect people who have used their skills to build the XBOX. Many contacted us through purchases, while others were listed here, or sought us out because they love this business and love XBOX. Today’s decisions do not reflect their skill or commitment.

Our business today is not good. We are operating at a margin 3-10x lower than a comparable platform for publishing businesses. We entered Gen 9 with less space and a higher price. To grow, we bet on Game Pass, more platforms, and a wider profile. Although those businesses have made a profit, they have not grown as we expected. This happened, our core business weakened, and we added more teams, more money, and more time, hoping for better results. And now the industry is facing the biggest hardware crisis in its history. We need to reset the XBOX.
First, we will reset our profile.

Since 2018, we have aggressively expanded our studio portfolio with the number of games produced each month across the industry surpassing the previous decade. Now we find ourselves competing not only with major publishers, but also with small independent studios. It is neither possible nor possible to have any major independent studio. We have also learned that we are not the best home for any type of studio; for a full year, we lost 64 cents for every dollar we invested. As we relaunch the XBOX, we will help developers succeed by providing open source development tools and resources to help them realize their visions.

Compulsive Games and Double Fine Productions are returning to management and transitioning to independent studios with an IP, a guide, and a strategy for their next game. Ninja Theory and Undead Labs have entered into negotiations to join new ownership and funds to complete and develop Senua and State of Decay 3. In France, Arkane’s management is beginning to negotiate with the Works Council to review the options.

We are also downsizing some units, and in some cases, changing costs to focus on more important projects. These updates vary in size from Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and XBOX Game Studios. None of our first publicly announced games are being canceled as part of these restrictions.

In addition, Mojang and King have now told me directly. These two studios have been growing in popularity and are our biggest players with monthly engagements. They bring complex areas, demographics, and differences to the XBOX.

Second, we will relaunch our platform.

We know that great technology is best when it’s simple, not bulky. Today, in some areas of the company, work goes through 14 levels of management. Our platform groups are 40% larger than they were at the start of this generation, even though our players and playtime have decreased. This difficulty has slowed decisions, hampered accountability, and made it difficult to deliver to players. When we return XBOX, we simplify.

We will reduce the administrative divisions to no more than 5, and if possible, 3. We will deliver success through a lean organization that is built around developers (individual assistants focused on the infrastructure), player-leaders (leaders who remain deeply involved in the work while creating their teams), and directly responsible people (DRIs) who have the main decisions and their consequences. And we will change the way we work on all our devices, with cleaner code, shared services, and a 50% reduction in vendor costs.

Third, we are changing the way we work.

As the XBOX grew, we became more divided. Teams, studios, and projects often functioned independently, and it became difficult to work together, create the right products, and get things done.

For the first time, we are establishing a Chief Operating Officer with end-to-end P&L responsibility for all products, devices, platforms, and services. Helen Chiang was promoted to this position and reports directly to me. In nearly two decades at XBOX, Helen has helped build our most valuable businesses, from XBOX Live to leading Mojang and the Minecraft franchise. They will bring our businesses together under a single operating system, ensuring we make sound investment decisions, learn from our successes and failures, and hold ourselves accountable for the results.

Thank you, Dave McCarthy, who is retiring after 17 years with XBOX. Dave has played a vital role in building the platform that millions of gamers rely on every day and has been a trusted partner during the biggest moments in XBOX history. We wish him all the best.

These updates are for the big future of the XBOX, not the small one. The next decade of gaming will be bigger, more global, and more creative than anything we’ve seen before. This year, we will invest as much in XBOX as we do, but we will invest more thoughtfully, more efficiently, and more clearly, all in making the XBOX where the world plays and creates.

I want XBOX to be one of the few companies that entertain over a billion people every day and give everyone the opportunity to create and connect. I know we can achieve this goal. XBOX has many of the most beloved franchises in the history of entertainment, creative studios around the world, and we will continue to grow in 2027.

History is littered with companies that mistake longevity for inevitability. We will not be one of them.

Asha