Microsoft is shrinking Xbox while telling employees it wants the business to reach an audience normally associated with the biggest consumer platforms on the planet. According to The Verge, Xbox CEO Asha Sharma told staff in a Monday memo that she wants Xbox to be among the few companies that entertains “more than a billion people each day” while giving people ways to create and connect.
That is the kind of sentence executives put in restructuring memos when the other numbers are worse. The same report says Xbox will cut 1,600 employees this summer, with another 1,600 expected over the next year. The cuts are part of a wider Microsoft restructuring, though The Verge reported that the gaming group is being hit especially hard.
Microsoft is also moving four internal Xbox studios out of the company. Double Fine, Compulsion Games, Undead Labs, and Ninja Theory are being spun out as independent developers, according to The Verge. Those names are not filler on an org chart. Microsoft bought them over multiple years as it tried to build out a pipeline for Game Pass, its subscription gaming service.
The Game Pass bet looks less clear
Game Pass needed a steady supply of games to justify a recurring fee, and internal studios were supposed to help provide that supply without Microsoft negotiating every title from the outside. Spinning out four of those studios does not, by itself, prove Microsoft is abandoning that model. It does show that the company is willing to reduce the first-party studio footprint it spent years expanding.
The Verge reported that the strategic direction behind the cuts is not yet clear. That uncertainty is the uncomfortable part for developers and players. Layoffs can be dressed up as focus, but a smaller team does less unless the company is also cutting scope, changing distribution, relying more on partners, or asking the remaining staff to absorb the mess. Microsoft has not publicly supplied enough detail, in the reported memo, to make the billion-user target look like a plan rather than a slogan.
The audience goal is also wildly larger than the traditional console business. Xbox has long meant hardware, studios, publishing, subscriptions, and PC services wrapped under one brand. Reaching a billion people each day would require Xbox to behave less like a console platform and more like a broad entertainment network. The mechanism for that shift, based on the reported memo, remains unstated.
For the employees affected, the near-term mechanism is much clearer: thousands of jobs are going away, and four studios are leaving Microsoft’s internal structure. Sharma’s memo gives Xbox an enormous destination. The reported restructuring raises the more practical question of what Microsoft is still willing to build in-house to get there.
This story draws on original reporting from The Verge.
