Today’s announced layoffs also seem focused on reining in a large Xbox platform team, which Sharma said has grown “40% larger than they were at the start of this generation, even as our player base and playtime have declined.” That could have an outsized impact on the development of Project Helix, the recently announced hybrid console that will also play generic PC games.

Hit the road, small studios

Amid these layoffs, Microsoft is also executing a massive reversal of its studio acquisition spree that dates back to 2018. Compulsion Games (We Happy Few) and Double Fine Productions (Psychonauts) will “return to management” and operate independently with full control of their intellectual property, Sharma writes. Ninja Theory (Hellblade: Senua’s Sacrifice) and Undead Labs (State of Decay), meanwhile, have been purchased by other unnamed companies, while France’s Arkane Studios (Dishonored, Prey) is reviewing “potential strategic options” to operate outside of Xbox.

Sharma bluntly admitted that these smaller studio acquisitions have been a financial mistake for Microsoft, resulting in a loss of “64 cents for every dollar we invested” in a “typical year.” In recent years, Sharma writes that Xbox has “learned that we are not the best home for every type of studio” and that “it is neither possible nor desirable to own every great independent studio.”

The era that brought games like

Hellblade: Senua’s Sacrifice

to Xbox is over.

Credit: Arkane Studios

The era that brought games like Hellblade: Senua’s Sacrifice to Xbox is over. Credit: Arkane Studios

At the same time, some of the larger game studios Microsoft has acquired are still apparently considered very desirable parts of its portfolio. Mojang (Minecraft) and King (Candy Crush) will now report directly to Sharma, reflecting their outsize share of Microsoft’s monthly player base and the “critical geographic, demographic, and differentiation” they bring to the gaming division, Sharma writes. And across Activision, Blizzard, Bethesda, and Xbox Game Studios, Sharma writes that Microsoft will be “shifting investment to focus on higher priority projects.”