This message has just been sent out to the XBOX team around the world.
Team,
We are embarking on the most significant restructuring in XBOX history. After careful consideration, I have made the difficult decision to reduce our team by approximately 3,200 people during FY27. Today, this will include the elimination of approximately 1,600 roles, as well as four studios turning over XBOX to new management. I recognize that a year-long restructuring poses additional challenges. Unfortunately, it is impossible to make all the necessary changes in one day, and I wanted to be clear about the scale.
I know it hurts. These changes will directly impact the people who put their creativity into making XBOX. Many joined us through acquisitions, while others were hired here or sought us out because they loved the industry and loved XBOX. Today’s decisions do not reflect their talent or dedication.
Our business today is not healthy. Our profits are 3-10 times lower than comparable platforms and publishing companies. We entered Generation 9 with a smaller installation base and a higher cost structure. To grow, we’re focusing on Game Pass, multi-platform, and a broader content portfolio. While these businesses created significant value, they did not grow at the rate we expected. When this happened, our core business weakened and we added more teams, more investment and more time, hoping for a better outcome. And now the industry is experiencing the most serious hardware crisis in its history. We need to reboot XBOX.
First we will reset our content portfolio.
Since 2018, we have aggressively expanded our studio’s portfolio, and the number of games created each month across the industry now exceeds the last ten years combined. Now we compete not only with the largest publishers, but also with smaller independent studios. It is neither possible nor desirable to own every major independent studio. We also realized that we are not the best home for all types of studios; in a normal year, we lost 64 cents on every dollar invested. By rebooting XBOX, we will help independent creators succeed by providing open development tools and an audience to realize their vision.
Compulsion Games and Double Fine Productions will return to management and move into independent studios with their IP, catalog and runway for their next titles. Ninja Theory and Undead Labs have entered into an agreement to join a new owner with funding for completion and development Senua And Decay state 3. In France, Arkane’s management is beginning the necessary consultations with its works council to consider potential strategic options.
We are also making cuts in other divisions and, in some cases, reallocating investments to focus on higher priority projects. These changes vary in size across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and XBOX Game Studios. None of our first publicly announced games or projects will be canceled as part of these cuts.
Additionally, Mojang and King will now report directly to me. These two studios are increasingly becoming platforms and are our largest players in terms of monthly activity. They bring important geographic, demographic and differentiation to XBOX.
Secondly, we will reboot our platform.
We know that great technology gets better when it gets simpler, not bigger. Today, in some divisions of the company, work passes through as many as 14 levels of management. Our platform teams are 40% larger than at the start of this generation, even as our player base and playtime have declined. This complexity slowed down decision making, blurred accountability, and made things more challenging for players. By resetting the XBOX, we’re keeping things simple.
We will reduce the number of management layers to no more than 5, and where possible to 3. We will achieve success through a flatter organization built around creators (individual contributors focused on building), player-coaches (leaders who remain actively involved in developing their teams) and direct accountable individuals (DRIs) who own key decisions and results. And we’re streamlining our tools with a cleaner codebase, shared services, and reducing vendor costs by 50%.
Third, we are rebooting the way we work.
As XBOX increased its headcount, we became increasingly fragmented. Teams, studios and divisions often work independently, and it has become more difficult to work towards a common goal, find the right compromises and achieve results.
For the first time, we are appointing a Chief Operating Officer who will have overall P&L responsibility for content, hardware, platform and services. Helen Chan has been appointed to this position and will report directly to me. In her nearly two decades at XBOX, Helen has helped build some of our most important businesses, from XBOX Live to leadership of Mojang and the Minecraft franchise. It will unite our businesses under one operating model, ensuring we make clear investment decisions, learn from our successes and failures, and are accountable for results.
Thank you, Dave McCarthy, who is retiring after 17 years at XBOX. Dave played a pivotal role in creating a platform that millions of gamers rely on every day and has been a trusted partner at many important moments in XBOX history. We wish him all the best.
These changes are about more of XBOX’s future, not less. The next decade of gaming will be bigger, more global, and more creative than anything we’ve seen before. We’ll invest as much in XBOX this year as ever, but we’ll invest with more focus, more discipline and more clarity, all with the goal of making XBOX the place where the world plays and creates.
I want XBOX to be one of the few companies that entertains over a billion people every day and empowers everyone to create and connect. I know we can achieve this goal. XBOX has many of the most beloved franchises in entertainment history, talented studios around the world, and will return to growth in 2027.
History is full of companies that mistake longevity for inevitability. We won’t be one of them.
Asha