Xbox Shifts Investment to Activision, Bethesda, Blizzard Amid Layoffs
Xbox is funnelling a larger share of its content budget toward Activision, Bethesda/ZeniMax and Blizzard, according to a memo CEO Asha Sharma published on Xbox Wire on July 6, even as the division cuts roughly 3,200 jobs and sheds four studios in what she called “the most significant restructure in XBOX history.” The reshuffle marks the clearest signal yet that Microsoft’s decade-long acquisition spree is being reorganised around its highest-earning franchises rather than its broadest studio roster.
Sharma’s Memo Names Winners and Losers Across Xbox’s Portfolio
In the memo, Sharma wrote that Xbox is “making reductions across other units, and in some cases, shifting investment to focus on higher priority projects,” adding that “these changes vary in size across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and XBOX Game Studios”. She stressed that “none of our first party publicly announced games or projects are being cancelled as part of these reductions.”
Sources briefed on the plan told Variety that throughout Xbox’s next fiscal year, which runs July 1, 2026 to June 30, 2027, the company will see approximately the same overall content spend as the prior record year, but the investment mix will change, with Minecraft and the Elder Scrolls franchise prioritised as major growth areas. The same insider said Xbox had been “using Minecraft as a funding source” for other studios, leaving Minecraft developer Mojang “not been given the funding it needs to grow”, and that for Elder Scrolls — which has not had a mainline release since 2011 — Xbox will be reallocating teams and funding toward new projects.
3,200 Roles Cut, Four Studios Leave the Xbox Umbrella
The investment shift comes bundled with the layoffs themselves. The changes include roughly 3,200 job cuts through the fiscal year, about 20% of the Xbox workforce, the spinoff of four game studios, a new chief operating officer, and a plan to flatten management from as many as 14 layers to no more than five. Sharma disclosed that Xbox has been “losing 64 cents on every dollar invested in its game studios” and is “operating at margins that are 3–10x lower than comparable platform and publishing businesses”.
Of the total headcount reduction, about 1,600 of the Xbox job cuts took effect on Monday as part of a broader round of 4,800 layoffs across Microsoft, with the remaining Xbox reductions to come in the months ahead. Two studios, Compulsion Games and Double Fine Productions, are being spun out as independent operations that keep their intellectual property, while Ninja Theory and Undead Labs have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3. A fifth studio, Arkane’s Lyon office, remains under required consultation with its French Works Council to review potential strategic options.
Mojang and King Now Report Directly to Sharma
Alongside the funding reshuffle, Xbox is restructuring who oversees its biggest live-service players. Sharma confirmed that Mojang and King will now report directly to her, noting the two studios have increasingly become platforms and are Xbox’s largest by monthly active players, bringing critical geographic, demographic, and differentiation value to the brand. That direct reporting line underscores how central Minecraft and Candy Crush have become to Xbox’s plan to stabilise its finances even as traditional console hardware revenue slides.
The scale of the cuts reflects how far Xbox’s spending had outrun its returns. Including the Activision Blizzard King acquisition, which cost Microsoft $69 billion in 2023, Xbox spent more than $89 billion in investments and studio support over the past five years, while the segment’s annual revenue declined by nearly half a billion dollars.
Unionised Staff at Bethesda, id Software and Blizzard Push Back
The reallocation has not been welcomed by the roughly 3,500 Microsoft gaming employees represented by the Communications Workers of America. CWA President Claude Cummings Jr. said in a statement that “although our union signed neutrality agreements with Microsoft, we have been extremely disappointed by a company that has slow-walked our members at the bargaining table” and warned that “when Microsoft decides to treat the workers who built Xbox as expendable, it should know who they’re dealing with”.
CWA District 2-13 Vice President Mike Davis added that the union “will take all necessary legal and contractual action to defend our members and their rights,” demanding “immediate bargaining—over fair severance, over vendor-contract decisions, over internal placement so that qualified employees can move into open roles, and over recall rights”. Staff at id Software, whose layoffs landed the same day the studio shipped its Doom: The Dark Ages DLC, told Aftermath that entire teams had been eliminated, leaving lingering doubts about the studio’s capacity to support live titles.
For Australian and New Zealand players, the reshuffle lands against a backdrop of already-strained Game Pass economics, after Microsoft reversed a steep subscription price hike earlier this year under Sharma’s direction. Whether prioritising Activision, Bethesda and Blizzard translates into a steadier release cadence for Call of Duty, Elder Scrolls or Diablo content in this region will depend on how quickly the newly consolidated funding reaches those teams.
Read also: Id Software Says Xbox Layoffs Shrank Studio to DOOM 2016-Era Size
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