Gaming

Opinion: Welcome to the house of pain, brought to you by Xbox

Jul 08, 2026 | 5 min read

Ignore the gleaming, blood-slicked guillotine and basket overflowing with wide-eyed craniums and do your very best to craft a hit video game. The investors demand it. Succeed and you might get to spend another year in this lavish emporium of torment.

Tremendous, isn't it? From the outside looking in, this is the reality facing thousands of Xbox workers who have been deigned necessary (for now) by a flailing corporate owner that has spent an ungodly fortune on mergers and acquisitions over the past decade only to admit it basically has no idea whether it's actually paying off. All signs point to a very obvious answer: it isn't.

Since Microsoft completed its near-$70 billion merger with Call of Duty and Candy Crush maker Activision Blizzard King in 2023 there have been five rounds of mass layoffs across Xbox.

It began in January 2024, when former Xbox boss Phil Spencer said the company had to eliminate 1,900 jobs to align on "a strategy and an execution plan with a sustainable cost structure." Bleak but perhaps not unexpected. That is generally what happens when two industry titans coalesce.

The studio closures began three months later. In May 2024, Xbox shuttered Arkane Austin, Alpha Dog Games, and Tango Gameworks—the latter of which was eventually salvaged by Krafton, but was initially slated for closure not too long after launching Hi-Fi Rush, a resounding success story according to some Xbox bigwigs.

In September that year, another 650 roles were eliminated to, in the words of Spencer, "organize our business for long term success."

Another sucker punch was dealt a year later. In July 2025, Microsoft cut 9,100 roles across the entire company, including a reported 1,600 within its video game division (thanks, Aftermath).

Now, another year on, the company has chosen to run it back. This time, newly-minted Xbox CEO Asha Sharma—who somehow managed to convince people of her credentials with masterstrokes such as capitalizing the word 'XBOX'—said the company is laying off 3,200 people in order to "reset."

Why? Because Xbox is rudderless. Nobody at the top seemingly has any idea how to course correct other than to mercilessly downsize, and over 7,000 employees (that we know of) have paid the price. This is not an opinion. It is a fact. In her memo announcing the latest cuts, Sharma confirmed as much.

"To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected," she wrote. "As that 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 facing the most severe hardware crisis in its history. We must reset XBOX."

Sharma's message is an explanation. It is not someone taking accountability. Here is a leader upending thousands of lives while behaving as if this situation was somehow forced upon Microsoft. Who, I wonder, could perhaps be responsible for fuelling a memory crisis that has left Xbox gasping for air during a period when hardware sales remain in decline? Could it be well-documented AI-peddler and Xbox parent company, Microsoft? Don't be silly.

Imagine spending billions on iconic studios and production talent if your only plan to deliver success and stability was to cross your fingers, wish upon a star, and start "hoping for a better outcome." Absurd.

Even if you, cynically, take the view that a rightsizing of this magnitude was inevitable, Microsoft has presided over the cuts in a way that feels almost malicious. Weeks ago, the company chose to spotlight Senua and State of Decay 3 during its latest Xbox Games Showcase. I wonder what sort of message that sent to employees at developers Ninja Theory and Undead Labs? Maybe something along the lines of 'we've got your back.'

Evidently not, because now both teams have been cut loose alongside Double Fine and Compulsion Games. A reprieve, perhaps, if those four studios can make independence work—but that is by no means guaranteed in a landscape where financing is at a premium.

Microsoft often talks about how it has a responsibility to players, and Sharma's early days have been defined by a series of easy wins designed to endear the Xbox brand to its most die-hard supporters. 'Exclusives have returned! We dipped the logo in a new shade of green!' The company has slammed a dead cat on the table to distract people while it drags the bodies out of the back.

In her memo to staff, Sharma said Xbox's ongoing commitment to embodying a headless chicken has made it "harder to deliver for players," but what about delivering for employees? I'm sure it won't be lost on Xbox owners that it will be quite literally impossible for the company to produce video games—exclusive or not—if the entire division is in disarray. This brings me back to my first point.

Sharma explained that out of the 3,200 cuts announced this week, around 1,600 will be made immediately. The remaining 1,600 will be confirmed by the end of the current fiscal year in June 2027. That is ghoulish. Consider how you might feel attempting to write lines of code, produce concept art, support your colleagues, or even just drag yourself into the office knowing you might soon be slapped on the chopping block.

It is unfathomable and untenable. There are few certainties in life, but Asha Sharma has promised her employees that another 1,600 people will be marched up to that crimson, viscera-strewn guillotine in the next 12 months.

If they have any last words, I suspect they wouldn't be suitable for print.

Game Developer news editor Chris Kerr is an award-winning reporter with over a decade of experience in the game industry. His byline has appeared in notable print and digital publications including Edge, Stuff, Wireframe, International Business Times, and PocketGamer.biz. Throughout his career, Chris has covered major industry events including GDC, PAX Australia, Gamescom, Paris Games Week, and Develop Brighton.

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Source: Chris Kerr · https://www.gamedeveloper.com/business/opinion-welcome-to-the-house-of-pain-brought-to-you-by-xbox