Gaming
Xbox shutting down studios
Xbox began offering voluntary severance agreements to producers, quality assurance testers to another game studio, according to sources.
The recent closures of multiple video-game studios within Microsoft Corp.’s Xbox division were a result of an ongoing cost-cutting initiative, as confirmed by sources familiar with the company’s plans.
This week, Xbox has initiated voluntary severance agreements for various staff members, including producers and quality assurance testers, at ZeniMax, a company acquired by Xbox in 2020 for $7.5 billion.
Further cuts are anticipated within the broader Xbox organization, as indicated to employees.
When approached for comment, a spokesperson for Xbox declined to provide a statement.
The unexpected closure of three Xbox subsidiaries, along with the absorption of a fourth, came as a surprise to employees.
Among the closures was the Tokyo-based Tango Gameworks, known for releasing the acclaimed action game Hi-Fi Rush last year.
According to insiders who spoke on condition of anonymity, Tango was in the process of proposing a sequel before the closure.
During a recent town hall meeting with ZeniMax staff, Xbox president Matt Booty acknowledged the success of Hi-Fi Rush but refrained from specifying the reasons behind the closure of the development studio responsible for it.
Booty highlighted that the decision to shut down these studios was aimed at reallocating resources to other areas within the organization, addressing concerns of understaffing and resource allocation.
Regarding the closure of subsidiary Arkane Austin, known for titles like Prey, Booty clarified that it was unrelated to the performance of their recent multiplayer game, Redfall, which faced challenges critically and commercially.
Prior to its closure, Arkane was exploring opportunities to return to its original focus by proposing a new single-player immersive game, possibly within the Dishonored series.
Jill Braff, head of ZeniMax studios, expressed during the town hall that the reorganization would allow the division, responsible for titles such as Fallout and Doom, to concentrate on fewer projects with increased focus.
She emphasized the challenges of supporting multiple studios worldwide with limited central resources and a growing workload.
Both Tango and Arkane had released games recently and were in the process of expanding their teams for new projects, a key factor cited in their closures by Booty and Braff.
Shinji Mikami, the founder and studio head of Tango, had departed before the recent closures.
These actions within Xbox coincide with broader contractions in the video-game industry following economic shifts post-pandemic.
Microsoft’s gaming division has notably expanded through recent acquisitions of ZeniMax and Activision Blizzard, totaling over $76 billion.
In a similar vein, Microsoft had announced workforce reductions of 1,900 jobs, predominantly at Activision Blizzard, in February.
The significant acquisition of Activision Blizzard has intensified scrutiny on the Xbox division within Microsoft, as per insider sources.
In recent years, Xbox has heavily invested in Xbox Game Pass, a subscription service offering unlimited access to downloadable games for a monthly fee.
To enrich the service, Xbox acquired numerous studios, including those known for creating smaller-scale games.
While many game publishers focus on large-budget titles, Xbox aimed to support creative projects like Hi-Fi Rush with smaller budgets, prioritizing Game Pass library enhancement over individual game sales.
Despite these efforts, Game Pass has not experienced the significant growth anticipated by Xbox leadership.
According to industry analysis, video-game subscription spending in the US has shown modest to flat growth since mid-2021, with Game Pass revenue growth plateauing.
While Xbox continues to support the Game Pass model, recent financial reports indicate that the division’s substantial investments have not yielded the desired outcomes.
Console revenue decline has prompted Xbox to release games on competing platforms recently, reflecting evolving strategies within the gaming industry.
In a prior interview, Xbox boss Phil Spencer expressed concerns about the industry’s limited growth, underscoring ongoing challenges and shifts in the gaming landscape.
