Bloomberg reported on the 10th, citing multiple people familiar with the matter, that Microsoft's (MS) gaming division Xbox plans to carry out a large-scale restructuring in July. It is seen as a move to address weak results.
According to sources, Xbox is considering major layoffs after June 30, when MS's fiscal year ends. The exact scale is unknown, but the industry expects around 1,000 people. It also plans to sharply cut the budget of some business units, including the marketing institutional sector. If the layoffs materialize, Xbox will be implementing large-scale job cuts for the fourth straight year.
Chief Executive Officer Asha Sharma began reorganizing the company right after taking office in February to boost Xbox's profitability. At a recent event, Sharma said Xbox's business is "not in a healthy state" and noted, "Over the next 100 days, we plan to reset the business from the ground up."
According to MS, Xbox has invested more than $20 billion (about 31 trillion won) over the past five years in content, platforms, and hardware, but annual revenue has instead fallen by nearly $500 million (about 680 billion won). On MS's internal profitability metric, profitability also fell to around 3%. In a recent email to employees, Sharma said, "This situation cannot continue any longer."
Xbox has posted poor results for years due to weak console sales, stalled growth in subscription services, and a lack of hits. Under pressure from parent company MS to improve profitability, Xbox over the past two years has wound down game studios, halted new game development, and raised product prices.
Sharma said the platform infrastructure must be rebuilt over the coming months and the game portfolio must be reviewed from top to bottom. Sharma assessed that "we expanded the organization to increase content supply, but as we pursued a strategic shift simultaneously in a market awash with content, the organization became overextended."
Xbox plans to strengthen its lineup of exclusive games to bolster its console market share. Sharma said that for Xbox's revival, "it is important to reliably supply exclusive games and new intellectual property (IP)." Until now, Xbox has released most of its own games on rival platforms PlayStation and Nintendo as well.
However, some analysts say that abandoning an exclusive-release strategy has weakened the incentive to buy Xbox consoles. According to the industry, while the PlayStation 5 has sold more than 90 million units to date, Xbox console sales are estimated at only 30 million, about one-third as many. In response, Xbox said in a recent video introducing new titles that it will not release "Gears of War: E-Day" and "Clockwork Revolution" on PlayStation or Nintendo Switch.