Xbox Reportedly Planning ‘Significant’ Layoffs, Budget Cuts for Marketing, and More

The memo outlined five “realities” about the state of Xbox, covering a notable decline in revenue that “cannot continue,” a hardware component crisis, and a reset/reassessment of Xbox’s portfolio and infrastructure.

“We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming and devices,” she wrote. “In the process, we have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content. We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win. At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success. We need to reassess the balance between these and our investment priorities for the next 5 years.”

The Verge reported that sources have suggested Xbox’s cuts could lead to a studio closure or changes to the Xbox studio lineup. Sharma’s predecessor, Phil Spencer, had to shut down a number of Xbox-owned studios before the end of his tenure. One of the most notable casualties was The Initiative, a new studio that was tasked with rebooting Perfect Dark.

Sharma also noted that Microsoft had to spend twice as much as it did on console storage components since last fall, and that number is expected to grow to five times as much as they plan for the next console, Project Helix. Her comments come just days after Xbox’s Chief Strategy Officer, Matthew Ball — who joined the company not even a full month ago — noted that they were unable to keep up with demand for new consoles due to the component crisis. He also stated that it was forcing a rethink on how they approach Helix.

All of this news comes after Xbox’s big showcase event, which reaffirmed a commitment to exclusivity on a case-by-case basis. This will begin with Gears of War: E-Day, which was originally in development for PlayStation 5. Sharma, however, reportedly made the decision to scrap the PS5 version, according to Bloomberg.

Xbox has only committed to two major exclusives at the moment, with Sharma noting that they will continue to evaluate exclusivity as the company becomes healthier.

Cade Onder is a freelancer for IGN’s news team. He covers all things entertainment, including gaming, film, and more. You can find him on Twitter @Cade_Onder.