The Cruelest Part Of Xbox's Layoffs

Hello, One Take Shire here. First of all, before we get started on what unfortunately will be a bleak video today, I just want to say how fun I've been getting a few emails from companies who want to do sponsorships on this channel. I've never actually, over the course of my career, which is now approaching 20 years covering the video game industry and being a journalist, I've never actually done any ad reads. And my goal in life is to never have to do one. Is that have that trend continue. So, if you are a company looking to do a sponsorship with me, you should know that my rate is $10 million and I will not do ad reads for anything less than that. Okay, on with today. So, as you have most likely seen by now, on Monday, Xbox announced a wave of layoffs. They are going to cut 3,200 jobs and divest five game studios. Um, a

couple are going independent, a couple are being sold off, and then one, Arkane in Lyon, France, uh, is just beginning the process of figuring out what is going to happen next. It's really bad news. But there is a catch to this. There is one part of this that I think has gone a little bit under discussed over the last week, which is that those that number, that 3,200, is not actually 3,200 job cuts on Monday. Um, it's actually 1,600 job cuts on Monday and then another 1,600 to come. Um, so that first tranche happened on Monday that gutted a lot of different studios, id Software and ZeniMax Online Studios, as I mentioned in my video on Monday. Um, ZeniMax got pretty hit hit pretty hard by this particular reorganization. Um, we also saw layoffs at at other studios. Obsidian cut a quarter of their staff, and as I reported on Bloomberg this week, Obsidian is having a total reorganization where they have canceled multiple games, including a sequel to Avowed, and they are now pivoting into

the early stages of what will be a Fallout game. Very, very early days on that, by the way. I wouldn't be totally shocking if something changed again in the next few months or the next year or so, but that is happening. By the way, quick side note is that Obsidian is actually they actually have a small team that was working on Avowed 2 that is still going to keep working on Avowed 2 even though it is canceled while they wait for other projects like Fallout 2 be ready for them. And maybe in hopes of getting it uncancelled. Maybe it it was actually farther along than I think people would expect for a sequel to a game that came out last year. So, I think their their hope is perhaps that they'll get it so close to being finished that Xbox will look at it and say, "Okay, yeah, you can finish and and release this. It won't cost that much more to finish it." Anyway, so that that all happened on Monday and we saw the kind of the ripple effects and we saw the consequences and everything that happened, the fallout of it, no pun intended, throughout the week. But what hasn't happened yet is the next 1,600

layoffs. So, that number, by the way, that number is actually a little higher than it will ultimately be in that it includes the studios that Xbox is divesting from. So, it might be a little bit closer to 1,250, something like that. Um although the total number of Xbox layoffs is actually much, much higher in the sense that Xbox is cutting their vendor spend by 50% and Microsoft is a company that hires a lot of people who are kind of like they're full-time working for Microsoft basically, but technically they're working for other agencies. And so, a lot of those people are losing their jobs as a result of this whole the whole thing. So, really the number is much higher than that. But still, let's focus on those 1,250. Um those 1,250 could be anywhere. Could be anyone. And the people who are remaining at Xbox have no idea when that's going to happen, who it's going to happen to, what companies are going to be impacted, if they are potentially on the chopping block, if

they now have to worry about losing their jobs um over the next 12 months, and and morale was already pretty low at Xbox overall. Um has especially been overall after what happened on Monday. Um whether you are still at whether you had a company that like a subsidiary of Xbox that was untouched, um and now you are just have to deal with the fact that that kind of survivor's guilt of like being a studio that wasn't hit by this. Like if you're one of the Call of Duty studios, you probably weren't hit very hard by this, but now you have to look around and be like, "God, we're still part of this organization that is doing all this." Um or you're part of a studio that was hit and you're a survivor, and now again you have to deal with survivor's guilt, and you also have to deal with doing more with less. You have to deal with picking up the pieces for other people, doing other people's jobs potentially. So it's it's just awful all around. And now on a on a top of all of that, you have this axe hanging over your head. And nowhere is that more apparent than at Blizzard Entertainment. So I got a couple of emails. A couple emails were sent to me

um that were sent out to the entire staff of Blizzard by um Blizzard president Johanna Faries, who started the company Faries, who started the company a couple of years ago. Um I'll talk more about her in a second. Um but she essentially wrote uh um on Monday she wrote an email saying like, "Hey everyone, take care of yourselves." Quote, "You can expect to hear more details regarding today's events mean for Blizzard in further communications." Not exactly comforting. Further communications is when you're going to find out more. Um the next day uh Faries wrote an email to the company saying they had cut quote, "a very small number of roles in the Chinese office." Um but she didn't say whether that was it, whether that was the end of the layoffs at Blizzard. She said quote, "The broader Xbox actions announced today can be challenging to navigate. At Blizzard, our forward-looking strategic initiatives and priorities remain in focus. Thank you again for the respect and care you have shown for our games, communities, and each other throughout. Um, by the way, this is all in a Bloomberg column that I wrote today about the cruelty of this uncertainty,

so go check that out. I'll post a a link in the show notes, as well as some other links to coverage that we've been doing over at bloomberg.com. So, Blizzard staff now have no idea what is going to happen. Um, are they going to be part of this next wave of layoffs? When is that going to happen? Is it going to be after BlizzCon in September? Is it going to be tomorrow? Is it going to be down the road? We really have no idea. Um, Blizzard is a pretty heavily unionized company, so it's possible that this delay and this lack of communication is because the company is negotiating with the union, and they're just kind of having that conversation back and forth. But right now, for a lot of people, there is just uncertainty. And this is a company that has been through, a lot. I mean, uh, if you've read my book about Blizzard, Playing Nice, you know about all the ups and downs they've been through, especially over the last decade or so, since the departure of Mike Morhaime in 2018, and the kind of the Activision culture takeover that happened, um, in

in those kind of sub- subsequent years, 2018, 2019, 2020. Um, the way that Activision culture clashed with Blizzard, and, um, there was this guy named Armin Zerza who came in in Blizzard's as Blizzard's CFO, and eventually COO, too, Chief Operating Officer, and, um, his way of running the company, uh, clashed quite a bit with, uh, Blizzard values and Blizzard culture. And it really it led to a lot of problems, led to a huge exodus of Blizzard staff, a lot of Blizzard veterans went up leaving, and, um, it it all kind of came to a head, or it all just kind of like had another big turnaround in 2023 when Microsoft finally closed the deal to buy Activision Blizzard, and Blizzard became part of Xbox. And then at the beginning of 2024, um uh Xbox laid off a whole bunch of people. Um 1,900 people across the uh the entire org, including a quite a lot at Blizzard at Activision Blizzard as a whole. Um and as a result of that, they they they ousted the um current the

president at the time, Mike Ybarra, um not super popular among Blizzard staff, I would say. And they brought in a woman named Johanna Faries, who I mentioned earlier. Like I said, I would I would tell you a little bit more about her. Um she has a really interesting background. She worked in the NFL for a bit. Um she worked in Activision, in Call of Duty, in esports, and also in just like the over supervising the Call of Duty franchise. And so people were pretty skeptical for a couple of reasons when she came in. One is that the way she talks, um especially like in all-hands meetings and just kind of in in public uh presentations on TV hits and whatnot, um she talks in a very corporate way, um which is not a Blizzard like Blizzard is is very much not that. Um and she also um has this background in Activision. People worried like she was another Activision-minded person, another person who was more about predictability um than kind of the creativity that Blizzard has hoped to cultivate and foster over the decades. Um but actually, I think from what I've gathered talking to people, um there's been quite a quite a shift in sentiment

about Faries, or at least that skepticism turned to be unwarranted. A lot of people actually really like her and the decisions she made and the way she talks to people. Um and uh it feels like people are generally happy with her as a leader. That said, I think there are some there are currently some some big battles involving the union and what Blizzard management is actually offering in terms of terms and that whole bargaining process, but that's kind of a bigger picture issue. Um so right now, Blizzard uh and Blizzard is kind of a microcosm for a lot of people at Xbox right now. But Blizzard, I'll talk about Blizzard specifically. Blizzard is in a really interesting place. They have managed to rebuild momentum for a lot of their franchises that were not doing well, especially Overwatch, which is now in a much better place than it was uh 1 2 years ago. Um World of Warcraft has also been really doing quite well and still has uh millions of subscribers and is still making tons of money. Um

Diablo has been doing really well. Um I don't know if they quite hit the exact numbers that they wanted to for Diablo IV and its expansions, but it is still a successful game that is making money for them. Um and uh there's tons of new projects in the works. New stuff in Diablo, um new stuff uh I mean, I've I've talked before and I wrote in Play Nice about a StarCraft shooter that is in development. Um a lot of cool stuff happening at Blizzard right now. Uh and now people have to continue working on that stuff without knowing if they're still going to have jobs in 3 months, which is really awful and cruel position to be in. I think making video games is very hard. Um if there's any through line in all of the work I've done over the over the years, it's that making video games is extremely hard, harder than than people know or realize or think about unless they've done it or have talked to enough people who have done it. Um uh like finding that like games are essentially all of the hard

parts about making art combined with all of the hard parts about like making software. combined in this big morass. Um not to mention the coordination and communication that has to happen among hundreds, if not thousands, of people. All of that is exacerbated. All of that is make made all the more hard by uh this kind of uncertainty about whether you'll have a job, this threat hanging over you, this axe over your head. And to me, it seems like it would be near impossible to do good creative work under those conditions. I think there's a belief in maybe in Silicon Valley at tech companies that the fear of layoffs can help motivate people, can help get people to to work harder. I know it's certainly something that Elon Musk put into play when he took over Twitter four years ago and laid off a significant number of staff. I believe it was something like 80% of the staff and told the people who stayed, "Hey, if you're going to stay here, you have to

be hardcore. You have to be That's the use the word he used, hardcore. You have to be willing to work your ass off and and put in all this extra time and motivated them with fear essentially. Um uh maybe that can work in Silicon Valley. I don't know. I'm not a tech reporter, but working on programming and software is much different than working on games and I think not a lot of people at the executive level think about this or realize this. But like software, you kind of you have a goal in mind and for the most part, I mean, I'm speaking very broadly here, of course, but for the most part, you you know what that goal is and the hard part is executing on it. You know, okay, I want Twitter to do X, Y, and Z. Maybe you came up with a feature and you know what you have to do and now the hard part is is writing the code and figuring out how to do it, bug testing, and etc. That is predictable work. That is work that can be achieved just through sheer, I don't know, labor and man hours and just

you can do it under duress because it is kind of you are you are doing work that is that is tangible, that has a a very clear goal at the end of it. Games are a different beast. In games, often times, you are have that kind of work aspect of it that that the programming aspect of it, but you don't know what the goal is. You don't know exactly what the vision is going to be. And sometimes you come you you finish the goal and it turns out that that game is not fun. It turns out that the features you thought would be so cool are not actually working. You have to be creative, especially on the art and design side of things, or the audio side of things, or things that are not just kind of pure software development. Um not to say the code isn't creative cuz it also has plenty of creativity, but code can be a little bit more like, okay, um I have a goal in mind, and this is how I'm going to execute it, and creativity is more of a how you get there. Whereas art, you were just creating something from nothing, and you have to have the goal in mind execution in mind, and both of those can be very fuzzy. All that is said, the the broader point here is that being

motivated to be creative is extremely difficult under the best circumstances, and with layoffs looming, those are not the best circumstances. That is not how you are going to get people to do their best possible work. I think there's a kind of there's a mentality from a lot of management types and executive types that um game development should be more predictable, and maybe they have a point, and I'll talk more in the future. I'm have a few videos planned where I'm going to get into some of the kind of um flaws on the development side, on the developer side, that I think have caused some problems, and um maybe maybe managers do sometimes have a point. Maybe executives do do sometimes have a point when it comes to um lack of discipline uh in the development process, but it's not predictable. Game development will never be 100% predictable because you are creating art, and that is not something that can be defined on a strict timeline. Um it's not just Blizzard, by the way. Um there are other organizations within Europe, other parts of ZeniMax that have not been touched

and just do not know if they're going to be. Other parts of Xbox Game Studios that have not been touched and do not know if they're going to be. Activision, um the kind of the other part of the Activision Blizzard equation, Activision, which is mostly Call of Duty these days, um they laid off uh I believe it was less than 100 people this week. Um what we don't know is is if that's going to be more layoffs, if there're going to be more after that, if there going to be more down the road, if more studios are going to shut down, um if what those cuts are going to look like. And that uncertainty is just still going to hang over everybody in the coming days and weeks and months. So, I I want you all out there to just think about this for a second and think about how difficult it must be to um to work under those kinds of conditions. Um and and hope hopefully have a little bit of of empathy for the people who are in that position. Cuz I think even if you're out there and you're looking at these layoffs and you're saying, "You know what? Xbox was in a really awful position. Um they needed to turn things

around. They needed some sort of restructuring, some sort of reorganization. Maybe they needed to get rid of some of these studios." I don't know. If that's your mentality, okay. Um I I I get it. I understand that perspective. Um but coupling that with just keeping people in this constant state of fear and panic and anxiety and uncertainty over whether they will lose their jobs too as a result of this, and not knowing when, not knowing who, not knowing how it's going to happen, um that to me is just not a way to run an organization that effectively does anything, effectively creates things, effectively makes money, um effectively keeps people employed and keeps people happy. I guess the one the one like advantage that a company like Xbox has right now is that the job market is a disaster that even if people wanted to leave because of all this, there aren't a lot of places where they could potentially go. So, do out there if you're watching this, um do have a

little bit of empathy for the people who are in this situation. All right. Have a good weekend everybody. Next week we are going to talk about hopefully a couple more uh happy happy topics. Um hopefully we'll get into a little bit more. I I had an idea for a video that maybe I'll I'll talk about next week or some point in the future about kind of a model for the games industry, a theoretical hypothetical model for the games industry that could maybe make things a little bit better. And we'll talk about other stuff down the road. Oh, and next week I think I'll talk about Steam Machines and the fun story, the long and twisty story behind the Steam Machine. I talked to a couple of Valve engineers last week, so I'll talk about that as well. So, some some good stuff to come. I promise it won't all be bad news. Um, this industry is not all just bleak. If you do have kind of ideas of topics you want me to explore, questions you have, feel free to post them in the comments or email me. At some point I'm also going to talk

about cool games just cuz I think that'll be a nice fun break from industry doom and gloom. Talking is to talk about maybe some of my favorite games of the year. So, lots of potential topics to talk about down the road. And one more thing, just remember if you would like to sponsor one of these videos, just write me a check for $10 million, that will buy you 30 seconds of me talking about your company. All right, see you all next time.