The Xbox Bloodbath Is Actually Way Bigger Than It Seems

Hello, One Take Shrier here, and today I want to talk about an aspect of the Xbox bloodbath that has not really been discussed. I know you might be sick of of the kind of the grim news that is circulating in the games industry, some of which I've covered on this YouTube channel, but uh that's unfortunately the times that we're in. Um and if you're sick of bad news, don't worry, on Friday I will have a much better story, a cooler, more interesting, positive story. But today we're going to get into an interesting negative story. So as you undoubtedly have seen by now, last week Xbox had their much-expected bloodbath where they announced that they were divesting five studios, canceling some projects, um laying off or cutting [snorts] 3,200 jobs, 1,600 last Monday, and then 1,600 to come. That second number includes the studio divestments, but it also includes around 1,200, 1,250 people who will just be laid off over the next year and have no no idea when or who or how that will

actually happen. Talked about that in a video last week and how cruel that has been for those people. But there's another side to this, another side that people haven't really talked about, um maybe don't even know about. So um let me tell you a story. Last July, um as I mean it's now become an annual tradition for Xbox to have mass layoffs every single first week of July um to coincide with the end of Microsoft's fiscal year. So last July, July 2025, they did the same thing. They laid off a bunch of people as they tried to make their budget for the coming fiscal year. And one of the things they did at that point was they canceled a game called Perfect Dark that had been in development at a studio that they built in, I believe 2018, called The Initiative. Um and so this game, Perfect Dark, it was in development for a very long time, had some documented struggles, and there's stories about their out there

about some of the things that they had gone through. Um, that game actually wound up uh going into partnership co-development between the Initiative and a company called Crystal Dynamics, that is best known as the makers of Tomb Raider. They made Marvel's Avengers, that Avengers online live service game, and many others. It's a long-running San Francisco studio. Um, and so obviously those two studios were impacted when Perfect Dark was canceled. Um, I reported on Bloomberg in the months afterwards. Um, the company Take-Two and their subsidiary 2K Games, which is the makers of like BioShock and Borderlands, they actually tried to buy Perfect Dark and save the studios involved, save the teams involved. Um, but that fell through due to some negotiation hiccups over the IP and long-term ownership and Game Pass and all that jazz. Um, so what happened was so obviously so Crystal Dynamics had to lay people off as a result of that. The Initiative, which was the main studio, they closed and so they had to lay people off because of that. But what people don't know is that there were other studios working on that game, too.

Um, I can't name them all cuz I haven't confirmed with 100% certainty every single one, but um, for example, Eidos Montreal, which was kind of is a sister studio to Crystal Dynamics, also had some people working on Perfect Dark. And there are others out there, too, other kind of work-for-hire studios that were working on that game. And as a result, they also had to lay people off. But it's kind of those people were in an even worse situation than the people who were at the Initiative because those people who worked at those co-dev studios couldn't even say that they were working on Perfect Dark. They couldn't put it on their portfolio. They couldn't explain why they were suddenly laid off. The studios involved in some cases put up LinkedIn postings saying, "Hey, sorry we had to cut 40 staff because of such and such reasons, cuz of market realities or a canceled project or whatever." But they could not say it was Perfect Dark because of NDAs they've signed and and like these complicated contracts where often times these co-development partners, these studios that work alongside these game other

studios on games um can't actually say that they're working on the games until much later on until the game ships. So, those guys also got impacted and so and they're kind of the invisible cost, the hidden cost of those job cuts and cancellations are the co-dev studios that are working with these studios. Um co-development has always Outsourcing has always been uh part of or not always but has been part of a game development industry for a long time, last two decades or so. There's been outsourcing in some capacity. Um in recent years in the more modern era, we've seen that kind of grow to encompass what is now called co-dev where you don't just have like um a studio in the Philippines that you're sending kind of like concept art to and having them model assets or whatever. Instead, you are actually having these studios, you're bringing them in to make substantial portions of the game. Sometimes it might be you have a studio come in to do, I don't know, your UI work. Sometimes it might be that they're coming in to do a level or a chunk of the game, um a certain portion of the

game and it's done through supervision with the main studio. Um for example, Obsidian Entertainment, uh they made Grounded and then for the sequel Grounded 2, instead of making it internally, they have they um made it in co-development with Eidos Montreal and Eidos Montreal um is made the bulk of that game. The majority of the people who worked on the game were in Eidos Montreal and there was a team of maybe, I don't know, four or five, something like that, people at Obsidian who supervised and just kind of monitored the project and were reviewing milestones and going over everything and just kind of offering their creative guidance. Um that's not uh usually what happens. Usually what happens is you have kind of a lead studio and then they are working with a bunch of other studios on chunks of it rather than co-dev handling the majority of the development, but still it's a very common process. I've seen it and years as a really good Obsidian is a really good example because that is a state a studio that has maybe, I don't know, 300 staff or at least they did before this current layoff. Um maybe a shade less than 300. And they were working on something like five different

projects, six different projects. Um which you can't do with that kind of staff unless you are heavily relying on code development, which is what they were doing. So, going back to Obsidian, when Obsidian canceled um three projects that they were working on and instead they're as I reported last week on Bloomberg, I'll I'll throw the link in the show notes, they kicked off development on um on a new Fallout game or very very early development on a new Fallout game. Anything could change on that. Who knows what it's going to be? Is it going to be a spin-off? Is it going to be Fallout 5? Like what does that kind of look like? All things are in the air right now. This was a very very recent decision. But anyway, they canceled a few games um including a sequel to Avowed, which as I mentioned last week, they still have a couple of people they still have a few people working on like through the next milestone or so um as they are waiting for the Fallout project to be ready and other things to be ready. Um but anyway, they canceled a few games and those games um or at least one of them, maybe multiple of them, I'm not 100% sure, but those games were also in

development with co-dev partners. And so those co-dev partners are now in a position where they're getting their game canceled, they're losing money, they can't afford to keep people employed. Um they have to cut jobs, they have to cut this canceled project. And then the people who they are cutting can't actually say what they were working on. So, it's a sit it's a situation where you you have this kind these kind of ripple effects from this game getting canceled that people don't even think about. Um and so that number 3200 that is I guess technically correct in terms of like the the full-time jobs at within the Xbox organization that are getting canceled, but it's also having all of these ripple effects all across the world as all these co-development studios are impacted by these game cancellations. And there are probably countless others that just have not been able to be talked about. And it's really tough. I think it's just worth thinking for a second. If you are an artist or a game designer in the video game industry and you lose your job, first of all,

you're entering a really tough market largely because of the contraction that the video game industry has gone through over the last 3 years. I've heard anecdotally I've heard stories from people tell telling me that it's taken them months if not years to find new work in the games industry. So you're entering a really tough market, but also you do not have things to show on your portfolio because you can't just be like, "Hey, I worked on concept art from this game that it was never actually announced and was canceled and also we never actually said at our studio, our co-dev studio, that we were working on this game, so I can't talk about it. Sorry."
[snorts]
So So like you are really like stuck in a really hard place.
[cough]
Excuse me. One take Charlie, not cutting that out. Um you are really stuck in a tough place because you have to hit this job market without being able to show your portfolio um in as thorough a way as you might have been able to if you were working on something that had been announced or something that was kind of more publicly

high-profile or something that had been released. This has been a problem for ages that people um there all sorts of stories I've heard over the years of people who like their entire resume was canceled projects and they didn't have a single game that shipped that they could actually show to people. Um but at least if something is canceled and it's been publicly announced and you can say you worked on it, you can put it on your resume and on your portfolio. Um granted, a little bit of a caveat here is that often times, if you are applying to a job and you actually get to the next step and you can talk to the an interviewer one-on-one, you can explain to them under kind of cover of friend DA or whatever, you can be like, "Look, I worked on this thing. Let me show you this, but you can't share it anywhere else." But, to get in the door in the first place, you need your portfolio and your resume, and to not be able to show that to potential HR recruiters and gatekeepers, um that puts you at a bit of a disadvantage. That really sucks. Um and so, there's also this level of uncertainty among code dev partners around the world. For example, um and and and every studio pretty much

is using code dev in some way or another these days. Like, these days, um most game development studios are relying on external partners for something or another. Um if you are a code dev partner who is working with, I don't know, uh Double Fine or Compulsion or Ninja Theory or Undead Labs or Arkane, you are now in the state of uncertainty. Maybe you think your game is still happening, but you don't know what it's going to look like. Maybe your game just got canceled and you're in the same position as all those other people I mentioned. Or or or who knows? Like, you just don't know what the future is going to look like, and you're not getting headlines, and you're not getting kind of this kind of big um uh public exposure to the work you're doing because you, by nature, are just work flying under the radar. You are trying not to get noticed. So, the code dev is a huge part of this, and it's one of the reasons that that 3,200 number is actually way bigger than 3,200. But, there's another thing, too. Another thing that I mentioned briefly in last week's video and my story on Bloomberg last week about the kind of the cruelty and the the real the cruelest part of

Xbox's layoffs, um but but I haven't super elaborated on. So, I want to get into it a little bit more right now, which is vendors. So, Microsoft, like a lot of big tech companies and even some gaming companies, uh has people who work within the company or or alongside the company full-time, but they don't do it through by being Microsoft employees. They do it by being employees of outside vendors. Um and there are a bunch of them. Uh I won't name them all, but there are a bunch of them. Uh Assembly is one that comes to mind. They do PR for Microsoft and stuff like that. Um, and so these outside vendors, uh uh, they are employing people full-time. And Xbox announced last week as part of Asha Sharma's memo in one line that got unnoticed or at least kind of under under played under under covered under reported. Um, Asha Sharma, the new CEO of Xbox, announced that they're cutting 50% of vendor spend, which is a lot of money, which is a ton of people, a lot of people who worked for Microsoft and for Xbox worked so in in a vendor

capacity. And to cut 50% of vendor spend essentially means you are saying, "Hey, we are cutting a whole bunch of jobs of people who work for vendors and we're working alongside Xbox people and sometimes direct reports to Xbox people or like part of Xbox teams." Like these were people who, um, uh, uh, unless like, I mean, I guess you could you would know because they didn't have the Xbox email address or whatever. So it might have been clear to you if you work there that they were vendors and not technically Xbox employees, but like I don't know if you met them out on the street, if you met them in an event or something, um, they would probably tell you, "Oh yeah, I worked for Xbox. I do Xbox PR. I do Xbox marketing. I do Xbox whatever." Um, these people, uh, are also being impacted by these massive cuts because 50% of vendor spend is a significant amount of money. And so there are a lot of people in the world of Microsoft and Xbox, whether it's those fields I mentioned, I don't know what else, IT. Um, there are a lot of people who are going to lose their jobs,

who are getting their jobs cut as a result of the Xbox bloodbath last week that do not count as part of that 3200, whether it's the first 1600 or 1600 that's coming later. Those are vendors. They are not full-time Xbox employees. So they are just kind of part of that hidden number that is impacted here. So you have, um, that kind of that big front-facing headline number and then you have all of these ripple effects that I think it's important to talk about, and think about, and look into. Um 3,200 seems awful enough. I mean, that's 20% of the Xbox staff. But, the actual number is much bigger, and the impacts are significantly higher um than than Xbox would have you believe by what they said last week. Not not that they're not being clear or anything. They're I mean, to be fair to them, it's not like they're going to be like, "And also, it's going to impact these 10 co-dev studios that we've been working with." But, still, there's more to the story as there often is. It's important to think about that. One thing I wish

would happen, and I think it might help some of these people out, is um it feels like if you were working on a game as a co-dev studio or an external contractor or whatever else, um you uh and and that game is canceled uh due to some massive reorganization in a company like Xbox, it feels like you should be kind of let free of any NDAs and contracts you've signed, and you should be allowed to say that you worked on that game, or say that your company worked on that game, so that you can try to find new work elsewhere. Because some of these co-dev companies that are trying to find new work elsewhere cannot publicly say, maybe in private conversations and BD conversations they can say it, but in in publicly they cannot say they worked on Perfect Dark, or they worked on X project with Obsidian, or Y project with Arcane, or whatever else. And that's really brutal. I feel for them. I feel for them all. Um so, again, uh let this be a call for some empathy to what's going on over there, because I

think even if you sympathize with the business decisions that um went into last week's reorganization and restructuring, and even if you think that like this is heading at this is pivoting Xbox to head in the right direction, um it has a lot of ripple effects. It impacts a lot of people's lives, a lot of people's families. It will drive a lot of people out of the video game industry, maybe people who worked on some of the things you loved and just had no idea that they even existed or even that those companies existed because a lot of them have names you've never heard of. Um, the biggest there's a company called Keywords that owns a lot of different subsidiaries and it's just become one of the biggest kind of code dev houses in the world. Um, and a lot of those studios are kind of quietly, secretly helping make some of the games that you love and a lot of them are being impacted when things like this happen. So, have a little bit of empathy even if you agree with the business decisions behind it all, even if maybe it leads to a better Xbox in the long run. We don't know. We don't know what's going to happen there. Um, it is going to leave a lot of carnage in

its wake and not just the number that we saw. All right, I'll see you guys on Friday for um, a fun story about Steam Machines. So, look forward to that. I spoke to some Valve engineers and I'll be doing a story on Bloomberg, my column on Bloomberg on Friday alongside a video. So, I'll see you guys then.