Where did the dream of Xbox go?

Wednesday was a difficult day for everyone involved. Microsoft initiated what can only be described as a minor bloodbath with layoffs, with the Xbox division being particularly hit hard. Naturally, it's most challenging for the thousands of individuals who are losing their jobs, but we also regret the closure of developers and cancelled games.

The Santa Monica-based The Initiative seems to have been hit the hardest, with both the developer and their title Perfect Dark being shut down. The studio was long intended to be a prestigious developer and, at its inception, had a long list of heavyweight names, all industry veterans. But after seven years of development, it seemed that their game was still far from finished, and every time we saw it, it was met with rather lukewarm comments - and now rumours are circulating that it wasn't even real gameplay but completely scripted.

It therefore comes as no surprise that the game was shelved, and one can't help but wonder how much the project cost without actually contributing anything. Personally, however, I mourn Rare's Everwild all the more, another game that appears to have been in development for a long time. This is more surprising though, because it actually seemed to be on track, and Microsoft's gaming boss Phil Spencer talked about how he had played it at Rare as recently as last autumn, and Everwild even graced Rare's Christmas card just over six months ago.

I guess the test audience simply didn't think the game was very fun and a lot probably needed to be redone, but with no guarantees that it would turn out well, it was shelved. Very sad for me personally, although I guess it wasn't going to be a big seller given the decision (no one cancels a game that shows promise and is expected to bring in big bucks) - and the fact that the creator of Banjo-Kazooie, Gregg Mayles, is leaving in connection with this also hurts.

Others who have been greatly affected are Turn 10, which seems to have been halved in size, something that will obviously affect Forza Motorsport going forward, and ZeniMax Online, which is said to have cancelled an upcoming project, while Swedish company King has lost 200 people. In addition, there are lots of other reports of people being laid off at developers such as Halo Studios and Raven Software, as well as half of the Xbox user research team (which risks compromising quality work).

According to reports, around 20,000 people work, or rather worked, at Xbox, and roughly 20% appear to have been let go. This will have consequences, significantly more than we have seen so far. Games will potentially take longer to complete, updates to Xbox may be further delayed, fewer games will be released, the size of the games may shrink, and so on. It also does not appear that Microsoft is done with the layoffs, and there is talk that many manual roles will be replaced by AI.

This is certainly possible in some cases, and I can imagine that in some areas it may even be an improvement. However, I can also imagine that in other areas it will be a deterioration. I find it difficult to believe that we are at the point where AI in creative work can surprise us and offer the personal touch that so often distinguishes a masterpiece from something more bland. On the other hand, I can imagine that AI would be a phenomenal beta tester and superb at rendering textures and similar repetitive tasks.

The aforementioned Phil Spencer commented on the decision as follows:

"To position gaming for lasting success and enable us to focus on areas of strategic growth, we will end or reduce work in certain parts of the business and follow Microsoft's example of removing layers of management to increase flexibility and efficiency."

In the same post, he also went on to state that the goal is to "protect what is successful and concentrate efforts on areas with the greatest potential, while living up to the expectations the company has for our business". To me, this sounds like Microsoft is thoroughly rethinking its strategy. Most people have long suspected that they would rather sell games than consoles, and although they will probably continue to have both portable and home devices, these seem to be becoming increasingly PC-related and may well be manufactured by others. It is reasonable to expect that there will be tougher demands for new ideas in the future, requiring a clear plan and strategy before a cheque is written for development.

Something that does not seem to be affected, however, is Game Pass. Although recent developments may sound apocalyptic, Microsoft says it has over 40 projects in development, so there will be no shortage of new games, of varying quality, as great variety is absolutely necessary for a service like Game Pass. Nor are cloud investments likely to decline; on the contrary.

However, I still think developers have reason to be concerned. The days when Spencer bought studios, promised blank cheques, and eternal support for passion projects are definitely over. Ideally, they want to release games and take as little risk as possible. Better then to publish other people's titles. However, a service like Game Pass requires a lot of its own games (just as Netflix would have been useless without its own films and series), so I don't believe they will abandon game development altogether. On the other hand, it will be safer, and development will have to stay within certain limits.

As a result, I believe that third-party projects such as Contraband and Hideo Kojima's OD may be on their way out, while their own IP such as Ara: History Untold and Ninja Theory's Project Mara are also at risk. It's also unclear whether Forza Motorsport will survive in the same way as before. It will need to be completely revamped, and it's entirely possible that Forza Horizon will take over completely. I also believe that established but harder-to-sell brands such as Quake and Wolfenstein may be deprioritised in the future.

It was only a few years ago that Microsoft, led by Spencer, bought Bethesda and declared that the deal was about exclusive games. At the time, he also said that he was not a fan of speculation about Xbox games coming to other formats. This has now been completely re-evaluated, and it's not out of kindness or anything like that, but is strictly a business decision. Xbox sales were not strong enough to justify exclusivity, and after the acquisition of Activision Blizzard, it became illegal to maintain exclusivity.

However, this is only the latest controversy involving Phil Spencer, a person who has long held a prominent position in the gaming world. He took over Xbox One ahead of its release after Don Mattrick's disastrous tenure, and began the journey that has brought us to where we are today. But that journey has been long and arduous. Even though it takes time to turn a ship around, Microsoft, despite its enormous capacity, has struggled to get the games it needed out, and those that have come out have often not been good enough. Furthermore, neither Halo 5: Guardians nor Halo Infinite have made anyone happy and have contributed to deflating the Master Chief's adventures. The feeling is that Xbox Game Studios has lacked good and clear leadership, and there is no shortage of witnesses who say that development has often been a little too chaotic at virtually all major studios.

Over time, this has led to two radically different perspectives on Spencer's performance. One comes from gamers who have become increasingly critical of what they perceive as a person who promises things but too rarely delivers. The other comes from Microsoft, which seems to be very satisfied with his performance. While the former group includes those who think Spencer should step down, Microsoft has instead promoted him several times and renewed its confidence in him. This was also the case recently, when it was confirmed that he would remain in his position.

Gamers naturally dream of a new first-class Halo, more new heavyweight action games, and role-playing games of the kind Xbox became famous for, while Microsoft has a larger overall strategy and a gaming division that is generating more and more money. The former group is naturally dissatisfied, while the latter is reasonably satisfied. Spencer is one of the most powerful people at Microsoft today, but he is not the head of the company (that is Satya Nadella), and his retention is not a sign of kindness.

In short, this week has been a tragedy for everyone who lost their job, and a clear setback in Microsoft's strategy going forward. Hopefully, Xbox will get it right with interesting hardware where positive news can dominate the flow for the brand, which now feels almost torpedoed, but there is also a risk that this is just the beginning of more closures and a significantly more timid Microsoft that prefers to work with only a few strong brands and mixes AI into production to such an extent that the games feel impersonal and sterile. We will have to wait a few years for the answer, but Wednesday, July 2, 2025, is unfortunately a date the gaming world will never forget.