March 27, Microsoft’s head of the gaming division, Phil Spencer, said the company’s decision to lay off 1,900 people was due to the lack of growth in the entire gaming industry.
In January this year, Microsoft announced layoffs of about 8%, involving three departments including Xbox, Bethesda, and Activision Blizzard, affecting a total of 22,000 employees. Microsoft completed the acquisition of Activision Blizzard in October 2023, giving it well-known games such as “Call of Duty”, “World of Warcraft”, “Diablo”, and “Overwatch”.
Wokoa.com noted that in the email sent to employees when the layoff news was announced, Spencer said that this decision was made after the leadership teams of Microsoft and Activision Blizzard “identified priorities, identified overlapping areas, and ensured that all teams were committed to the best growth opportunities.”
Recently, in an interview with Polygon, Spencer said that the lack of growth in the industry is forcing publicly traded game companies to cut costs. Game developer Farhan Noor has been tracking the layoffs in the gaming industry for a long time. Based on the data from the website videogameslayoffs.com, he estimated that about 10,500 gaming industry employees were laid off in 2023 alone. In less than four months into 2024, the number of expected layoffs has reached about 8,000.
“My biggest concern is the lack of growth in this industry,” Spencer said. “When an industry expects a decline in the number of players and revenue next year, publicly traded game companies need to show growth to investors, because if there is no growth, who will hold the stocks of these companies? Therefore, cost is often the first area to be reviewed. Because if revenue does not increase, costs will become a challenge.”
“We are a business,” he continued. “I have said this repeatedly. Within Microsoft, I have no choice but to run a profitable and growing business, and we have achieved this. But looking at the entire industry, as you mentioned earlier, when I attended the Game Developers Conference (GDC), I thought of some friends who were laid off in the industry, which made me very sad. I don’t want the gaming industry to become a place where people can’t build their careers with confidence. So, I keep thinking about how the gaming industry can regain growth. But for Xbox or any other team, layoffs really stem from the lack of growth in the industry. The gaming industry can grow again and surely will grow again. But we are in such a period where its impact is real and will affect people’s lives. We all should reflect on this.”
According to data from research firm Newzoo, the global gaming market generated approximately $184 billion in revenue in 2023, growing by 0.6% compared to 2022, while revenue in 2022 declined by 5% compared to 2021. Newzoo expects the gaming market to generate $189.3 billion in revenue in 2024 and reach $205.7 billion in 2026.
In the interview, Spencer also mentioned the constantly rising cost of game development and the behavior of Generation Z consumers as one of the important factors that prompted the company to bring more Xbox games to PlayStation and Nintendo consoles.
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