The Redmond giant officially made a drastic reduction in its workforce focused on video games, resulting in the layoff of 3,200 professionals by the end of the current fiscal calendar. Of this amount, around 1,600 workers were summarily dismissed, generating a profound impact on the brand’s development and administration teams.

The contingency plan also covers a radical change in the control of four developers, which will leave the direct umbrella of the games division to operate under different administrations. This maneuver is part of a larger corporate effort to stem losses and readjust the company’s operational machinery.

A confidential memo sent to employees, leaked and verified by the IGN portal, contains strong statements from the department’s leader, Asha Sharma, classifying the movement as the biggest structural change ever promoted in the division’s trajectory. In the document, the executive was categorical in stating that the corporation’s digital entertainment arm is going through a delicate and unsustainable financial moment.

Within this new arrangement, Compulsion Games, responsible for the upcoming South of Midnight, and the renowned Double Fine Productions, famous for the Psychonauts franchise, will regain their independent status. The two software creators will once again walk on their own two feet, maintaining full control over their trademarks, previously released games and the capital needed to finance new creations, according to Sharma’s guidelines.

In a parallel move, Ninja Theory, which produces the Hellblade series, and Undead Labs, focused on the State of Decay franchise, signed terms to integrate a different corporate conglomerate. These teams will receive exclusive capital injections to complete and scale the Senua and State of Decay 3 projects, signaling that the arrival of these titles to the market will happen under this new business configuration.

On the European continent, more specifically in France, the creators of Marvel’s Blade from the Arkane studio will enter into the negotiation phase with the local labor council. The goal of this round of conversations is to discuss viable alternatives for continuing operations, although the current status of the superhero game remains a mystery.

Downsizing the workforce will not spare other vital arms of the ecosystem. The corporation guaranteed that no interactive work already revealed to the public will be canceled, but confirmed that the cuts will affect professionals allocated to the following divisions:

• Activision and Blizzard;
• Bethesda/ZeniMax;
• King and Mojang;
• Xbox Game Studios.

Through an extensive electronic message sent to the workforce, Asha Sharma unraveled the reasons behind the corporate turnaround. When addressing employees, the director pointed out that the brand has begun the most profound transformation of its existence. The leader confirmed the tough decision to eliminate approximately 3,200 positions by the end of the 2027 fiscal year, confirming the 1,600 immediate departures and the transfer of command of the four producers.

The division commander assumed that the transition process will be long and exhausting, justifying that the magnitude of the changes prevents quick execution, preferring to maintain clarity about the duration of the crisis. Expressing solidarity with the pain of those affected, Sharma highlighted that the layoffs affect people who lent their ingenuity to build the platform’s success. Several of these talents arrived through studio purchases, while others were attracted by their love of the world of electronic games, and the executive made a point of emphasizing that the layoffs do not erase the technical competence of these individuals.

The executive did not mince words when describing the current operation as financially unhealthy, recording profit margins that are up to ten times lower than rivals in the console and distribution sector. The current handset cycle began with a shrinking customer base and inflated operating expenses, compounded by the weight of Activision Blizzard’s recent $69 billion acquisition. Projects such as the subscription service and expansion to other screens did not gain the projected traction. The core of the business lost strength as the number of employees and expenses increased without the expected return. She warned that the global market is experiencing the worst decline in equipment sales ever, justifying the wave of layoffs that also hit giants like Sony, Epic Games and Unity.

Unprecedented strategies for curating games and studios

The first step of the restructuring involves a complete review of the production catalog, as Sharma pointed out. Starting in 2018, the corporation bought developers in a frantic manner, exactly at a time when the monthly volume of titles launched on the market exceeded the sum of the entire previous decade. Today, the fight for player attention involves not only giant conglomerates, but also a multitude of small independent creators.

The director admitted that trying to absorb all the prominent producers in the market is an unsustainable tactic and outside of current plans. She exposed an alarming fact: the corporation realized that it does not offer the ideal structure for any type of team, suffering a loss of 64 cents for every dollar injected in normal periods. With the new route, the focus will be on providing affordable graphics engines and direct bridges with the public so that smaller creators can make their ideas viable without depending on acquisitions.

As a reflection of this policy, Compulsion Games and Double Fine Productions will once again operate autonomously, ensuring ownership of their creations, game libraries and budget for future adventures. Ninja Theory and Undead Labs have entered into partnerships to create a distinct business organization chart, securing the money needed to complete the Senua and State of Decay 3 sagas. Simultaneously, Arkane’s French branch will go through legal procedures with worker representatives to assess what its commercial fate will be.

Sharma’s internal statement also confirmed staff reductions in various departments, in addition to a reallocation of funds to projects of greater strategic importance. The impact of these changes will be felt in different proportions within Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios. Even with the turbulent scenario, the leadership reiterated the promise that no exclusive work already revealed to fans will be shelved.

Producers Mojang and King, which account for the largest share of the company’s active users, will have a direct line of communication with Sharma from now on. These companies have evolved into true ecosystems of their own and add invaluable value in terms of global reach and audience diversity to the brand, justifying the change in the organizational chart.

Technological simplification and cutting internal bureaucracy

The second pillar of the transformation requires a fresh start for the system’s infrastructure, explained the manager. She defended the thesis that superior technologies stand out for their simplicity, not their bloat. Today, the workflow in certain sectors of the corporation needs to go through up to 14 approval instances before being executed.

The groups responsible for maintaining the system grew by 40% compared to the beginning of the current generation of consoles, but this increase occurred precisely while engagement and the number of players decreased. This excess bureaucracy hampered corporate agility, dispersed responsibilities and hindered the delivery of innovations to the end consumer. The solution found to revitalize the brand is to radically streamline the internal gears.

The central objective is to bring down the leadership layers to a limit of five steps, or just three where possible. Efficiency will be pursued through a flatter work format, prioritizing those who get their hands dirty, leaders who work together with the team and professionals with total autonomy to hit the ground running. In addition, daily processes will be refined with more organized programming codes, unified tools and a drastic 50% cut in expenses with outsourced companies.

Changes at the top and unification of departments

The third and final focus of the restructuring changes the way the company operates on a day-to-day basis, said Sharma. The swelling in the number of employees turned the division into an isolated archipelago. Departments, producers and administrative sectors began to work in bubbles, which generated noise in communication, delays in critical decisions and failures in the execution of collective goals.

To correct this fragmentation, the brand will have its first Operations Director in history, who will be fully responsible for the financial balance involving games, consoles, systems and subscriptions. The person chosen for the mission was Helen Chiang, who will now report directly to Asha Sharma. With a CV spanning almost twenty years at the company, Chiang was a key player in consolidating the company’s online network and in the resounding success of Minecraft. Its new role will be to centralize command to ensure precise investments, absorb lessons from past mistakes and demand concrete results.

The internal document also reserved space to pay tribute to Dave McCarthy, who leaves corporate life after 17 years of service. The executive was fundamental in the architecture of the virtual environment accessed by a legion of users every day, being described as an indispensable ally in the brand’s most decisive chapters. The board wished you prosperity for the next steps of your personal journey.

All these drastic measures, in Sharma’s view, pave the road for a new era of growth. The executive predicts that the next ten years of digital entertainment will be marked by a global scale and an unprecedented level of creativity. To follow this evolution, the injection of resources this year will break records, always guided by absolute rigor, with the mission of establishing the platform as the main global hub for players and developers.

The leadership’s ultimate ambition is to transform the division into one of the rare giants capable of entertaining more than a billion individuals daily, delivering tools for everyone to interact and invent. The manager demonstrated unwavering optimism in achieving this milestone, relying on the weight of its established brands and the talent spread across its studios around the world, with the promise that the profit curve will rise again by 2027.

Closing her speech, the director left a blunt message about the corporate market, remembering that many traditional brands failed to believe that the time of existence guaranteed future success. She guaranteed that her division will not make this fatal mistake, demonstrating an aggressive stance and ready to adapt to the industry’s ups and downs.