Experts Explain Xbox’s Future: Studio Closures and Blockbusters

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Key Takeaways

  • Microsoft announces further cost reductions following the closure of key Xbox studios due to broader industry downturn, as reported by Bloomberg.
  • Xbox president Matt Booty explains the closures aim to streamline resources amid over 9,500 job losses in the gaming sector since early 2024.
  • Despite challenges, including a sluggish Xbox Game Pass, Microsoft remains committed to gaming, continuing with major acquisitions and exploring new revenue avenues.

Following the recent closures of several video game studios within Microsoft’s Xbox division, the company has revealed plans for further cost-cutting measures. 

The announcement, initially reported by Bloomberg, comes amidst a broader contraction in the gaming industry, with economic shifts prompting a reassessment of strategies.

The sudden shuttering of studios, including Tokyo-based Tango Gameworks and Arkane Austin, sent shockwaves through the gaming community. 

At a town hall with ZeniMax staff on May 8, Xbox president Matt Booty reportedly attributed the closures to the need for streamlining resources and alleviating the strain on the company’s development teams, which had been stretched thin across multiple projects.

The Xbox cuts coincide with a broader downturn in the video game sector, prompted by economic adjustments after a pandemic-driven growth. 

Over 9,500 positions have been lost since the start of 2024, including layoffs at Unity Technologies, Twitch, Playtika, Discord, and Riot Games.

Despite the closures, Xbox allegedly said it remains committed to its gaming ambitions, having recently completed high-profile acquisitions of ZeniMax and Activision Blizzard, totaling over $76 billion.

“Now that Microsoft has completed the acquisition of Activision Blizzard King, it has control over mobile properties such as Candy Crush Saga and Diablo Immortal,” James McWhirter, Senior Analyst, Games at Omdia tells Techopedia.

“It could roll in content benefits from these titles into its Game Pass Core tier, giving the subscription service reach over an audience that may not typically be interested in access to a library of console and PC games.”

However, the performance of its flagship subscription service, Xbox Game Pass, has reportedly not met expectations. 

“Microsoft’s recently announced studio closures have been focused on internal developers who aren’t closely associated with established blockbuster properties such as Elder Scrolls, DOOM, and Fallout,” McWhirter added.

“It may have originally anticipated that titles such as Hi-Fi Rush would not only grow Game Pass subscribers, but Game Pass subscribers would have reached a point to enable the sustainable development of future titles.”

Omdia estimates Xbox Game Pass (excluding Core) subscribers at slightly over 28 million by the end of 2023, but this projection is unlikely to come to fruition. This suggests that Microsoft will prioritize the continued development of blockbuster titles instead.

With console revenue declining, Microsoft has also begun exploring alternative avenues for revenue generation, including releasing games on competing platforms.

Despite Techopedia‘s attempts to contact Xbox for further comment on the matter, the company has not responded as of this writing.