Phil Spencer, the CEO of Gaming at Microsoft, claimed the company’s mass layoffs are the result of a lack of growth in the industry.
A screenshot from Overwatch 2 x Cowboy Bebop (2024), Blizzard Entertainment
Back in January Microsoft announced it was laying off around 1,900 employees following the company’s acquisition of Activision Blizzard, the owner of Call of Duty and World of Warcraft.
At the time, Spencer explained in a memo to staff that the reason for the layoffs was to align “on a strategy and an execution plan with a sustainable cost structure that will support the whole of our growing business. Together, we’ve set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth.”
He continued, “As part of this process, we have made the painful decision to reduce the size of our gaming workforce by approximately 1,900 roles out of the 22,000 people on our team.”
Screenshot of Black Wing from World of Warcraft Classic (2020), Blizzard Entertainment
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Now, in an interview with Polygon conducted at the Game Developers Conference Spencer shared that the reason for the layoffs was part of what he sees as a larger trend of a stagnant and even shrinking market as well as conditions that were unique to Activision Blizzard, King, and Xbox.
Spencer shared, “It’s a little bit of both. But I’ll say the thing that has me most concerned for the industry is the lack of growth. And when you have an industry that is projected to be smaller next year in terms of players and dollars, and you get a lot of publicly traded companies that are in the industry that have to show their investors growth — because why else does somebody own a share of someone’s stock if it’s not going to grow? — the side of the business that then gets scrutinized is the cost side.”
“Because if you’re not going to grow the revenue side, then the cost side becomes challenged,” he added.
A screenshot from Halo Infinite (2021), 343 Industries
Spencer went on, ““We’re a business. I’ve said over and over. I don’t get any luxury of not having to run a profitable growing business inside of Microsoft. And we are that today. But just across the industry — you mentioned it, and in sitting here at GDC, I reflect on friends of mine in the industry that have been displaced and lost their jobs and how just, I don’t want this industry to be a place where people can’t, with confidence, build a career.”
“So that’s why I keep pivoting back to: How does this industry get back to growth? But to your question, for us as Xbox or any of the teams that are out there, it is really an outcome of an industry that’s not growing. It can grow and it will grow again. But you see this time right now and the implications have human impact. And we should all reflect on that and think about it,” Spencer asserted.
A screenshot from South of Midnight (TBA), Compulsion Games
As for how he plans to solve what he views as a growth problem, he plans to eschew console exclusivity. He said, “I will say, every decision we make today and tomorrow is for the better of Xbox. I know sometimes things get weaponized, that there’s some evil in the background that’s making us do things — ‘Phil hates exclusives and that’s why we’re like PlayStation and Switch now.’ Every decision we make is to make Xbox stronger in the long run. It doesn’t mean everyone’s going to agree with every decision we make. But it is fundamental for how we make decisions.”
“This notion that Xbox can only be this one device that plugs into a television isn’t something we see in the Gen Z research. Because nothing else is like that for them,” he continued. “Some of them will have an iPhone, some will have an Android, but all the games and everything is the same. I can still get to TikTok on both of them, at least for now. All of their stuff is available wherever they want. So for Xbox, our brand pivot — as we attract and maintain relevance with a younger audience — is ‘Xbox is a place where I can find the great games I want to.”
A screenshot from Everwild (TBA), Rare
What do you make of Spencer claiming that the industry and market is not growing is the reason for the layoffs?
