Report: Xbox is Considering More Layoffs and Game Pass Price Increase

This week, Microsoft should be celebrating the upcoming release of Hellblade 2: Senua’s Saga, which is the game the company chose to officially announce its next-gen Xbox console nearly five years ago. Unfortunately, that’s not what’s happening, as Xbox fans are instead wondering if Hellblade 2 developer Ninja Theory could be the next Microsoft studio to be closed down if the game fails to meet expectations.

That’s indeed what happened this week to Tango Gameworks, the Japan-based developer of the critically-acclaimed Xbox exclusive Hi-Fi Rush. At the BAFTAs last month, the studio’s creative director John Johanas told Eurogamer “We have a good situation in our studio, where we were granted a lot of creative freedom and were able to take risks.” Now that the studio has been closed alongside Arkane Austin and two other Bethesda/Zenimax studios, it looks like this sense of freedom and security was just an illusion.

Yesterday, two separate reports from Bloomberg and The Verge provided more details about what’s happening at the Xbox division right now. Bloomberg’s Jason Schreier reported that Tango Gameworks was actually in the process of pitching a sequel to Hi-Fi Rush to Microsoft. According to The Verge, Head of Xbox Game Studios Matt Booty told Microsoft employees during a town hall meeting yesterday that “we need smaller games that give us prestige and awards.”

This is pretty much what Tango Gameworks did with Hi-Fi Rush, an AA game that received numerous awards. Back in March 2023, Xbox marketing chief Aaron Greenberg posted on X that “Hi-Fi RUSH was a break out hit for us and our players in all key measurements and expectations. We couldn’t be happier with what the team at Tango Gameworks delivered with this surprise release,” the exec said. That enthusiastic statement makes the closure of the studio really hard to understand.

Hi-Fi RUSH was a break out hit for us and our players in all key measurements and expectations. We couldn’t be happier with what the team at Tango Gameworks delivered with this surprise release.

— Aaron Greenberg 🙅🏼‍♂️💚U (@aarongreenberg) April 21, 2023

Anyway, according to Schreier, Booty justified the studio closures during the town hall meeting yesterday by the fact that some of them were understaffed, like “peanut butter on bread.” During the same meeting, Jill Braff, head of ZeniMax studios reportedly said that “it’s hard to support nine studios all across the world with a lean central team with an ever-growing plate of things to do.”

Microsoft may not be done reorganizing its internal studios. Schreier also reported that Microsoft has started offering Zenimax staff including producers and quality assurance testers to voluntarily quit and take a severance package. “Others across the Xbox organization have been told that more cuts are on the way,” Schreier wrote.

While some consolidation had to be expected after Microsoft spent close to $80 billion to acquire Bethesda/Zenimax and Activision Blizzard, Microsoft had already laid off 1,900 employees across its gaming division in January. However, it certainly doesn’t help that the growth of Game Pass subscriptions has slowed down in recent years, and Xbox console sales are also down and will continue to decrease in the upcoming quarter according to Microsoft. In the past quarter, the company’s gaming revenue was also down year-over-year if you don’t take into account revenue from Activision Blizzard.

Overall, Microsoft is now under pressure to find new growth opportunities for its Xbox business. That’s why we’ve seen the company recently release four of its games on rival consoles. And according to The Verge’s Tom Warren, the upcoming Hellblade II is “another game that Microsoft has been considering for the PS5.” The original game was a cross-platform title, so it probably wouldn’t be surprising to see the sequel make its way to the PS5 at some point.

Microsoft CEO Satya Nadella previously said that he would “love” to see console exclusives games go away. While Microsoft is now a massive cross-platform publisher following the acquisition of Activision Blizzard, the company has been trying for many years to make the Xbox ecosystem more attractive by adding all of its new games on day one on Game Pass. However, following the addition of Diablo IV on the service in March, we have yet to see any Call of Duty game come to the Game Pass library.

According to Warren, that’s because there are still internal debates about the positive and negative consequences of putting new Call of Duty games on Game Pass on day one. “I understand this is a debate that has been ongoing internally for quite some time, with concerns from some that the revenue that Call of Duty typically generates for Activision Blizzard will be undermined by Game Pass,” the reporter said.

Last but not least,  Warren also reported that “Microsoft has also considered increasing the price of Game Pass Ultimate again,” adding that “these are only considerations, so a final decision could mean we still see a future Call of Duty release appear in most versions of Game Pass.” Microsoft announced the first Game Pass Price increase in July 2023, six years after the service launched on Xbox consoles.