Microsoft Corp’s gaming division laid off hundreds of employees on July 2, part of a broader culling at the software company as it seeks to control costs.

An Xbox spokesperson declined to confirm how many people were impacted, but the cuts were widespread and significant.

Subsidiaries across the gaming organisation were told that they would be affected by the layoffs. Microsoft’s Stockholm-based King division, which makes Candy Crush, is cutting 10% of its staff, or about 200 jobs, according to people familiar with the plans. Other European offices, such as ZeniMax, also began cutting employees early Wednesday, said the people, who asked not to be identified because they were not authorised to speak to the press.

News of further job cuts trickled out slowly as other units of Microsoft Gaming, such as Call Of Duty studios Raven Software and Sledgehammer Games as well as Halo Studios and Forza Motorsport developer Turn 10 Studios, also announced workforce reductions, according to the people familiar. 

The company canceled several projects that had been in development for years, including the fantasy game Everwild, in development at UK-based Rare Studio, and an original new online game from ZeniMax Online Studios, the maker of The Elder Scrolls Online. Both of those studios will cut jobs as a result of the cancellations, according to the people.

Xbox also cancelled the planned reboot Perfect Dark and shuttered The Initiative, one of the studios behind it. In an email to staff, Xbox Game Studios head Matt Booty said that the studio shutdown and project cancellations "reflect a broader effort to adjust priorities and focus resources to set up our teams for greater success within a changing industry landscape.”

Microsoft announced July 2 that it’s eliminating 9,000 workers companywide in its second wave of layoffs this year. The cuts will have an impact across teams, geographies and tenure, and are being made in an effort to streamline processes and reduce layers of management, a company spokesperson said. The terminations follow an earlier round of 6,000 job cuts in May that fell hardest on product and engineering positions. 

The company’s gaming units were expected to be told throughout the day how many jobs would be cut at each office. The division had about 20,000 employees as of January 2024.

"To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness,” Microsoft Gaming chief executive officer Phil Spencer said in an email to staff seen by Bloomberg News.

Spencer didn’t share specific numbers but said that impacted employees will be "given priority review” if they apply to open jobs elsewhere within the company. He wrote that Microsoft’s "platform, hardware, and game roadmap have never looked stronger,” but that "we must make choices now for continued success in future years and a key part of that strategy is the discipline to prioritize the strongest opportunities.”

Employees at Xbox had been bracing for the job cuts since May, when Microsoft began conducting companywide layoffs and speculation mounted that the gaming division might be impacted. This is the fourth mass layoff at Xbox in the last 18 months. The gaming division has been under pressure to boost profit margins since Microsoft purchased Activision Blizzard for US$69bil (RM291.11bil) in a deal that closed in October 2023. – Bloomberg