In a global message sent to employees, Xbox leadership has announced the most significant restructure in the brand's history. The plan, which aims to address what management describes as an unhealthy business model, includes the elimination of approximately 3,200 roles throughout fiscal year 2027, starting with 1,600 departures today.
A Reset of the Content Portfolio
The restructuring involves a major shift for the company’s studio portfolio. Four studios will leave Xbox to operate under new management or as independent entities. Compulsion Games and Double Fine Productions are transitioning to independent studios, retaining their own IP and catalogs. Meanwhile, Ninja Theory and Undead Labs have entered terms to join new ownership, with funding secured to complete and grow Senua and State of Decay 3. In France, Arkane’s management is beginning a mandatory consultation with its Works Council to discuss potential strategic options.
Despite these changes, the company confirmed that no publicly announced first-party games or projects are being cancelled. Additionally, Mojang and King will now report directly to the head of Xbox, as these studios have evolved into large-scale platforms for the company.
Platform and Operational Changes
Xbox is also moving to flatten its organizational structure. Currently, some departments operate with up to 14 layers of management; the new mandate aims to reduce this to no more than five layers, and ideally three. The goal is to build a flatter organization focused on individual contributors, player-coaches, and directly responsible individuals (DRIs) who own specific project outcomes.
These efforts are accompanied by a push to reduce vendor spending by 50% and streamline tools across the organization. To consolidate these changes, the company is establishing a new Chief Operating Officer position with end-to-end P&L responsibility. Helen Chiang, formerly of Mojang, has been promoted to this role and will oversee the integration of content, hardware, platform, and services under a single operating model.
The restructure also marks the retirement of Dave McCarthy, who is stepping down after 17 years with the division. Leadership stated that the goal of these measures is to return to growth in 2027, citing that while the business has created value through Game Pass and multi-platform expansion, those initiatives have not grown at the expected pace amid a severe industry-wide hardware crisis.