Asha Sharma’s leadership at Xbox has officially begun with a major shakeup. As part of a wave of layoffs affecting approximately 3,000 employees, the company is effectively shedding a significant portion of its studio portfolio. While no studios were shuttered in this immediate round of cuts, two are currently being "released" by the company without an acquiring owner, leaving their future status in limbo.
The End of the Phil Spencer Era
To understand the scale of these changes, one must look at the acquisitions made under former CEO Phil Spencer. Counting this week's news alongside previous closures and spin-offs, Xbox has now lost roughly a third of the studios it brought into the fold during Spencer's tenure. For the studios that remain under the Microsoft umbrella, the situation is increasingly difficult, as many have been hit by significant, ongoing layoffs.
The list of studios acquired under Spencer that have since departed Xbox is extensive:
- Ninja Theory: Sold to an unknown buyer.
- Compulsion Games: Now independent.
- Undead Labs: Sold to an unknown buyer.
- Double Fine: Now independent.
- Tango Gameworks: Closed in 2024, later acquired by Krafton.
- Alpha Dog Games: Closed in 2024, later reopened as an independent entity.
- Roundhouse Studios: Closed in 2024.
- Toys for Bob: Independent as of 2024.
Additionally, Arkane Austin was shut down in 2024. While the broader Arkane brand remains, the studio is currently entering a “required consultation” period mandated by French labour laws, which often precedes further layoffs or closures.
Impact on Remaining Studios and Game Pass
Even those studios that remain within the Xbox ecosystem are feeling the pressure. Both Obsidian and Bethesda have been impacted by the latest round of cuts. While reports suggest the Bethesda layoffs are intended to help the team focus on future installments of Fallout and The Elder Scrolls, it remains unclear how the studio will manage these massive sequels with a reduced workforce.
The strategy for Xbox Game Pass also faces uncertainty. With fewer studios now under the Xbox banner, there are fewer teams compelled to bring their titles to the subscription service. This shift is already visible; for instance, State of Decay 3 may no longer be headed to Game Pass following the sale of Undead Labs.
As the industry processes these changes, the focus remains on how Asha Sharma will define the future of the brand. With thousands of developers out of work, it is clear that the previous vision for Xbox has been dismantled.