Xbox is cutting thousands of jobs. To understand why, we have to go back to the dysfunctional team that created a console with “chewing gum and tape.”
Microsoft’s gaming division is undergoing the biggest restructuring in Xbox history. nearby Xbox is set to lose 3,200 jobs in the next fiscal year. Around 1,600 posts are being cut immediately. Four studios are also leaving Xbox, either becoming independent again or moving under new ownership.
According to Xbox CEO Asha Sharma, the company believes it has no choice. Ironically, Xbox was born out of another high-risk gamble nearly three decades earlier.
Xbox shouldn’t have existed
In the late 1990s, Microsoft ruled the personal computer. Windows was everywhere, Office dominated workplaces, and the company had no reason to jump into gaming consoles. Except one.
Inside Microsoft, there was growing concern that living-room consoles like Sony’s PlayStation might eventually become the primary way people consume games, which could then diminish the importance of Windows PCs.
Also read: ‘The world is changing’: Why Microsoft is laying off 4,800 people as it makes changes to Xbox
A small group of Microsoft’s DirectX team, Seamus Blakely, Kevin Bachus, Otto Berkes, and Ted Hase, thought that Microsoft needed to fight back.
The problem, however, was that almost no one inside Microsoft agreed with it.
In the official documentary Power On: The Story of Xbox, members of the original team describe themselves as rebels trying to convince one of the world’s largest software companies to make a gaming console.
“We thought of ourselves as rebels. A strange combination of madness and genius,” he said in the documentary. He canceled meetings, repeatedly rebuked officials, and kept refining the prototype. “We were trying to cancel meetings and draw attention to this thing.”
Steve Ballmer, then president of Microsoft, was reportedly not impressed. “Steve looked at the Xbox idea and saw madness.”
Officials are concerned about the cost of each component. “What will a hard drive cost? What will an Ethernet port cost?”
The team still moved forward. They admit that an early prototype barely worked.
“We made this little device. And it was held together out of chewing gum and tape.” At one point, he said, “It doesn’t turn on.”
Why was the original Xbox different?
When the Xbox launched in North America on November 15, 2001, it seemed huge compared to its rivals. According to the documentary its launch controller, later named ‘The Duke’, was so large that gamers joked that it required giant “gorilla hands”.
However, beneath the bulky design were several features that later became industry standards. Unlike Sony’s PlayStation 2 or Nintendo’s GameCube, the original Xbox included –
-A built-in hard drive instead of a separate memory card.
– An Ethernet port for broadband Internet, years before online console gaming became mainstream.
-PC-style hardware powered by Intel and Nvidia.
-Microsoft’s DirectX technology, which made it easier for developers to create games. Those decisions laid the foundation for services like Xbox Live.
Halo may have saved Xbox
One member recalled in the documentary, “It doesn’t matter what your technology is, if you don’t have the games…”
Then came the game Halo: Combat Evolved. Originally being developed by Bungie, Halo became Xbox’s defining launch title and is widely credited with turning Microsoft’s risky experiment into a legitimate competitor against Sony.
Over the years, franchises like Halo, Forza, and Gears of War became Xbox’s biggest identities.
xbox disasters
In 2005, Microsoft launched the Xbox 360, which soon became extremely popular. Then thousands of consoles began failing.
Owners were greeted by three flashing red lights, later known throughout the world as the Red Ring of Death. According to a 2007 Guardian report, the hardware problem ultimately cost Microsoft more than $1 billion in warranty repairs, as the company extended repairs free of charge.
Former Xbox executive Shannon Loftis later spoke about it. “It was absolutely a make-or-break moment. It was the right thing to do for the customer and at a great cost to the company,” he said in the documentary series. “And I think if we hadn’t reacted that way, we wouldn’t be in this business now.”
Xbox faltered again in 2013 with the Xbox One. Microsoft launched the Xbox One with controversial plans around digital ownership, always-online connectivity, and used games.
Gamers reacted negatively and Sony took advantage of the reaction. The PlayStation 4 dominated that console generation.
Those lessons ultimately shaped the development of the Xbox Series X and Series S.
Also read: Fired Xbox engineer says he put ‘heart and soul’ into company for more than 20 years
xbox included today
-Game Pass subscription service.
-PC gaming.
-Cloud gaming.
-Xbox Live Services.
-Large-scale acquisitions including Bethesda and Activision Blizzard.
-Minecraft developer Mojang.
-Mobile gaming through King.
Why is Xbox cutting jobs now?
Growth has not kept pace with spending, According to Asha Sharma, the new CEO of Xbox. At X, he said that the restructuring was “the most significant restructuring in XBOX history.”
He said the business expanded aggressively over several years, but never achieved the returns Microsoft expected. The main reasons listed by him were –
-Xbox “operates at 3-10 times lower margins than comparable platform and publishing businesses.”
-The company entered the current console generation with fewer console users than competitors.
-Microsoft invested heavily in Game Pass, acquisitions, and expansion of the studio.
The gaming industry is now facing what Sharma called “the most serious hardware crisis in its history.” “We have to reset the XBOX,” she said. Sharma, also the executive vice president of Xbox, took over as CEO from predecessor Phil Spencer in February.
Criticism
US senator Bernie Sanders Criticized the latest layoffs and said big companies continue to reward shareholders and executives while cutting jobs.
“Last year, Microsoft made $101 billion in profits, took $12.5 billion in tax breaks from Trump, and paid its CEO $96 million. This year, it’s raising the price of Xbox by $150 and eliminating 3,200 jobs. Please don’t tell me corporate tax breaks create jobs. That never happens,” he wrote on X.
An employee revealed that he was one of those affected. On
What’s actually changing on Xbox?
According to Sharma, Xbox is downsizing its studio empire. Microsoft Says he no longer wants to own so many development studios.
Compulsion Games will return to independent ownership. Double Fine will be free again. Ninja Theory is headed to new ownership. Undead Labs are also being relocated. Arcane’s future is under review in France.
Sharma said that Microsoft realized that “we are not the best home for every type of studio.”
The second major goal is management. According to Sharma, some decisions currently pass through 14 management layers.
Xbox is planning to reduce this. The company wants fewer management levels, more engineers and manufacturers making decisions directlyLess spend on vendors, simpler internal technology.
One change is that Minecraft studio Mojang and mobile giant King will now report directly to Sharma. Unlike traditional console businesses, both attract huge global audiences each month and represent areas where Microsoft is still seeing growth.
She says Microsoft still plans to invest heavily in gaming but with strict financial discipline. “I want Xbox to be one of the few companies that entertains more than a billion people every day and gives everyone the opportunity to create and connect. I know we can achieve this goal,” she wrote on
He believes Xbox could return to growth in 2027.
