Sources told various news outlets today that Microsoft will cut 1,900 positions from its video game workforce, as the tech sector layoffs pile up mere weeks into 2024.
Three months after the acquisition of Activision Blizzard and King, Microsoft Gaming is facing its first major post-merger hurdle: a workforce reduction of 1,900 employees, roughly 10% of its combined 22,000-strong team.
According to reports from The Verge, Microsoft will primarily be laying off Activision Blizzard employees, but some Xbox and ZeniMax employees will be affected too.
A “Painful” Decision for Gaming CEO
Microsoft is the most valuable company in the world, recently surpassing Apple with a valuation over $3 trillion – the only two companies to have currently ever surpassed that figure. In spite of this positive economic outlook for the Redmond-based company, it hasn’t managed to avoid the tech sector job cuts which have affected so many companies over the last 12 months. In fact, its last major round of layoffs was almost exactly a year ago when it let go of 10,000 employees.
In the internal memo viewed by IGN and the Verge, Microsoft Gaming CEO, Phil Spencer cited the recent acquisition of Activision Blizzard (owner of Call of Duty, Diablo, Overwatch, World of Warcraft and Starcraft) not to mention King, who operates Candy Crush, as what spurred the restructuring of staff.
Spencer said there will be “full support to those who are impacted during the transition, including severance benefits informed by local employment laws.”
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Blizzard’s President Steps Down
In a separate internal memo, in addition to the layoffs, Blizzard president Mike Ybarra has decided to leave his post. He was a long time Microsoft employee himself, before moving to Activision Blizzard where he guided the company through the long acquisition.
Ybarra took to X to thank everyone in a heartfelt post, “to the Blizzard community: I also want to let you all know today is my last day at Blizzard. Leading Blizzard through an incredible time and being part of the team, shaping it for the future ahead, was an absolute honor. Having already spent 20+ years at Microsoft and with the acquisition of Activision Blizzard behind us, it’s time for me to (once again) become Blizzard’s biggest fan from the outside.”
Investing in the Future
Despite the layoffs, Microsoft remains focused on the future of its gaming division. Spencer reiterated the company’s plans to expand access to games for players worldwide, stating, “looking ahead, we’ll continue to invest in areas that will grow our business and support our strategy of bringing more games to more players around the world. Although this is a difficult moment for our team, I’m as confident as ever in your ability to create and nurture the games, stories and worlds that bring players together.”
This statement suggests that the cost-cutting measures are intended to fuel investments in key areas. The layoffs at Microsoft Gaming follow a year of upheaval for the gaming industry marred by layoffs, consolidations and unionisation.
The successful acquisition of Activision Blizzard made Microsoft Gaming the world’s third-largest video game studio by revenue, and marked a significant moment in the ongoing consolidation within the video game industry.
With much work ahead of the Microsoft Gaming division to restructure and streamline the newly merged teams, and old colleagues departing, it’s unclear yet whether the pain will be worth it. As the dust begins to settle, we may get some preliminary answers with Microsoft’s Q2 2024 earnings reports due next week, which will include information on the impact of the merger.
