The future of gaming after XBOX cuts

**Andrew Peach** (0:00)
Job losses in gaming.

**Peter Moore** (0:02)
If Microsoft could get out of the hardware business, they absolutely would.

**Andrew Peach** (0:06)
It's not safe out there, Hazel. It's World Business Report from the BBC World Service. This is Andrew Peach. On the way, we'll hear why Microsoft is making cuts to Xbox. Also today, as NATO leaders head for Turkey to haggle over defence spending, we'll get advice from a former Prime Minister of Sweden. And at the World Cup, the benefits of hosting and the cost of an early exit. We'll hear from Mexico City's Minister of Tourism.
But let's start World Business Report with this.
The Xbox. Today, Microsoft announced it's cutting nearly 5000 jobs, about 2% of its workforce, and most of those cuts will hit the Xbox team. As part of the shake up, it's selling four game development studios responsible for hugely popular games like these.

**Peter Jankowski** (1:10)
I got to find mom.

**Andrew Peach** (1:12)
It's not safe out there, Hazel.

**Peter Jankowski** (1:17)
Night's just getting started.

**Andrew Peach** (1:22)
That's Hellblade, South of Midnight and Blade, all Xbox favourites made by Xbox Studios. To find out more, let's talk to BBC Newsweek's gaming reporter, Tom Richardson. Tom, thanks for being with us. Just tell us a bit more about what Microsoft have announced.

**Tom Richardson** (1:36)
Hi there, yes. Microsoft has announced 3,200 job costs across its Xbox gaming division, 1,600 members of staff have been let go today, and then another 1,600 to be let go over the course of the next fiscal year. That's across the board, that's developers at its studios and also its platform staff, that's people that handle some of the behind-the-scenes stuff, like its hardware business and things like that. Asha Sharma, the new CEO of Xbox, has said that's because it wants to focus on some of its big multi-million selling franchises, so your blockbuster games fall out in Gears of War and get those to play as faster. Asha mentioned at the top there, they're actually dropping five studios, four of those have either found buyers or are going independent again, and there's a fifth studio called Arcane based in France, that's currently working on the Blade game you played out at the top there.
Because of French employment laws, that process will be a bit more drawn out, but they're still waiting to find out what their fate will be.

**Andrew Peach** (2:36)
Pretty big changes then in this division of Microsoft. What will it mean for gamers?

**Tom Richardson** (2:41)
In terms of what it will mean for gamers, it sounds like Microsoft is pivoting away from these studios were brought in to support its Game Pass service, which was described as like a Netflix for games, a subscription pass with a sort of all you can eat model.
These studios, they weren't actually behind massive blockbusters, but they were there to round out the catalog and give people some maybe more cult appeal things. It sounds like the strategy in Xbox is to really focus on its big sort of core franchises, and things like Fallout and Gears of War and your Halos, things like that, brands that really people associate with Xbox.

**Andrew Peach** (3:15)
So the things people care about most will still be there. Okay, Tom, thank you very much indeed for that. Tom Richardson is from BBC Newsbeat. To find out more about why this is happening in gaming, I've been talking to former Xbox executive Peter Moore.

**Peter Moore** (3:29)
Well, I think at a macro level, seeing Microsoft reposition its business in advance of AI.
As you may know, changing leadership with Akshay Sharma coming in, and Satya Nadella, obviously the CEO, has been pretty critical that the investment made in gaming, and in Xbox in particular, at an overall level within Microsoft has not paid off to the level. He would expect its divisions to be doing there. Their margins are thin. They've invested tens of billions of dollars in gaming, and it simply needs what Akshay this morning has called a complete reset. A reset, unfortunately, is involving thousands of job losses, and as well as spinning off studios into independent ownership. I think four or five studios are going as well. So it's a pretty major reshuffling of the deck chairs at Microsoft as regards where they're putting their money. I think that's what's going on, Andrew, right now.

**Andrew Peach** (4:26)
And when Asha Sharma says these changes are all about a bigger future for Xbox, not a smaller one, how does she square that with thousands of people who work in that part of the Microsoft business losing their jobs? Or is it just talk? Is that just gloss?