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The closure of four studios casts a shadow on Microsoft’s commitment to innovative content

Layoffs and studio shutdowns are barely newsworthy anymore, considering their frequency. It nevertheless came as a surprise when Microsoft emailed everyone about the planned shutdown of four Bethesda Studios last week: Arkane Austin (maker of Redfall), Tango Gameworks (Hi-Fi Rush, The Evil Within), Alpha Dog Games (Mighty Doom), and Roundhouse Studios.

On a mission to reduce its overall headcount in pursuit of profitability, team Xbox had previously laid off 1,900 employees. Following the acquisition of Activision Blizzard, Microsoft’s gaming division had swelled to around 23,000 employees globally. It is now the third-largest game company in the world and generated $23 billion in revenues across console hardware, and first- and third-party software sales last year. Pushed to provide evidence that its $69 billion purchase had been a good idea, Xbox is clearly looking to improve its margins.

Redfall wasn’t received that well, but that doesn’t mean the developers deserve a stake through the heart, surely.

Sure enough, Redfall wasn’t all that well received. That’s not to say everyone deserves to lose their job. Commercial success isn’t the only measuring stick in a culture industry like gaming. Obviously. And yet, it does kind of put a target on your back when it’s time to decide on who has to go.

Awkward exchange

But it seems rather counter-intuitive to let go off a studio like Tango Gameworks which delivered a standout success, Hi-Fi Rush. According to one exec, the game was “a break out hit for us and our players in all key measurements and expectations.” It creates an awkward exchange when your employer says you’ve done a good job and promptly un-employs you.

The news casts a shadow on Microsoft’s willingness to develop innovative content. Typical of large acquisitions, management will focus on the most valuable franchises, freeze the smaller successes, and indefinitely delay anything unpublished no matter how promising. So, too, it seems, is the case with the quadruple shutdown. And now that 2024 is shaping up to be a modest year at best in terms of consumer spending, a clear retrenchment has emerged across the industry as the dominant strategy.

Stick with the winners while it’s still winter.

Joost van Dreunen
Joost van Dreunenhttps://superjoost.substack.com/
Joost van Dreunen is an academic and entrepreneur with an expertise in video games. He teaches at the NYU Stern School of Business and is author of One Up: Creativity, Competition, and the Global Business of Video Games. Previously Joost was co-founder and CEO of SuperData Research, a games market research firm, which Nielsen (NYSE: NLSN) acquired in 2018. He is an investor and advises funds and firms active in interactive entertainment.

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