We were expecting Microsoft layoffs today, but that doesn’t make them any more pleasant or justified, and as you’re about to find out, they very likely impact some of the multiplayer games you play. Previous reporting from Bloomberg suggested “thousands” out of the gaming division’s 20K people would be cut, but that number has hardened to 9000 across Microsoft now.
So far, we know of some specific studios under the Xbox division that have indeed been hit. King, the company that used to make bank for Activision-Blizzard before Microsoft bought the whole lot, is apparently losing a full 200 workers. ZeniMax/Bethsoft is losing its marketing team in London and some staff in Rockville, which is the main hub for Bethsoft. And Rare – that’s the Sea of Thieves studio owned by Microsoft – has reportedly been forced to cancel its upcoming game, Everwild (h/t Fisty). WindowsCentral further reports losses at Activision-Blizzard (QA, marketing, sales), Undead Labs, and The Initiative – the last of which was working on Perfect Dark, also now canceled. We initially thought Blizzard itself had escaped layoffs, but Blizzard admitted that it’s maintenance-moding Warcraft Rumble and laying off off some of its team too.
For MMORPG players, the worst news (so far) is that ZeniMax Online Studios has been forced to cancel the unannounced new MMORPG it’s been working on for the last seven years, aka Blackbird. Apparently, everyone working on the project has been laid off – hundreds of people. Relatedly, ZOS president Matt Firor announced he’s leaving as well, with a new studio head now taking over the Elder Scrolls Online studio.
BREAKING: The new MMORPG project from Zenimax Online Studios, maker of Elder Scrolls Online, has been canceled as part of the Xbox layoffs, sources tell Bloomberg News. The project, code-named Blackbird, had been in development since 2018. Still more news to come this morning.
— Jason Schreier (@jasonschreier.bsky.social) 2025-07-02T15:05:30.540Z
IGN published the full staff memo from Phil Spencer, but it doesn’t really say anything you’re not expecting; Spencer basically repeats his past comments that suggest the best way to position the company for future success is to eliminate many of the workers who produce the things that create the future success, but this time instead of pretending gaming is dying (since that went over like a sack of bricks last year), he acknowledges that Microsoft gaming is actually booming and suggests that’s the case because of past layoffs, somehow.
“To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness,” he says. “I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before. Our platform, hardware, and game roadmap have never looked stronger. The success we’re seeing currently is based on tough decisions we’ve made previously. We must make choices now for continued success in future years and a key part of that strategy is the discipline to prioritize the strongest opportunities. We will protect what is thriving and concentrate effort on areas with the greatest potential, while delivering on the expectations the company has for our business. This focused approach means we can deliver exceptional games and experiences for players for generations to come.”
In spite of Spencer’s assurances that the layoffs are being handled with care, sources inside ZOS say that’s absolutely not the case.
As one illustration of just how sloppy and chaotic today’s mass Xbox layoff has been, some employees at Zenimax Online Studios are now watching their Slack accounts abruptly get locked out. No message from HR, no word on whether they still have a job, just an ominous Slack deactivation
— Jason Schreier (@jasonschreier.bsky.social) 2025-07-02T15:43:07.028Z
As we’ve been reporting, Microsoft has been purging thousands of workers over the last two years, including 6000 just a few months ago that according to Bloomberg hit “product and engineering positions” particularly hard.
Source: Bloomberg, Eurogamer, IGN. This post has been updated like eighty times now with all the new information flooding in over the course of the day. Thank you to everyone who’s been kicking us tips – GD, Alessio, Fisty, Tom, Crimson!