"The business logic is understandable. The human cost is devastating": The Mobile Mavens on Xbox's restructuring

• “It should be the rudest of awakenings, but based on the reactions I'm seeing, I'm not confident the right lessons are being learned yet.” - Chris Heatherly.
• “To me, the main signal is King and Mojang now reporting directly to Xbox leadership. Fewer management layers, and mobile studios move to the centre.” - Tanja Loktionova.
• “I think Xbox's problems run deeper and centre on the consequences of the Game Pass strategy.” - Oscar Clark.

Microsoft's latest overhaul of Xbox marks one of the biggest strategic resets in the company's history. The company is cutting 3,200 roles through FY27, divesting four studios and is reorganising its leadership.

Alongside the restructuring, Xbox CEO Asha Sharma has outlined an ambitious vision to reach more than one billion daily active users, while King and Mojang are set to report directly to Sharma.

The changes have sparked debate about Xbox's long-term strategy and the role mobile will play in its future. 

We asked our Mobile Mavens for their thoughts on the reset and whether Xbox's new direction can deliver.

Chris Heatherly

Game/entertainment leader

That there are layoffs and a major course correction at Xbox was not a surprise to anyone. 

What absolutely stunned me was this stat that Xbox "lost 64 cents for every dollar we invested", studios that hadn't shipped games in half a decade or more, and 14 layers of management. These just paint a picture that Xbox leadership at all levels - not just the top - was either MIA or clueless (or both).

What it also means is that all the economics around Xbox, and by extension, triple-A, are fake. They inflated the cost of making games while subsidising them heavily via Game Pass, killing standalone game sales on the platform in the process (and via non-exclusive exclusives). The ramifications of the price/value disconnect will be felt in core gaming for years.

Beyond management, the entitlement and mismanagement from some of these studios is unbelievable. These are allegedly the cream of the crop of triple-A gaming studios and yet the way they work is absolutely Byzantine. 

This level of bloat and slowness would never fly in Silicon Valley, but not even Hollywood could justify this! It's impossible to keep up with gamers and the culture which are moving at ever-increasing speed when you are still stuck in the 2000s like this.

It should be the rudest of awakenings, but based on the reactions I'm seeing, I'm not confident the right lessons are being learned yet.

Tanja Loktionova

Founder at Values Value

This could have happened a year ago. I heard Microsoft and Xbox-related executives discuss strategic challenges at Gamescom 2025, in private conversations. Overspending. Too many layers of decision-making. 

Decisions stuck in internal politics. This reset confirms what was already visible behind closed doors.

The business logic is understandable. The human cost is devastating. People have lost their jobs, and I deeply sympathise with them. This industry is now at its lowest point, even having crowdfunding initiatives for laid-off workers struggling to find new roles.

To me, the main signal is King and Mojang now reporting directly to Xbox leadership. Fewer management layers, and mobile studios move to the center. King brings strong IP and deep expertise in user acquisition and creative production, expertise that reduces the risk that comes with double-A and triple-A development. Moving these studios closer to leadership is Xbox betting on that expertise to carry the business forward.

The billion daily users goal only makes sense through this lens. You do not reach that scale through console studios, but through King's live ops and UA muscle, and through Minecraft's platform potential. Who Xbox and its studios hire or transfer next will show if this ambition is a real strategy.

This reset will influence the industry landscape: co-production studios, outsourcers, service providers. Less money to spend, more talent density in-house. This is a representation of what Western gamedev looks like right now.

Oscar Clark

Director at Arcanix

We all know that post-Covid the games industry has faced turbulent times, but it's easy to think of this as one cause... in reality, it's complicated.

Rising User Acquisition costs and regulatory changes have had a significant chilling effect, and console platforms are not immune from those pressures. 

At the same time, the market's shift toward longer-term retention games and live ops (now 80% of revenue) has fundamentally changed the model.  But I think for Xbox, that has been compounded by them suffering from the subscription model dilemma.

Xbox Game Pass fundamentally changed the way players expect to engage with content on console, but it comes at a price. The impetus to buy new games or to access games outside of the pass is greatly diminished. That was managed somewhat when they cycled games out of the pass, but increasingly, most games that we are likely to keep playing don't actually get removed.

But they were also significantly behind in terms of base users. Phil Spencer's Xbox team took the strategy of buying some of the biggest teams, especially acquiring Activision Blizzard. But instead of using that to consolidate players, they choose to make their 1st-party games available on other platforms, but this apparently hasn't delivered the numbers Microsoft needed to see.

His replacement, Asha Sharma, who doesn't come from games, announced a significant restructuring of the Xbox group, culling 20% of the staff and divesting at least 4 studios.  But this is a continuation of an existing pattern.

The team had already had repeated rounds of layoffs since 2023 and had already closed multiple studios! I am an Xbox user - I use my Xbox more than I use my PlayStation (despite having worked for Sony). The reason is Game Pass. And for me, publishing on Xbox was painful because we weren't on Game Pass.

I come back to my mantra... 'Subscription without upsell equals death' and on Xbox I very rarely feel the need to spend more than my subscription.

Unless the team builds a more socially connected experience, and I think leveraging cross-platform capabilities, I don't see this changing.  

In summary, the games market has been consolidating at the same time as the marketing and regulatory environment is making things more complicates/expensive. That can't be ignored, but I think Xbox's problems run deeper and centre on the consequences of the Game Pass strategy.

Rebecca Liao

CEO and co-founder at Saga

It may sound overly simplistic, but to succeed in the gaming industry, you must either have the games or a strong user acquisition strategy (the lucky ones have both). 

What went wrong at Microsoft is that they had neither. Their obsession with Game Pass led to greenlighting unprofitable games and keeping them alive for far too long to expand the ecosystem. 

That led to less discipline and more experimentation with games from their acquired studios, which ultimately did not translate into better game quality. At the same time, user acquisition is completely broken within the gaming industry; this problem doesn't just affect Xbox. 

The studios that have survived this gaming bear market are those that keep an eye on top-line revenue and can run effective UA without overrelying on expensive ad networks. 

Shortly after the Activision acquisition, their last big one as part of the gaming company buying spree, cracks became unignorable in the Microsoft gaming org, but such a big org is not easy to change, especially on the heels of a blockbuster, industry-defining expansion.

Errors in long-term strategic decisions, inability to adjust to market conditions, and some people would argue, being out of touch with gamer sentiment and demand led to this restructuring.  

Christopher Kassulke

CEO at HandyGames

Thoughts from Christopher Kassulke via LinkedIn.

"I want XBOX to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect. I know we can achieve this goal."

In the past, Phil aimed for 100 million Game Pass users, which was already extremely unrealistic without mobile or PC coming in.

Minecraft should have around 32 million daily active players. King has around 200 million monthly active players. Those are the two companies Asha wants to have report directly to her. So I guess they should drive a lot more into the Xbox Universe.

But how? King did not release a new major title for quite a while and when I see how hard it is to position titles into the top charts, this is a big mission/vision.

The PC market alone will not help, as Steam has around 50 million DAU. I really wish everyone good luck! I have no idea how Xbox can do the reset with those independent creators by offering open development tools only, as their audience is already somewhere else, and I have my doubts that, with all those changes, the market share will get bigger.

An interesting fact in her memo is also:

"Mojang and King will now report directly to me. These two studios have increasingly become platforms and are our largest by monthly active players. They bring critical geographic, demographic, and differentiation to XBOX."

So mobile will finally become a bigger topic after all those years of "silence" in that field.

Eden Chen

CEO at Pragma

The first thing I'd point to is what Microsoft hasn't changed. It's still investing in games, Game Pass remains central to the strategy, and the next Xbox hardware is still on the roadmap. This suggests it's about restructuring the business, not retreating from gaming.

The more surprising part is which teams were affected by the cuts. Everyone expected content to take the biggest hit, but it was the platform side, hardware, services and Game Pass operations that absorbed the largest reductions. When your platform organisation grows by 40% while player numbers and playtime decline, a correction becomes difficult to avoid.

For some studios, returning to independent management may ultimately be the healthier outcome. Large organisations inevitably create more layers of management, and when decisions have to pass through as many as 14 layers, it becomes much harder for studios to move with the speed and autonomy that game development demands.