Microsoft has recently laid off around 9,000 employees, marking a significant 4% reduction in its workforce. This decision is part of the company’s strategy to reallocate funds toward bolstering its artificial intelligence (AI) infrastructure, with a massive $80 billion investment planned in this area-$25 billion more than last year.
Despite concerns raised by some, including a game developer from Halo Studios who hinted that Microsoft might be replacing human workers with AI, the cuts are more about cost optimization to enable future AI investments.
However, the layoffs come at a cost to Microsoft’s reputation, especially in the gaming sector. The company has spent billions on gaming acquisitions, such as Bethesda’s ZeniMax Media and Activision Blizzard, with the goal of expanding its Game Pass subscription service. Yet, the expected growth in the Game Pass user base hasn’t materialized as hoped, leading analysts to question whether the Xbox division’s bet on subscriptions was misguided. Unlike music or TV/film subscriptions, the appeal of a game subscription service isn’t as clear-cut for gamers.
The layoffs have also sparked a backlash within the gaming community. Microsoft’s closure of Tango Gameworks, despite its success with Hi-Fi Rush, and the cancellation of a promising game from ZeniMax Online Studios (the creators of The Elder Scrolls Online) have fueled frustration. Many former developers have criticized the cancellation of Project Blackbird, a project they believed was finally heading in the right direction. There are even rumors that Microsoft Gaming CEO Phil Spencer had enjoyed playing an early version of the game but was likely under pressure from higher-ups to pull the plug. The game’s cancellation makes sense in light of Microsoft’s prioritization of AI infrastructure, but for gamers and developers, it’s a disappointing setback.