Gaming's grim year continues with the Xbox reset, and it might not get better quick
Could things eventually settle down?
2026 is turning into a fairly terrible year for the gaming industry, with the last few weeks in particular feeling like a parade of one depressing announcement after another. Hot on the heels of Sony declaring that it's binning off all physical disc publishing from early 2028, Xbox has now swung the axe that we all knew was hanging over its gaming portfolio.
Alongside some other layoffs around Microsoft's large empire, Xbox is being hit extremely hard, with a total of 3,200 people set to lose their jobs as part of what it's calling its most significant restructuring ever. 1,600 of those professionals will be laid off today, making for an absolutely brutal day.
There's no real way to sweeten that pill, and to its faint credit, the announcement that Xbox has published is frank and self-critical. It also confirms much of the reporting and rumours that have circulated around the gaming giant for years now, including the theory that its Game Pass bet isn't all that close to paying off, and that its acquisitions look extremely suspect in terms of a return on the investment.
In fact, the acquisitive phase that Xbox went through now seems to be definitively over, and the fact that four (or potentially five) of the development studios it bought are now trying to transition back to independence is quite the indictment of both its strategy and its management.
If the likes of Double Fine and Ninja Theory manage to survive, finish their current projects, and go on to greener pastures, then it'll almost be the perfect confirmation that the problem was Xbox and its approach from the beginning.
In theory, those studios will be taking their IP with them, so franchises like Psychonauts and Hellblade needn't loiter in limbo for the rest of time, but it's still far too early to be feeling particularly optimistic about any of this.
That Xbox is now admitting it has too many layers of management, and that those layers are often too disconnected from the projects over which they have power, is more surprising than the facts themselves. It also means that the next generation of Xbox hardware is even more important than it already looked.
With the Xbox One and Xbox Series X/S generations having seen Sony establish a crushing lead in hardware sales, if Xbox is to have any hope of remaining a genuine competitor, it surely needs Project Helix to be a big hit. How might that happen, given the rumours about lofty prices and no disc drive mean it's unlikely to be obviously differentiated from the PlayStation 6?
Well, raw power has some appeal, obviously, but I honestly couldn't plot a way out of this mire from Xbox's point of view, although cost reduction does have a certain depressing logic to it. Microsoft runs a brutal business, and these decisions are often made by spreadsheet, so it's no surprise that a terrible downturn in Xbox's fortunes has brought these layoffs about, whether it's self-inflicted or not.
The question is whether this makes for the leaner and more efficient Xbox that this press release is trying to sketch out, or whether it just makes an ailing division look more anaemic and therefore easier to cut further when things don't turn around. That's the fallacy behind all layoffs, of course, and I'm not in a pay grade that gets to solve such issues.
With the memory crisis showing signs that it'll get worse before it gets better, and Xbox now shrinking its roster of franchises, though, it's hard to avoid the sense that we're going through some sort of end of days in gaming. What the landscape will look like in five years is hard to predict, but it's a little difficult to imagine Xbox having the same presence that it does now.
