'There has to be a better way than this': Game developers call Microsoft's latest layoffs 'a colossal waste of talent' from a publisher that seems like it's in 'a death spiral'

Yesterday, despite posting $26 billion in profits and outperforming Wall Street forecasts in the last quarter, Microsoft began its latest round of restructuring with a targeted goal of laying off 9,000 employees. Many of those cuts have affected the Xbox gaming division, leading to cancellations of projects like Rare's Everwild and an unannounced Zenimax MMO, and studio closures for teams like The Initiative, which had been developing the now-cancelled Perfect Dark reboot.

Microsoft has now laid off over 20,000 people since the start of 2023. On social media, game developers from solo indies to triple-A studio staff and everything in between have shared their dismay over the continued turmoil affecting their peers and colleagues.

"It's heartbreaking to watch what's happening to this industry that I love," said Eric Neustadter, former operations manager at Xbox Live and current VP of technology at The Pokémon Company. "The incentives are misaligned so strongly that fun games and profitable teams aren't what matter."

BioWare veteran and current Skate narrative director John Epler said that he's "reeling" over the news that's continuing to break about further Microsoft cuts. "18 years in the industry and I can confidently say this is the grimmest shit has been yet," Epler said.

"There has to be a better way than this," said Vlambeer co-founder Rami Ismail. "There has to be a better games industry than this happening to so many people, over and over and over. This isn't good enough."

There has to be a better way than this. There has to be a better games industry than this happening to so many people, over and over and over. This isn't good enough.

— @ramiismail.com (@ramiismail.com.bsky.social) 2025-07-03T20:09:23.083Z

"The games industry is going to turn me into the joker," said award-nominated Civilization 7 and Marvel's Midnight Suns writer Emma Kidwell.

Many devs see Microsoft's layoffs as emblematic of an industry trapped in a doomed pursuit of perpetual growth.

"Laying off thousands of people so that your numbers look better for the quarter while making many more billions is such a f'd up reality," said Chandana Ekanayake, co-founder and creative director at Outerloop Games. "Making numbers go up forever is not sustainable and never was. What a colossal waste of talent."

Like, when mass layoffs are just a quarterly event, is this not just a death spiral? Xbox already seems to be pivoting, Sega-like, away from hardware and towards being purely a publisher. At the same time they're gutting their portfolio. Okay, are you going to have a company at the end of all this?

— @brunodias.bsky.social (@brunodias.bsky.social.bsky.social) 2025-07-03T20:09:23.091Z

"When mass layoffs are just a quarterly event, is this not just a death spiral?" asked Bruno Dias, former lead narrative and systems designer on Fallen London, who notes that Xbox seems to be carving up its own publishing portfolio while it's seemingly moving away from hardware. "Xbox behaves like a company that's been sold to private equity and is having the copper stripped out of the walls."

Andrew Carl, systems designer at Respawn, said the newest Microsoft cuts are particularly hard to stomach given the company's heavy investment into the "dumpster fire" of generative AI development. "Reminder that all this carnage at Microsoft is coming at the same time as they are financially doubling down on the agentic & generative AI slop that nobody wants because it lies to you, has terrible security issues, & has untenable energy costs," Carl said.

Microsoft said in January that it intends to spend $80 billion on AI this year.

Even Seamus Blackley, creator and designer of the original Xbox who left Microsoft in 2002, said that Xbox's current strategy—assuming there is one—is self-defeating.

"Think of the number of great games that had troubled development histories. All of them?" Blackley said. "Now consider how often executives cancel troubled games. Smooth development comes only when you take no risks. Greatness comes only when great risks are braved. Do the math."

When one of his followers joked that "the math is being done by Copilot," Blackley said "Then it will be wrong, and it will insist it's right."

Elsewhere, Firaxis narrative director Cat Manning said what felt like a summation of the entire industry's exhaustion: "I just want to make things that get players excited, man."