Xbox CEO letter sent to employees regarding restructuring explains a lot

dermot41 · July 7

Seems like a typical "we made of bunch of bad decisions so we're getting rid of people who didn't actually make those decisions" announcement.

As for 'hardware crisis', that seems self-inflicted...

tomofhyrule · July 7

I’m waiting for this bubble to burst.

AI is unprofitable. The only reason everyone (or at least all of the tech bros) is throwing so much money in the dumpster fire that is AI is that it might eventually not be unprofitable. It’s completely propped up by potential.

Sam Altman has even said his costs are astronomical right now. And eventually, someone will have to pay them.

I foresee all of these AI things eventually going the way social media did:

Wow, you mean we can say whatever we want to the entire internet? This is awesome!
Oh, we need a lot of servers to hold all of this data so people can post pictures and thoughts.
Oh, servers are expensive. Data storage is expensive. How can we make money?
Maybe an optional subscription so our most valued users will get some little benefit, and then we can get some income.
Oh, that’s not enough. And if we charge everyone, then they’ll leave. Maybe we can put in an ad. One ad. A tiny one. Nothing major.
Ok, maybe one more ad.
And another.
Oops, all ads.
Oh, and it’s affecting kids’ development and actively reducing peoples’ IQ and ability to socialize.
Wait, that’s not a problem. They’ll just need to use it more! Can we add in anything to make it even more addictive?
Oh, and we’ll also sell all of this data to the highest bidder since we have so much and everyone has spilled their guts.
Profit!
(Also let’s also pay off some sleazy lawyers and pseudoscientists so they can ‘prove’ we’re not destroying the environment. But AI needs that water more than those stupid humans, amirite?

It won’t be long before you ask ChatGPT to write your English paper and it’ll be like “Sure, I can get that. And since you’re so good at saving time by having me write your paper, you can also save time cooking by grabbing a nice Big Mac! Mmm, I’m Loving It!™️”
And then when you submit it without proofreading, your teacher wonders why you’re got a line in there reporting on Tom Sawyer’s trip to Starbucks to try their new Matcha Pumpkin Spice Latte.

The vast majority of people hate AI everything. It’s hard to find anything outside of ‘kicking puppies’ that has this negative of a reception. But since the rich people stand to make more money on it, they want it. And they’re shooketh that we unwashed masses aren’t lapping it up like good little peasants.

[snip] AI. Burn it all down.

ceruulean · July 7

According to Wikipedia, Sharma has worked with blue collar industries, which the majority of Xbox customers are going to be working class people. So that's probably why she was chosen over Sarah Bond, daughter of a CEO and Harvard MBA graduate.

rafaelcsmaia · July 7

tomofhyrule wrote: »

I’m waiting for this bubble to burst.

AI is unprofitable. The only reason everyone (or at least all of the tech bros) is throwing so much money in the dumpster fire that is AI is that it might eventually not be unprofitable. It’s completely propped up by potential.

Sam Altman has even said his costs are astronomical right now. And eventually, someone will have to pay them.

I foresee all of these AI things eventually going the way social media did:
Wow, you mean we can say whatever we want to the entire internet? This is awesome!

Oh, we need a lot of servers to hold all of this data so people can post pictures and thoughts.

Oh, servers are expensive. Data storage is expensive. How can we make money?

Maybe an optional subscription so our most valued users will get some little benefit, and then we can get some income.

Oh, that’s not enough. And if we charge everyone, then they’ll leave. Maybe we can put in an ad. One ad. A tiny one. Nothing major.

Ok, maybe one more ad.

And another.

Oops, all ads.

Oh, and it’s affecting kids’ development and actively reducing peoples’ IQ and ability to socialize.

Wait, that’s not a problem. They’ll just need to use it more! Can we add in anything to make it even more addictive?

Oh, and we’ll also sell all of this data to the highest bidder since we have so much and everyone has spilled their guts.

Profit!

(Also let’s also pay off some sleazy lawyers and pseudoscientists so they can ‘prove’ we’re not destroying the environment. But AI needs that water more than those stupid humans, amirite?

It won’t be long before you ask ChatGPT to write your English paper and it’ll be like “Sure, I can get that. And since you’re so good at saving time by having me write your paper, you can also save time cooking by grabbing a nice Big Mac! Mmm, I’m Loving It!™️”
And then when you submit it without proofreading, your teacher wonders why you’re got a line in there reporting on Tom Sawyer’s trip to Starbucks to try their new Matcha Pumpkin Spice Latte.

The vast majority of people hate AI everything. It’s hard to find anything outside of ‘kicking puppies’ that has this negative of a reception. But since the rich people stand to make more money on it, they want it. And they’re shooketh that we unwashed masses aren’t lapping it up like good little peasants.

[snip] AI. Burn it all down.

AI is a cancer to all good things we have, it will drain resources from everything else until all wither and it itself will implode.

Thats one of the reasons that financial pyramids are a crime against economy:

Mr Chris starts to make 5000$ per week on this new "not pyramid" stuff, if he recruits more, they also make 5k and he makes 100 more.

Eventually the baker in town, the barbershop owner, everyone realizes they will make more money on this recruit fiesta than by having their businesses, which in turn start to close left and right as those ppl start the pyramid.

When the pyramid crashes, economy is destroyed.

Does that ring any bells? Its exactly what Sharma said about MS, they are focusing their resources on AI, which has no return other than investing more and more.

There is no amount of narrative that can convince me that AI is making anything better other than the spreadhseets of mega corporations that can layoff half a team cuz now bob the developer supposedly can work 10x faster using slop GPT.

Not only that, all major AI companies work on a deficit like you said, I wonder how high this can hike before it plummets like a comet.

code65536 · July 7

ceruulean wrote: »

So that's probably why she was chosen over Sarah Bond, daughter of a CEO and Harvard MBA graduate.

Wikipedia also says that Sharma has a business degree from the Carlson School of Management. Is that really that different than Sarah Bond's MBA from Harvard? I think what matters more is the blurb in Wikipedia about how Sharma started playing video games only in 2026 so that she could "learn and understand" gaming.

You see, someone who already "understands" gaming would probably understand that, for a player, a MMO is a long-term investment. They would understand that players are not likely to invest time and money in a MMO if they aren't sure that this world will continue to be around and thrive. And that's not something that you learn from a business school; that's something you understand by being a player.

James-Wayne · July 7

'We will deliver success through a flatter organization that is built around makers (individual contributors focused on building), player-coaches (leaders who remain deeply involved in the work while developing their teams), and directly responsible individuals (DRIs) who own key decisions and outcomes.'

That is why they were cut.
Sad for all involved.

Morimizo · July 7

code65536 wrote: »

ceruulean wrote: »

So that's probably why she was chosen over Sarah Bond, daughter of a CEO and Harvard MBA graduate.

Wikipedia also says that Sharma has a business degree from the Carlson School of Management. Is that really that different than Sarah Bond's MBA from Harvard? I think what matters more is the blurb in Wikipedia about how Sharma started playing video games only in 2026 so that she could "learn and understand" gaming.

You see, someone who already "understands" gaming would probably understand that, for a player, a MMO is a long-term investment. They would understand that players are not likely to invest time and money in a MMO if they aren't sure that this world will continue to be around and thrive. And that's not something that you learn from a business school; that's something you understand by being a player.

Other than the tragedy of all these wonderful people losing their gigs, this point you make is what concerns me the most. It's a tale as old as time, of course:

We need a new Captain for the flagship of our navy, sir! Let's choose someone who has never been to sea!! Or even rowed a canoe on a backwater creek! What could go wrong?

They would have been better served to choose from one of the excellent, very experienced Guildmasters in this game. Not just for their organizational and motivational prowess, but for their LOVE of the game.

Alas, this NEVER happens. It's so disheartening to witness the inevitable promotion of the unqualified, and the casting overboard of the creators and nurturers. I'll try not to dwell on how MS and Sharma will continue to profit from the hard work of the latter, who are now forced to cling onto whatever driftwood is at hand.....but I will not succeed.

code65536 · July 7

Morimizo wrote: »

Other than the tragedy of all these wonderful people losing their gigs, this point you make is what concerns me the most. It's a tale as old as time, of course:

We need a new Captain for the flagship of our navy, sir! Let's choose someone who has never been to sea!! Or even rowed a canoe on a backwater creek! What could go wrong?

https://youtu.be/Kfao1s3Tiek

AzuraFan · July 8

Morimizo wrote: »

We need a new Captain for the flagship of our navy, sir! Let's choose someone who has never been to sea!! Or even rowed a canoe on a backwater creek! What could go wrong?

Their previous CEO was a gamer and ran the division into the ground. Being a gamer doesn't guarantee success in gaming management, and not being a gamer doesn't guarantee failure.

She's only been CEO a few months. Let's see how she does. And no, these layoffs don't mean she's doing a lousy job. Not enough info yet.

SwordOfSagas · July 8

14 layers of management sounds like a DEI nightmare tbh.

Marto · July 8

Her "14 layers of management" excuse is nonsense. It's a lie and corpospeak. The vast, vast majority of layoffs are creatives.

If the goal truly was to make development more agile by shifting leadership, ZOS had already done that. That's what this year was all about. Releasing things like the DK and Werewolf refresh, and experimental features Vengeance or the Night Market for players to try out, at a faster pace, without countless meetings to agree on features before the playerbase even getting a chance to learn about it (Like they did for Two-Sided battlegrounds or Subclassing, as a comparison.)

Part of Microsoft's strategy after layoffs, not only in gaming but other divisions, is to have a single leader manage multiple teams.

Imagine if the animation lead was also responsible for the audio, just because those two things fall under the category of "art". Or if the community manager is also in charge of game balance, since both things involve looking at the forums for feedback. Or if a quest designer was in charge of the servers because they both involve some programming.

It's nonesense.

These layers of management exist for a reason. As a rough example.

Character artists report to the Character Art Lead who makes sure everyone is working on what they need to instead of wasting time.
They report the Character Art Director, who makes sure it matches everything else related to characters, hairs, tattoos, etc.
They report the Art Director, who makes sure the artistic vision of the game remains consistent, and doesn't look like something out of Fortnite or Diablo. They look not just at characters, but terrain, armors, enemies, effects, etc.
They report to the Game Director, who makes sure the art is consistent with the audio, gameplay, etc.
They report to the Producers, whose job it is to procure what is needed. More desks, more employees, new software, voice actors, you name it. They balance the costs of making the game.
And above that the Studio Director, who has to manage the studio as a whole. From games and marketing to payroll and janitors.

Six layers of managers, and we haven't even left the office building. All these 7 people have unique skills that can't be merged or replaced. A character artist doesn't often have the skill to make buildings. A game director may not know how to order 15 new computers and get a new contract with Adobe.

Add to that Bethesda Publishing, Zenimax Media budget and business, Xbox North America, Xbox Global, Microsoft... What's the minimum number of layers possible? 10? 12? 14, even?

What the Xbox CEO wants is more corporate meddling. More power to directly influence how the games are made, instead of letting talented artists and developers work in peace.

zaria · July 8

LootAllTheStuff wrote: »

If you'd kept reading, they would have opened wide at this bit:

Today, in some parts of the company, work passes through as many as 14 layers of management.

That is some insane management bloat right there, and explains a lot about MS decisions over the last while. I suspect that Zenimax was never that bad. At least, I hope not!

14 layers of management is more layer than the military, that is insane,
Unlike in the military you will never not have communication and you don't have to take split second decisions.
Outside perhaps shut down game for maintenance because an exploit. But that does not get hundreds killed.

Now an major issue in gaming is that the budgets are ballooning out of control, ESO is estimated to cost $200 millions to make, who makes sense, it took me probably close to half an year to finish as in Cadlew's gold and I did all the quests I found. Granted game was harder back then so fights took longer. and did other stuff than quests but it was my main game.
In short its ton of content.

How can you spend $200 M on an shooter who shuts down after 14 days?
Or any game who is not ESO level content. Yes better graphic cost more but its an very steep hill to climb today.
As you can double the visual effects and accuracy, but its mostly stuff none notices or blurs out in all the effects.
I do 3D stuff and I'm my worst critic but its people making game but want to make movies. So you get interactive movies.
They tried that some times, as then the CD drive came, it did not work, I'm so happy Bethesda and ZoS uses minimum of cut scenes and then they do its in game. Because i got this gem.

And its not needed Kingdom come deliverance and Crimson desert looks and plays extremely well on around $50 M budget, and they are large games.
Stop making stuff nobody notice in combat anyway. And if you need cut scenes make them in game unless its an racing game or other games without caracters

ESO_player123 · July 8

Morimizo wrote: »

Other than the tragedy of all these wonderful people losing their gigs, this point you make is what concerns me the most. It's a tale as old as time, of course:

We need a new Captain for the flagship of our navy, sir! Let's choose someone who has never been to sea!! Or even rowed a canoe on a backwater creek! What could go wrong?

Yeah, there is a lot of that going around here nowadays.

Personofsecrets · July 8

All the big game companies had to do over the past decade was make games that people enjoy. They did so, once in a while, in between a bunch of stinkers.

Personofsecrets · July 8

Freelancer_ESO wrote: »

karthrag_inak wrote: »

khajiit has to wonder why they purchased these studios to begin with.

My impression was that Microsoft wanted to turn gaming into a subscription service similar to what Netflix has done with tv shows and movies.

When I saw my doofy room mates using xbox apps to watch hoops, like 15 years ago, that was the key moment that I decided to never get a console ever again. It was clear even back then how gaming was becoming a platform to ensnare people like social media does.

On the brite side, Microsoft is apparently learning that it isn't so easy to manipulate consumer behavior. What people do like, spending millions of collective dollars on GTA X, is a pretty nasty counterpoint though.

It will be a better day when video games fail as they have obviously become tools of predation.

Rungar · July 8

this may be unpopular but the eso team did not deserve better. The game, a flagship franchaise, was neglected for years and years with low quality generic updates sold as full cost games. There were multiple poor decisions from management especially in regards to the combat system and the generic updates. Once it was stabilized after a poor reception launch it was managed as an afterthought a couple of expansions in.

Thats not to say people didnt work hard at it, but for a world class franchiase eso achieved only mediocrity when it could of ( and should of) been great and thats on the management of this game and the designers. They took few risks and this is unfortunately the reward for playing it safe. Now we see that making some money isnt enough. These types of products have to excel and stand out.

there are an endless number of elder scrolls fans but eso could not reach or retain them. Im actually suprised it made it this far. All things considered 10+ years is a major accomplishment with this management style. This industry has killed itself with lack of innovation and endless bloat.

this game relies on microtransactions to survive, but microtransactions are no longer popular, if they ever were. It was a good call to let this die on its own to make way for es6.

mocap · July 8

dat typical western corps mails ego trip...

We will
We became
We have
We now
We this, We that, We blah, We blah blah, We We weeee...

kafedristoran · July 8

" Today, in some parts of the company, work passes through as many as 14 layers of management. "

And these degenerates decided not to reduce bureaucracy, but to fire the ordinary workers who do all the work and leave all these endless circles of middle managers? Really?
Macroslop and their execs deserve all the worst in the world

Haenk · July 8

Again, this is likely a pure ROI Excel sheet management. They expect 20% ROI, but get only 5%. While that is still "something", this is at least a risk - one or two failed large projects, and you are dead. 20% leaves more headroom. Also, from an investors' perspective: "Why should I invest into 5% ROI, when I could invest into 20% ROI?"
I'm no investor, but I could understand the decision to trim spendings.
And I really would blame MS for just spending too much money on unnecessary purchases - that oubviously did not pay off.

Mik195 · July 8

Cutting studios that haven't produced games or sucessful games is fine and a management decision. As is canceling unreleased games. But, cutting ZOS didn't just punish a studio (who by the way had a sustainable roadmap for the foreseeable future so its not like they were promising things for years and not delivering), it hurt every player who has been supporting this game for over a decade and the players (and ZOS) didn't deserve this.

reazea · July 8

One day soon all these companies investing in AI are going to have a realization that AI can't do anything without anyone to teach them their job and make sure the AI is doing the job correctly.

Almost every job that can be automated already is.

AScarlato · July 8

Rungar wrote: »

this may be unpopular but the eso team did not deserve better.

I want to preface that I understand articles and interviews with former ESO employees are not official sources and we cannot view them as certain truths. I am writing this to try to avoid running afoul of whatever forum rules I would infringe by mentioning the below.

An interview came out with PC Gamer of a former Dev this week where the Dev claimed that a lot of their success was invested into other products, rather than reinvesting in the team that generated the money. I don't know if that is true, as I dont' work there, but it seems like it is possible. In that regard, I do believe the team deserved better.

LalMirchi · July 8

From another interview with Xbox CEO Asha Sharma:

"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. XBOX has many of the most beloved franchises in entertainment history, talented studios around the world, and we will return to growth in 2027."

The last statement sounds very unrealistic and full of hubris. How can they return to growth in 2027 when they've sacked all the workers? A billion daily users is another hyperbolic claim.

Jeremy · July 8

Rungar wrote: »

this may be unpopular but the eso team did not deserve better. The game, a flagship franchaise, was neglected for years and years with low quality generic updates sold as full cost games. There were multiple poor decisions from management especially in regards to the combat system and the generic updates. Once it was stabilized after a poor reception launch it was managed as an afterthought a couple of expansions in.

Thats not to say people didnt work hard at it, but for a world class franchiase eso achieved only mediocrity when it could of ( and should of) been great and thats on the management of this game and the designers. They took few risks and this is unfortunately the reward for playing it safe. Now we see that making some money isnt enough. These types of products have to excel and stand out.

there are an endless number of elder scrolls fans but eso could not reach or retain them. Im actually suprised it made it this far. All things considered 10+ years is a major accomplishment with this management style. This industry has killed itself with lack of innovation and endless bloat.

this game relies on microtransactions to survive, but microtransactions are no longer popular, if they ever were. It was a good call to let this die on its own to make way for es6.

That probably wasn't their fault because pretty much every online game followed the same trend to focus on cash shops and microtransactions while neglecting quality gameplay. That's what happens when profit-driven corporations take over a market. The priorities change, and the focus becomes to make as much money as possible instead of the quality of the product.

HybridFreak · July 8

Between Microsoft's bull crap, Sony on a an anti consumer spree (killing physical game discs, deleting accounts after 3 years of inactivity, and closing the PS3 store), and current hardware prices, gaming is completely cooked.

katanagirl1 · July 10

karthrag_inak wrote: »

khajiit has to wonder why they purchased these studios to begin with.

I mentioned on another thread that I worked for a big company like that. They bought other companies because they were unable to take some of their profit and invest in new projects and innovate and increase the size of their own company. They were too busy either passing the profits on to the top or passing it along to the shareholders. It could be the same here too.

IZZEFlameLash · July 10

What they really are saying:
"Sorry we overspent in our shopping spree and many of the studios we acquired aren't making games. And our parent, Microsoft wants us to make profit to make shareholders happy and able to funnel the money into AI. So, we are letting go of staff from the studios that actually make games and contents for their games."

LalMirchi · July 10

This is a direct result of MS losing the game ecosphere to Sony. NO amount of CEO whitewashing is going to erase that.

nb_rich · July 10

After reading that and some peoples comments it seems like they made the right decision to hopefully make the game better. Of course I never wish that people have to lose their jobs but when it comes to the health of the game it might be good.

From my point of view it seems like they were behind on tasks, hired more people and were still not getting accomplished what Microsoft asking them to do. Im assuming with the number of employees laid off from this studio specifically, it was one of the studios that had up to 14 levels of management to go through.

Imagine how many times someone doesn’t agree with something so it has to be looked over again or how many times an idea is on someones desk that gets missed. Then when it gets close to there deadline they rush and put out unpolished content.

Gabriel_H · July 10

code65536 wrote: »

And now the industry is facing the most severe hardware crisis in its history.

Gee, I wonder why.

What I find hilarious about it all is that chip manufacturers, including RAM/VRAM, are putting all their efforts into AI, causing a shortage and spike in prices of commercial hardware.

If this trend continues, we are going to have 394928438902309209 AI data centres, and no personal computers capable of utilising them. As usual, capitalism returns short-term profits at the expense of basic common sense.