Recent developments at Microsoft have seen the company making strategic adjustments to its workforce. The tech giant has initiated staff reductions across various departments, including security, devices, experiences, and gaming. According to a confirmation by Microsoft to Business Insider, the layoffs are described as relatively minor and distinct from the performance-based cuts announced previously. Notifications to affected employees began on Tuesday.

The gaming sector has been under particular scrutiny. A report this week revealed that in 2021, Microsoft's leadership considered either expanding or discontinuing its Xbox division. CEO Satya Nadella reportedly discussed acquiring larger game studios to enhance the Game Pass subscription service or abandoning gaming altogether. Ultimately, Microsoft chose to expand through acquisitions, purchasing Bethesda Studios for $7 billion and Activision Blizzard for $75.4 billion, marking its largest acquisition to date. Despite these moves, financial filings show that gaming revenue growth fell short of expectations, growing only 5.8% instead of the projected 11% in the first half of last year.

The broader video game industry has faced significant challenges over the past few years. Mass layoffs have become commonplace, with Microsoft itself shutting down smaller studios like Arkane Austin and Tango Gameworks in May. Industry expert Matthew Ball highlighted the "growing crisis" in gaming, citing factors such as poor-performing titles, economic pressures, and lingering effects of the pandemic. In response to these challenges, Microsoft has acknowledged the need to make tough decisions to ensure the long-term health of its business. This proactive approach underscores the company's commitment to navigating the evolving landscape of the gaming industry with resilience and innovation.