This week’s decision by Xbox to close entire studios stunned me. The nightmare of widespread layoffs in the industry doesn’t seem to seize. I’m disappointed of this particular piece of news for several reasons.

I genuinely root for Xbox’s vision of play anywhere. Game Pass and demolishing platform exclusives are pro-gamer pillars in their strategy. That said, Game Pass is not all good news for game developers. It can give critical exposure, especially to smaller titles, but in other cases it can also erode sales and thus commercial success. In my region Game Pass for PC goes for 10 euros/month. Considering the library and how often it’s updated it’s an extremely good value - but does it work?

Closing entire studios wipes out whole work cultures. This is substantially different to e.g. canceling a project, partially reducing workforce or pivoting to a new direction. In these examples, the intangibles of what makes a great team can be largely retained. Closing an entire studio extinguishes something invisible in addition to the business itself.

A sound business decision for Xbox is beyond the scope of a single studio. This is not a rant against capitalism, it’s not the point. I am disappointed because the studio closures show the worst of having a multi-studio corporate owner, VC or the like. Xbox itself is not Microsoft - citing Microsoft’s overall profit is almost irrelevant. Xbox may derive more value by closing a studio than selling it, e.g because of IP ownership and competition considerations. What hurts is that had the studios been viewed in isolation and with a more fully vested owner they might have been considered viable.

Ultimately, I believe Xbox made the decisions that support its long-term goals best. Their operating profit based on FTC leaks from last year is in the 10% ballpark. Revenue for Xbox grew only by virtue of the Activition Blizzard acquisition. The gaming industry hasn’t meaningfully grown in the past year and feels very saturated. Clearly, both Arkane Austin, following the Redfall flop, and Tango Gameworks, following Shinji Mikami’s departure, would have a challenging road ahead. I don’t believe the studios were judged only on the basis of their most recent performance. It’s about future outlook and profit appetite.

Taking all into account, I’m still left wondering if the corporations consolidating the gaming industry at the moment are truly building the world game developers and gamers want to see. This is why I’m having such a hard time reconciling this particular blow from Xbox.