More Xbox studio cuts likely to follow Tango and Arkane Austin, and Game Pass looks like the culprit

Like us, you’re probably still reeling from Tuesday’s news that Hi-Fi Rush studio Tango and Prey’s Arkane Austin are getting shuttered by Microsoft. According to Bloomberg, these closures were just a part of a “widespread cost-cutting initiative” that’s still underway. All signs point towards more cuts to come, basically. ZeniMax studios seem to be the main target.

According to sources “familiar with the company’s plans,” this week saw Xbox offering voluntary severance to “producers, quality assurance testers and other staff at ZeniMax.” During a meeting with ZeniMax staff yesterday, Xbox president Matt Booty suggested that “the company’s studios had been spread too thin — like “peanut butter on bread” — and that leaders across the division had felt understaffed.” It’s this want to free up resources that Booty claimed led to the recent closures of Tango, Arkane Austin, Mighty Dog, and Roundhouse.

“It’s hard to support nine studios all across the world with a lean central team with an ever-growing plate of things to do,” said head of ZeniMax Jill Braff at the meeting. “I think we were about to topple over.” The recent closures came as Arkane Austin was deep in development of more content for vampire live service Redfall, as well as looking toward making a new immersive sim, potentially a new Dishonored. Xbox had previously called Tango’s critical darling Hi-Fi Rush “one of the most successful launches for Bethesda and Xbox in recent years.”

Zenimax themselves were purchased in 2020 for $7.5 billion in one of the industry’s largest acquisitions in history, the largest also being at Microsoft via their $76 billion acquisition of Activision Blizzard. Back in January, Activision Blizzard laid off nearly 2000 people. “The massive Activision Blizzard acquisition has ramped up scrutiny on the Xbox division from leaders at Microsoft, according to people familiar,” write Bloomberg.

The cost cutting measures across Xbox, as Bloomberg point out, could be down to a lack of the Game Pass growth Xbox were counting on. Quoting analyst Mat Piscatella, they write:

“In our data, Game Pass spending really had its big growth period in late 2019 through early 2021 and has since settled,” Piscatella said. “Purchasing games and add-on content as well as free-to-play models are still the vastly preferred method of getting to video games by US consumers, at least for now.”

The Game Pass model theoretically allows for smaller, more creatively risky games. Sales expectations don’t have to be the be all end all, as long as a release provides value to the library. With Game Pass growth stalled, it seems Xbox are becoming less willing to take risks on similar releases.

Today, someone nuked Phil Spencer’s Fallout 76 camp. At the time of writing, it isn’t clear if he’s managed to rebuild it yet.

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