He has some consistently horrible takes which is only amplified by the position and job he’s in
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They were a mess so it will be some time before things are straightened around.
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When you get a chance, can you provide some insight into one of the things I keep hearing with this. Listening to game mess mornings and I think they have said at least twice now “this is a three trillion dollar company”. There seems to be some weird belief that just because a company has a high valuation that means the businesses within that parent don’t have an obligation to be financially viable.
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Yeah, I’m definitely not venturing out into the storm on this one. I will say that the reactions and discussions here have been pretty nice and levelheaded if I’m being honest.
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Shame, but such is life. Hope everyone finds their feet.
What a horrible, horrible day. 2024 is going to be a bloodbath in this industry.
Thanks I did think it would be as much!
Shame though because the ABK marketing team is brilliant, arguably much better than Xbox’s.
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I feel terrible for everyone at Xbox, Zenimax, Acitivision, Blizzard & King that lost their jobs. Next week is Microsoft financials and that will probably be record breaking and people are going to be even more pissed. I think what Team Xbox is doing is keeping core franchises like Call of Duty, Diablo, Overwatch, WoW and Candy Crush alive and kicking like with Halo, Gears, Forza, Elder Scrolls and Doom. Bring back some old IPs to modernize it like Fable, Perfect Dark, Flight Simulator, and Age of Empires. Level up sequels from smaller titles like Hellblade 2 and State of Decay 3. Microsoft Gaming will invest heavily in new IPs Like Avowed, Grounded, Pentiment, Hi-Rush, Clockwork Revolution, South of Midnight, Blade, Indiana Jones, Everwild, Starfield. That is their strategy for ABK! I’m shocked that Odyseey was cancelled and it was years away I development .
ABK spends a lot on marketing. Let’s see how Microsoft Gaming spends on marketing in the future.
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There is a lot to be said about this, but i’ll try to be reasonably concise (for me) with this reply.
I think the short answer is way to many “observers” just don’t understand anything about business - especially publicly traded companies. They see Microsoft has a huge market cap, but don’t really understand why it’s huge, how it got there, or what it takes to maintain it. They simply equate huge market cap = (nearly) limitless resources. With this mindset there is not really ever any justification for budget cuts, layoffs, etc.
The rest of this is speculation, but I suspect the motivation for these layoffs is that word has come down from the top that now that corporate has invested about $80 billion in Xbox , it’s time to start providing a return.
We know the division is profitable, on an income statement basis. However, due to opportunity costs there is a big difference between income statement profitability and economic (financial) value creation. The breakeven Return on Capital for Xbox is probably over 8%, based on that being (approximately) the breakeven for MSFT as a whole. Xbox’s number could be higher due to the risk of the video game industry. That 8% (or higher) is the MINIMUM Xbox can earn without destroying economic value for Microsoft and its shareholders.
In reality, I suspect MSFT leadership wants Xbox to (eventually) earn the same Return on Capital as the rest of the firm - which would be somewhere in the low 30% range. If Xbox can “pull its weight” by earning the same returns as Office, Azure, etc, then no one would ever have to worry about the future of the division again.
We don’t know what Return on Capital Xbox actually earns. MSFT doesn’t disclose it and they don’t even release the divisional data we would need to compute it ourselves. However, based on the layoffs today (and the limited financial information that has been released) I would assume the division is pretty far from that number.
None of this is the say the layoffs are fair or “good” in any sense. But if what I outlined above is actually going on, then they are understandable from a corporate decision making context.
Again, there was lots of speculation above, so I may be way off base, but I suspect I am at least in the ballpark of the truth.
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https://x.com/stephentotilo/status/1750565895565394272?s=46&t=O_AGT9SEnlptKOF_2SxtqQ
https://x.com/stephentotilo/status/1750565898090377440?s=46&t=O_AGT9SEnlptKOF_2SxtqQ
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I don’t have the time to read the whole thread but on the face of it, this strikes me as disgusting and indefensible.
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I think people should look at this sort of situation pragmatically with a level head (difficult I know in 2024, especially in this industry… but nevertheless important), i.e. from what we’re hearing, there’s quite a few people in various positions which have become redundant who’ve been let go, like marketing, community management etc.
These positions after an acquisition are literally pointless & always get the chop. That’s life. There’s no reason for MS to double up positions at Activision which are performed by their own team.
It’s why the outbursts I’m reading this evening (many of which are completely over the top in terms of emotive lack of control) are just difficult to take seriously without suspecting some performative fake virtue signalling (especially in known console warrior circles online) considering the premise of corporate acquisitions entails this exact sort of restructuring. Every single time.
It’s not a stretch for me to suspect quite a bit of pontificating in some circles about the plight of the 1900 layoffs is really just another excuse to have a dig at acquisitions full stop. Aka Xbox acquisitions to be precise. It’s ammo in ze console wars, sadly.
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There should be no defense for the garbage that is late stage capitalism
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I hope no one gets the wrong idea but just because I’m explaining the reason on its timing and what not doesn’t mean I’m defending them. I have seen posts like “it’s normal” and sadly, it’s not that far from the truth. It sucks and all we can do is wish the laid off workers the best.
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I’d like conversations about this topic to be a bit more nuanced though before I engage fully with the other side, i.e. for example if xyz management/accounting/marketing position at Activision (or any other acquired company) is covered by the same position at Xbox, why would Microsoft keep that person on board?
It’s so easy to sit at a computer & type away on the internet how the world should be a better place but in the mean time why would MS employ people who now perform redundant jobs since the acquisition?
Not everyone at Activision-Blizzard is a developer or artist.
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https://twitter.com/DanShoeHsu/status/1750576576377557284
Relocated for the job and then laid off. That is vomit inducing.
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Basically the industry exploded with Covis and evveryone sat at home looking at ways to entertain themselves in lockdown… Not only did revenue explode but employee numbers increased as everyone was working from home to tryo to speed up game development.
Now Covid is over… less money being earned and ultimately… figures on a sheet influences shareprices and not emotions.
Layoffs suck and MS should be roasted for this, but I think it’s fine if people want to bring some nuance to the conversation. That’s a tough line to tow though on text-based social media platforms where your honest intentions may not be apparent to others.
To me, this whole thing seems to be a way to appease shareholders since MS is making more money than ever. Really sad to see people’s financial situations upended for no good reason.
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