Video Games Weekly: Every time this industry grows, it shrinks

Engadget

08-07-2025

Welcome to Video Games Weekly on Engadget. Expect a new story every Monday or Tuesday, broken into two parts. The first is a space for short essays and ramblings about video game trends and related topics from me, Jess Conditt, a reporter who's covered the industry for more than 13 years. The second contains the video game stories from the past week that you need to know about, including some headlines from outside of Engadget.
Please enjoy — and I'll see you next week.
In a 2024 interview with Chris Plante , just a few months after Xbox fired 1,900 employees in one blow , Microsoft Gaming CEO Phil Spencer said the best way to prevent further layoffs in the video game industry was to ensure constant financial growth for major studios' shareholders. And the most logical way to do that, he intimated, was with layoffs.
'The thing that has me most concerned for the industry is the lack of growth,' Spencer said. 'When you have an industry that is projected to be smaller next year in terms of players and dollars, and you get a lot of publicly traded companies that are in the industry that have to show their investors growth — because why else does somebody own a share of someone's stock if it's not going to grow? — the side of the business that then gets scrutinized is the cost side.'
He says it as if it's a natural and irrefutable fact of life. Of course the company has to continuously grow. Obviously the studio caters to its shareholders above all else. The only way to make the numbers go up is to reduce costs, which means slashing headcount. And Spencer is just a man in a Battletoads graphic tee who, clearly , has to do everything he can to make these investors, his fellow executives and himself richer. Poor guy.
'We're a business,' Spencer told Polygon . 'I've said over and over. I don't get any luxury of not having to run a profitable growing business inside of Microsoft. And we are that today. But just across the industry — you mentioned it, and in sitting here at GDC, I reflect on friends of mine in the industry that have been displaced and lost their jobs and how just, I don't want this industry to be a place where people can't, with confidence, build a career. So that's why I keep pivoting back to, how does this industry get back to growth?'
He's already said the answer — layoffs — but it flies directly in the face of his stated desire to create a stable marketplace where his friends can thrive, so he watches the snake devour its own tail and shrugs, never once considering that the question itself is the problem.
Fast forward to July 2, 2025. Microsoft laid off 9,000 people across its global workforce, and the Xbox division was rocked by thousands of job losses, multiple studio closures and notable game cancellations. The news came out in leaked memos, social media posts from fired employees and LinkedIn status updates, and I spoke to someone with knowledge of the situation at Halo Studios about the mood among developers. Overall, it's been a lot to keep track of. Here's all of the reported fallout, as it stands on July 8: Blizzard: Layoffs; Warcraft Rumble sunsetting
Halo Studios: Layoffs affecting at least five people; we published a firsthand account of tension at the studio
The Initiative: Studio closed; Perfect Dark remake canceled
King: Layoffs affecting roughly 200 people, 10 percent of the studio
Rare: Layoffs; creative director and Banjo-Kazooie creator Gregg Mayles is out after 35 years; Everwild canceled
Raven Software: Layoffs
Sledgehammer Games: Layoffs
Turn 10: The Forza Motorsport team was gutted by layoffs and shut down; Turn 10 is now a Forza Horizon support studio
ZeniMax Online Studios: Studio head Matt Firor is out after 18 years; Blackbird canceled
Spencer said it in 2024 and it's still true today: The Xbox division is growing, with an eight percent yearly increase in revenue from Xbox content and services in the first three months of 2025. Still, for employees, it doesn't feel stable.
This situation isn't unique to Microsoft, either: In May, Electronic Arts canceled its Black Panther game and closed the studio creating it, and this followed a previous culling at Respawn , which included canning a new Titanfall title, plus years of layoffs at BioWare. Meanwhile, EA CEO Andrew Wilson took home more than $25 million in the 2024 fiscal year. In 2024, 11 percent of developers across the industry were laid off, according to GDC's 2025 State of the Game Industry Survey . Statista reports the global games market is expected to grow yet again in 2025, generating more than $522 billion in revenue.
Layoffs are a cruel solution to a shitty question, and at the moment , they form the backbone of the AAA industry. The world's largest studios function on a binge and purge cycle, with acquisitions , crunch and layoffs built into their business plans. This cadence is only becoming more chaotic as additional factors, like AI and consolidation, are converging to decrease hiring numbers and increase the scope of layoffs. At Microsoft, using the company's Copilot AI toolset is ' no longer optional ' for employees, and as one worker told me, 'They're trying their damndest to replace as many jobs as they can with AI agents.'
Practices like these have helped propel unionization efforts across the industry, including at Xbox studios.
'We are deeply disappointed in Microsoft's decision to lay off thousands more workers, including union-represented CWA members, at a time when the company is prospering,' Communications Workers of America President Claude Cummings Jr. said about the recent layoffs. He continued, 'Right now, we are living through a moment of profound corporate consolidation and disruption. In times like these, union organizing is not just a tool for protections in the workplace; it is essential to workers' survival, and one of the strongest defenses we have against unchecked corporate power.'
In addition to this most recent round of 9,000 layoffs, Microsoft fired 6,000 people across its divisions in May. The Xbox segment specifically lost more than 2,500 employees to layoffs in 2024, and Microsoft closed Arkane Austin , Alpha Dog Games and Tango Gameworks (though Krafton eventually scooped up Tango for itself, thankfully). The scattershot vibe of the closures, cancellations and layoffs — affecting productive and low-overhead studios like Tango, exciting new projects like Blackbird , and multiple proven ZeniMax teams — drives home the notion that Microsoft was always more interested in controlling these studios' IPs than supporting the developers that worked there.
Layoffs are an answer to the question, 'How does this industry get back to growth?' Mass firings are not a function of artistic integrity or technological innovation, and they're antithetical to the process of actually building fresh and powerful video games. I've never asked myself how industry profits can grow, as a player or a critic. Only a small and very specific group of people have, and they don't speak for me. Unfortunately, they move for all of us.
Helldivers 2 is heading to Xbox on August 26, ending its tenure as a PlayStation 5 console exclusive after a little more than one year. Helldivers 2 is developed by Arrowhead Game Studios and published by PlayStation, so it wasn't guaranteed to come to Xbox platforms at all. To be clear, it's not due to be included in Game Pass any time soon. Since settling its launch issues in early 2024, Helldivers 2 has been quietly building up a sizable playerbase of intergalactic freedom fighters, with more than 15 million copies sold across PC and PS5.
Naughty Dog co-founder Neil Druckmann is stepping back from the development of HBO's The Last of Us television series to focus on making games again. Druckmann is a co-creator of the show and he's been spending his time recently helping produce and write it at HBO, but now that the second season is done, he's returning his attention to the studio that started it all.
'Now is the right time for me to transition my complete focus to Naughty Dog and its future projects, including writing and directing our exciting next game, Intergalactic: The Heretic Prophet ,' he said in a statement. Welcome back, Druckmann — as Engadget deputy news editor Nathan Ingraham put it, the video game industry is happy to see you again .
Former Ubisoft executives Thomas Francois, Serge Hascoet and Guillaume Patrux were convicted in France of fostering a toxic workplace with rampant sexual and psychological abuse. Former chief creative officer Hascoet was sentenced to 18 months in prison, suspended, and Patrux received a 12-month suspended term. Francois was additionally found guilty of attempted sexual assault and received a suspended three-year prison sentence. This wraps up a multi-year investigation by French authorities into complaints of toxicity and gender-based harassment at Ubisoft.
Sucker Punch will show off about 20 minutes of Ghost of Yōtei gameplay on Thursday, July 10, at 5PM ET during a dedicated State of Play event. I can't wait to watch that wind move .
I've been looking forward to Time Flies since I buzzed my way through the demo at Summer Game Fest 2022. It's a ridiculous little game that provokes poignant thoughts about human existence and pushes players to find joy in small moments, and it's finally coming to PC, Switch and PS5 on July 31. Make sure to give it a go, whenever you have some time to kill.
Two days after news of the Microsoft layoffs broke, Xbox Game Studios Publishing executive producer Matt Turnbull made a post on LinkedIn offering 'ways to use LLM Al tools (like ChatGPT or Copilot) to help reduce the emotional and cognitive load that comes with job loss.' His suggested prompts included, 'Draft a friendly message I can send to old coworkers letting them know I'm exploring new opportunities,' and, 'I'm struggling with imposter syndrome after being laid off. Can you help me reframe this experience in a way that reminds me what I'm good at?' The tonedeaf post was met with appropriate ridicule and swiftly taken down.
Have a tip for Jessica? You can reach her by email , Bluesky or send a message to @jesscon.96 to chat confidentially on Signal.