Microsoft made large-scale layoffs across its gaming division this week, as part of wider cuts that have seen about 9,000 employees of the tech giant let go. It’s the fourth round of layoffs to hit Microsoft’s gaming operation since the start of last year, and the biggest since the company shuttered four Bethesda studios, including Arkane Austin and Tango Gameworks, in May 2024.

This time, the story has centered on the cancellation of two high-profile games that had been in development for a very long time: Rare’s Everwild, and The Initiative’s reboot of Perfect Dark, which took the whole studio down with it. The Initiative, formed in 2018, never released a game.

But there are many more stories to tell among this round of cuts. Blizzard was hit by layoffs and the end of active support for its mobile game, Warcraft Rumble. Call of Duty developer Raven Software, currently working on this year’s Black Ops 7, lost staff. Forza Motorsport developer Turn 10 reportedly saw nearly 50% of its workers cut. Elder Scrolls Online developer Zenimax Online Studios had an unannounced massively multiplayer game canceled. Mobile specialist King, of Candy Crush fame, laid off 200 people. The cuts reached smaller independent developers, too. Doom creator John Romero was working on a new first-person shooter, apparently for Microsoft, which has lost its funding, putting the future of developer Romero Games in doubt.

The scale of the cuts is bewildering, reflecting Microsoft’s massive stature within the industry after a five-year acquisition spree that ended with the $68.7 billion purchase of Activision Blizzard in late 2023. But there’s a depressing sense of inevitability to it, too.

Some of that inevitability stems from the scale of Microsoft’s expansion in games over the past decade. The seismic consolidation of two giant publishers, Bethesda Softworks and Activision Blizzard, with the Xbox Game Studios group, which itself had been undergoing rapid expansion, was always likely to be followed by a long series of aftershocks as efficiencies were found, duplication was rooted out, and projects and studios fell away. The cuts began very soon after the Activision Blizzard deal closed, and haven’t really stopped since. Microsoft gorged itself on the game industry, got too fat too fast, and now thousands of workers are suffering the consequences of its post-binge purge.

But there’s another story to be told here — and it’s older and, if possible, even sadder. Microsoft has simply never been any good at running game studios.

There’s an inevitability to the cancellation of Everwild and Perfect Dark that has nothing to do with the wider picture of Microsoft’s gaming expansion. These were ambitious, marquee projects, announced with fanfare, long before anything substantive was shown. (In the case of Everwild, nothing ever was.) Years of official silence were accompanied by all-too-believable reports of internal reboots and directionless development hell. It seems these games, announced in 2019 and 2020, but in development for years previously, never came together. They should arguably both have been canceled a long time ago.

The waste — of time, money, and human potential — is incalculable. And it’s a sadly familiar story. In 2006, Microsoft acquired the legendary British developer Lionhead, only to close it ten years later after forcing the studio to chase fads it was ill-suited to, like motion control and live-service games. Rare, acquired for a then-record-breaking $375 million in 2002, has seemed to skirt close to a similar fate several times as it searched for a place within the Xbox family that made sense and played to its strengths. Pirate game Sea of Thieves has kept the developer afloat in recent years, but how much longer can that last?

Microsoft’s original sin in this arena was its handling of Bungie. The studio was an inspired early acquisition that almost single-handedly made Xbox’s reputation among gamers with its Halo series. But Microsoft responded to this success by stifling Bungie’s creativity with a forced march of sequel production that ultimately drove the studio away: It bought itself out in 2007. The Halo brand never recovered from the loss, and the mismanagement of the caretaker studio founded to take it over, 343 Industries (now Halo Studios), was arguably even worse. It was never allowed to develop its own identity, and saddled with tasks — including maintaining its own game engine, and turning Halo into an ill-defined forever game — that were clearly beyond its capabilities.

It’s impossible to imagine Sony allowing the same thing to happen to Naughty Dog, for example. Microsoft’s console rival has made many mistakes of its own — culminating in tragedies like the closure of Japan Studio — but it seems to know when to give its most prized studios room to breathe creatively, and when to shut down their flailing projects before they cause too much collateral damage. Microsoft has consistently failed to find this line.

The truth is that much of Microsoft’s decision-making as a publisher seems to come from a place of insecurity. Burned by its experiences with Bungie, Lionhead, and Rare, the company began a partial retreat from first-party development under previous Xbox boss Don Mattrick. When the resulting weakness of its slate of games became all too apparent, Mattrick’s successor Phil Spencer began a massive overcorrection, buying studios left, right, and center.

Some of these acquisitions worked out better than others. Obsidian Entertainment has released four games since Microsoft bought it in 2018, and has two more ready to go. Playground Games should have gone just as smoothly; up to the point of its acquisition in 2018, it turned out excellent Forza Horizon games every two years like clockwork. But in the six years since, it has released just one more Forza Horizon and many senior staff have left, while the studio’s beleaguered reboot of Lionhead’s long-dormant Fable series has sucked up untold time and resources and remains at least a year away.

If the goal of the spending spree was to turn Xbox into a first-party powerhouse with system-selling exclusives to rival Nintendo and Sony, Microsoft has failed — or, arguably, overshot the mark. The acquisitions of Bethesda and Activision Blizzard brought it properties like Call of Duty, Warcraft, and The Elder Scrolls that were too big to make exclusive. Combined with a strategic shift away from consoles and toward PC, subscriptions, and cloud gaming, Microsoft has become something quite different: the biggest game publisher the world has ever seen, bigger than any platform. In that context, nurturing vanity projects like Everwild or resuscitating old IP like Perfect Dark simply isn’t a priority.

If that were the only reason for this wave of cancellations and layoffs, it would be a terrible shame, but a rational reality. But the darker cloud hanging over the story is that Microsoft has — consistently and repeatedly, over decades — shown it has no aptitude for running the creative industry it just bought half of. If the mismanagement doesn’t end, there will be worse to come.

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