Phil Spencer Explains The 1,900 Layoffs In Microsoft Gaming

Phil Spencer has gone on record on why Microsoft Gaming suddenly fired 1,900 of their own employees after the Activision Blizzard King merger was finalized months earlier.

We reported on the 1,900 layoffs last January, which also claim very quickly after the company made contact with Activision’s many studios, and they processed the executive reshuffling that put Phil in charge as the CEO of Microsoft Gaming. That shakeup also placed Matt Booty as the head of Microsoft Game Content and Studios, and Sarah Bond as the president of Xbox.

The FTC sought to use these layoffs in court, claiming that this indicated that Microsoft was not allowing Activision Blizzard King to operate independently as they promised. Microsoft then responded that Activision was planning these layoffs before the deal was finalized, and also made clear that the deal had changed in the course of the FTC appeal.

In an interview with Gamefile, Phil explained in his own words why Microsoft decided to have these layoffs. In his own words:

“I have a commitment to the company on the Xbox business being a profitable and growing part of Microsoft. And I need to put us in the best position for long-term growth. Most of that is about building great products that exceed their expectations and find millions of customers.

But honestly, you know, the cost of building the products inclusive of the people who work on them—I need to make sure we have enough of the right people and the right number of people in the right places for us to succeed.”

While Microsoft made the reasons for the layoffs confidential even to the employees themselves, we do know that they did not just fire people because there were other Microsoft employees with equivalent abilities. Activision and Blizzard are being allowed to operate separately from Microsoft, and in fact seem to be running independent of each other.

To paraphrase Phil here, while Microsoft is worth billions as a whole, each division has to prove they are profitable and aren’t just losing the company money. Here’s one way of seeing it – a CEO who favors a division that isn’t making money, is literally squandering that money, and could put the viability of the company at risk. That doesn’t just harm the company’s good name, or their profits – it could mean people who are doing good work, and are actually valuable to the company, could lose their jobs for no good reason than other people bankrupting that same company.

Phil had more to say about why they fired so many people:

“I’d say it was a combination of us looking across the full portfolio of what was working, which we have to do, and running the business, as well as areas of alignment between Activision, ZeniMax and Xbox.”

Phil would likely receive more criticism for his comments in isolation, but this is happening as we are still under a wave of industry layoffs and restructuring. Layoffs have already also happened at Sony owned studio Bungie, under even more onerous circumstances, and the worst offender so far has been Embracer Group.

Still, no one wants to hear about people losing their jobs. It also smarts that this is happening in an entertainment industry, who works to help their customers forget about their troubles in their own lives. We can only hope that the prevailing business conditions in the industry turn around to end this wave of layoffs sooner rather than later.