XBOX Layoffs Explained: Comparing It to PlayStation Misses the Bigger Picture

Job cuts have been a common story in the gaming world this year, and XBOX's most recent round has come under fire online. That's usually when people start talking about how it's a lot more stable than PlayStation. However, the actions of the bulk of the industry are not the ones receiving the most attention.

XBOX said it would cut 3,200 jobs, and 1,600 of those cuts had been confirmed this week, with the other 1,600 to take place over the next calendar year. When compared to the overall Microsoft workforce, the cut is 2.1% of the company's employees, while compared to XBOX, it's 20% of the staff.

The Numbers Behind XBOX's Layoffs

The logic used is based on the XBOX at 3% profit. A typical premium savings account might pay 4% interest, while both the S&P 500 and the Dow Jones Industrial Average have averaged 9% to 11% over the past five years. Even on paper, the returns from the bank would have been higher than those from investing in an XBOX, making the margin problem quite serious.

The notion that PlayStation is a safe, well-managed console that differs from XBOX is not borne out by reality. Bungie's management has replaced many of its senior leaders across the board, including founder Jason Jones, after seeing too many of its games fail to meet the studio's revenue expectations set by Sony. 

In addition to Bungie, PlayStation has closed studios in recent years, including Bluepoint, Dark Outlaw, Firewalk, Neon Koi, London Studio, Pixelopus, Japan Studio, and more. PlayStation has also discontinued physical media sales in some regions, canceled previously purchased digital films from users' accounts, raised prices on hardware and services several times, and has had to deal with a fast-changing game market where prices fluctuate at random. 

Previously, approximately 900 people were laid off at successful studios, such as Insomniac and Naughty Dog. None of that takes away from XBOX's issues, but it definitely doesn't make PlayStation seem like a clean alternative.

XBOX and PlayStation are by no means the only ones impacted. Quantic Dream has already undergone layoffs; EA has been sold; Ubisoft has bled its workforce across its various offices, including Halifax, Winnipeg, San Francisco, Belgrade, and Barcelona.

The Activision Blizzard Acquisition in Context

Then there are Iron Galaxy, Eidos Montreal, Epic Games, Redtorm, Crystal Dynamics, Warner Brothers, Riot Games, and more, who've all been hit with layoffs over the course of just this year. Here's the bad news for XBOX: it has been getting almost three times as many news stories as PlayStation this year, mostly because its cuts are more noticeable. However, this contraction trend is not limited to any one publisher.

One of the complaints leveled against XBOX is that the acquisition of Activision Blizzard would not have happened, and that the current round of job cuts would not have taken place. That's looking at the situation from the outside, but what's going on inside Activision?

When the acquisition was announced, it was reported that there were several serious internal problems, and before the deal was finalized, job cuts had been a regular occurrence at Activision.

If the deal had fallen through, Activision would probably have been forced to make several job cuts on products such as Call of Duty, and Bungie, now an independent developer, would have been left with a cash-flow problem. In that case, none of the available options resulted in job losses.

The wave of job cuts across the gaming industry isn't just about a single poor business decision.

In recent years, the acquisitions by XBOX, PlayStation, Embracer, and Tencent were made not from a position of strength, but rather as an understanding that consolidation was afoot became more pronounced. The industry has been growing at a very fast pace for several years, and the latest round of job cuts is a step toward reducing that growth to a more manageable rate.

None of this makes the job cuts any easier to take in, and it's not just thousands of jobs being lost; it affects the people in the industry. But looking at the financial realities of these decisions, such as the low profit margins, high costs, and saturated marketplace, gives you some context that you can't get by focusing on any one company. 

It's only XBOX, PlayStation, and Nintendo that have built vast ecosystems to sustain employment and game development, and a failure at any of these giants would have ramifications far beyond the company. Not all projects can be monetized, and no publisher can believe that their problems are unique and do not stem from the industry as a whole being in decline.