Xbox boss Phil Spencer says recent games industry layoffs were due to lack of growth

Phil Spencer has talked about the nature of layoffs, and their links to industry growth, in a new interview.
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Phil Spencer, CEO of Gaming at Microsoft, has spoken about the recent spate of games industry layoffs in a new interview, tying them to a concerning lack of growth in the global games industry. According to Spencer, when Microsoft laid off 1,900 staff in early 2024, it was the result of a shrinking games landscape, and a need to satisfy shareholders.

“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 scrutinised is the cost side,” Spencer recently told Polygon.

In conversation, Spencer emphasised that Microsoft remains a business, and is beholden to expectations of continuous growth, regardless of economic circumstances. Shareholders expect growth, and therefore growth must be achieved by any means necessary – even if that means cutting staff in a time of hardship.

Read: Microsoft lays off 1,900 workers at Xbox, Activision Blizzard and ZeniMax

“We’re a business,” Spencer said. “I’ve said over and over. I don’t get any luxury of not having to run a profitable growing business inside of Microsoft … 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?”

According to Spencer, the games industry is not currently growing, and it’s for this reason that layoffs became necessary. As for the reasons why growth has slowed over the last two years, an array of complicated factors are involved.

Consider the ballooning costs of game development, the increasing popularity of free-to-play games, the habits of young players, and increased living costs forcing people to make tougher decisions about where to spend their money. All of these factors have contributed to change, but it’s unclear how they can be meaningfully addressed, so the industry can continue to grow as it has over the last two decades. Perhaps reaching for continuous, high growth is unsustainable.

Whatever the future holds, it’s clear there are tough questions that need to be asked. The games industry is currently facing a major turning point from which it must evolve. In the long term, that can’t come at the expense of hard-working employees looking to make a stable living, regardless of shareholder whims.

Leah J. Williams is a gaming and entertainment journalist who's spent years writing about the games industry, her love for The Sims 2 on Nintendo DS and every piece of weird history she knows. You can find her tweeting @legenette most days.