The recent news of Microsoft closing down Hi-Fi Rush studio Tango and Prey’s Arkane Austin has sent shockwaves through the gaming industry. It has come to light that these closures were part of a broader cost-cutting initiative by the tech giant. According to reports, more cuts are expected to follow, with ZeniMax studios being the main target.
Sources familiar with the company’s plans have indicated that Xbox has offered voluntary severance to producers, quality assurance testers, and other staff at ZeniMax. During a meeting with ZeniMax staff, Xbox president Matt Booty expressed concerns about the studios being spread too thin and understaffed. Booty likened the situation to spreading peanut butter on bread, indicating a lack of resources to support the growing demands of the studios.
Head of ZeniMax, Jill Braff, acknowledged the challenges of managing nine studios worldwide with a lean central team. She stated that the recent closures of Tango, Arkane Austin, Mighty Dog, and Roundhouse were necessary to free up resources. Braff emphasized that the studios were on the brink of toppling over due to the increasing workload and limited support.
The closure of Arkane Austin has disrupted the development of additional content for the vampire live service Redfall and potentially a new installment in the Dishonored franchise. Xbox had previously lauded Hi-Fi Rush as one of the most successful launches for Bethesda and Xbox in recent years. The closures have raised concerns about the future of innovative and critically acclaimed games from the affected studios.
ZeniMax was acquired by Microsoft in 2020 for $7.5 billion, marking one of the biggest acquisitions in the gaming industry. The acquisition of ZeniMax was followed by Microsoft’s acquisition of Activision Blizzard for $76 billion. The increasing scrutiny on Xbox from Microsoft’s leadership following the Activision Blizzard deal may have influenced the cost-cutting measures across the division.
The stagnation of Game Pass growth has been cited as a possible reason for the cost-cutting measures at Xbox. Analysts have noted that Game Pass spending peaked from late 2019 to early 2021, but has since plateaued. US consumers still prefer purchasing games and add-on content over subscription-based models like Game Pass. This shift in consumer behavior may have prompted Xbox to reassess its strategy and focus on more traditional game releases.
The Game Pass model was initially seen as a platform for smaller, more creatively risky games that may not meet traditional sales expectations. However, with the slowdown in Game Pass growth, Xbox appears to be more risk-averse when greenlighting new projects. This shift in strategy could have a significant impact on the diversity and innovation within the gaming industry, as studios are less inclined to take creative risks.
Uncertainty in the Industry
The closure of Tango and Arkane Austin, as well as the broader cost-cutting measures at Xbox, have created uncertainty within the gaming industry. The recent nuking of Phil Spencer’s Fallout 76 camp serves as a metaphor for the challenges and setbacks facing the industry. As stakeholders navigate this turbulent period, the future of game development and innovation hangs in the balance.
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