Satya Nadella Backs Xbox Streamlining Under Asha Sharma

Microsoft CEO Satya Nadella has expressed confidence in new Xbox chief Asha Sharma's leadership. He praised the ongoing team streamlining as 'great to see' during an interview on the Sources Podcast.

Nadella clarified that the mandate for Xbox to become a sustainable business came from him, not Sharma. He stated that the goal is to be a great publisher and platform provider for games across both PCs and Xbox consoles.

Clarifying Xbox’s dual role as publisher and platform

Nadella reiterated that Microsoft plans to operate as both a major game publisher and a platform provider. The company intends to keep Xbox as a platform business rather than shifting entirely toward game publishing. He expressed feeling fantastic about Xbox's studios, IP portfolio, and ability to produce great games, citing Minecraft and the Activision Blizzard fleet.

Streamlining tied to layoffs, studio closures, and canceled projects

The restructuring has resulted in thousands of layoffs, studio divestments, closures, and game cancellations. In July, Xbox announced plans to lay off 3,200 staff, with around half enacted immediately. Last week, another 268 roles were cut. The stated goal is to reduce headcount by 3,200 employees before the end of the fiscal year.

Xbox planned to divest five studios in July. Consultation with Arkane remains underway and is expected to continue through the end of the year. Xbox will also begin consultation with employees on a proposed closure for Ninja Theory. Chief content officer Matt Booty said: "Unfortunately, two separate agreements for Ninja Theory fell through."

Microsoft has reshuffled its games division, moving Halo, Rare and Age of Empires under Activision's umbrella. Many games have been canceled and several studios have been severed or consolidated.

Growth target tied to sustainable model and first-party strength

Nadella linked Xbox’s return to growth in the next fiscal year to inventing a sustainable business model. He said they need to invent the right sustainable business model that allows them to deliver gaming to more and more people. Producing strong first-party games will form an important part of the strategy to return to growth.

Historical context and internal skepticism

Nadella traced gaming’s role in Microsoft's DNA to Flight Simulator, which predates Windows. However, some veterans question whether his sustainability focus is the root of current issues. John Kimmich, a 16-year Microsoft veteran, is among those who believe Nadella's outlook may be part of the problem.

An id Software employee stated that inside Xbox, the only concrete thing communicated is a desire for higher profits, and they want it now. Nadella acknowledged significant headwinds like the component crisis affecting Asha Sharma's ability to accomplish the mandate. Xbox is 75% through an urgent restructuring plan.

Xbox is preparing for another busy release week with 37 new games arriving from September 28.