The great Xbox reset has officially begun. Five studios at Xbox have been revealed to be moving away from the Xbox brand. Two are going independent, two are being sold to new owners, and one remains in limbo. You can read my separate breakdown of the affected studios here.

For this article, we’re going to focus on the more gruesome part of the story: layoffs.

According to reporting from Bloomberg, Tom Warren at The Verge, and Christopher Dring at The Game Business, Xbox has laid off around 1,600 people today, Monday, July 6. However, it does not end there. Another 1,600 jobs are expected to be eliminated over the coming months, or over the rest of Microsoft’s fiscal year.

Xbox has confirmed the numbers: 1,600 today, with another 1,600 to come.

That means today is not the end of the bloodbath for many Xbox employees. Today is just the beginning of a year-long period of uncertainty.

These cuts are happening as part of a wider Microsoft layoff round. Bloomberg reports that planned cuts across Microsoft total around 6,400 jobs, with roughly 3,200 of those coming from Xbox. Warren, meanwhile, reports that Microsoft is laying off 4,800 employees today, with more than 30% of those cuts coming from Xbox.

But rather than getting bogged down in the company-wide numbers, let’s focus on Xbox itself.

According to Schreier, Xbox had around 16,000 employees before this restructure. After the full 3,200 cuts, it will drop to roughly 12,800. That is around 20% of Xbox’s workforce.

The truly scary part of these layoffs is not just that 1,600 people have already lost their jobs today. That is horrifying enough. Staggeringly, though, it may not even be enough to take the title of the biggest single layoff event in the video game industry. Microsoft previously announced plans to cut 1,900 people across Xbox, ZeniMax and Activision Blizzard in January 2024, a story I covered at the time.

No, the truly gruesome part is that another 1,600 people are now going to spend the coming months wondering if their job is next.

Who might it be? What studio might it be at? Nobody really knows.

In a new video discussing his reporting, Schreier says Xbox Game Studios will see big cuts, and that ZeniMax will also be hit hard. Activision Blizzard will also see some cuts, but seemingly fewer than both ZeniMax and Xbox Game Studios.

The Game Business likewise reports that the Xbox platform team will be hit hard, and that Xbox hopes these cuts will simplify the business and allow it to move faster.

In other words, this is not one troubled studio being trimmed. This is Xbox being cut across multiple studios, publishing, platform, services and management. Nobody is safe.

In Asha Sharma’s internal memo, she is extremely blunt: “Our business today is not healthy.”

According to Sharma, Xbox is operating at margins three to ten times lower than comparable platform and publishing businesses. She says Xbox must “reset.”

Platform teams are reportedly 40% larger than they were at the start of the generation, while player base and playtime have both declined.

In essence, Microsoft’s argument is that Xbox has become too large, too layered and too slow. And the solution is thousands of people losing their jobs.

For Xbox and Asha Sharma, this is the promised reset. And, if I’m going to be blunt, it is probably the most expected and needed reset the company could have made. That doesn’t mean I like it or want it. If Xbox is going to survive in anything like its current form, this level of cutting may have been almost inevitable. Something was going to have to change.

But for the employees, a reset is nothing more than a disaster. A lot of people no longer have a job as of today. A lot more will no longer have a job over the next year. And perhaps the worst part of all is that we do not even know if this is going to work.

Xbox is in such a strange, difficult position right now that it is impossible to say whether this level of cutting can save the brand, or simply turn it into something very different from what people once understood Xbox to be.

That is not meant to be pure doom and gloom. Xbox still has a chance. It still has enormous franchises, talented studios, Game Pass, cloud infrastructure, PC, and the ability to become the world’s biggest third-party publisher if that is where this road ultimately leads.

I am convinced Xbox will continue to exist in one form or another for years to come.

I am just far less convinced that it will look anything like the Xbox we used to know.

And I want to end this on a more personal note: this week has been a hell of a time for video games.

Sony’s reported move away from physical games in 2028 has raised questions about ownership, access, preservation and whether the next PlayStation will be digital-only. And now the Xbox bloodbath has begun, with thousands of people losing their jobs and even more left waiting to find out if they are next.

The industry feels like it is in turmoil. Studios and budgets are getting enormous. Sales expectations are going through the roof. The cost of everything is insane. Grand Theft Auto 6 is looming over the entire business, potentially dragging us toward an $80 future that every other publisher will want to chase.

It is a pretty miserable time right now.

It is a hard time to be a fan. It is a hard time to want to read the news. It is a hard time to want to write about the news.

But it is what it is.

Let’s just hope things get better.

And let’s hope that future still has Xbox in it.