00:00Breaking a few moments ago, Microsoft announcing 6,400 layoffs, half of which will stem from its Xbox unit.
00:06Bloomberg's Jason Schreier covers the gaming industry.
00:10So, Jason, how much are these layoffs due to Microsoft's ailing fate in the stock market recently,
00:16and how much are they just due to the fact that Xbox hasn't had a hit in forever, and what
00:21on earth are those staff doing?
00:23Yeah, so the Xbox organization specifically has been struggling for a couple of years now.
00:30They replaced their CEO in February, who has vowed to do what she calls a reset, and this is the
00:37first step of that.
00:38This is, I think, maybe tangentially, but not really related to the broader cuts at Microsoft, which are about efficiency
00:44and AI.
00:45These are specific problems that Xbox has.
00:48And on those problems, by the way, I was just looking at the CEO of Xbox, the memo he wrote
00:54to staff, which you all covered, saying we must reset Xbox.
00:57I don't know if a pun is the best way to announce that you're laying off more than 3,000
01:02employees, but putting that aside,
01:04how much of this, Jason, also has to do with what we've been learning about how expensive components are with
01:10Xbox itself having to rise prices?
01:12How much is that weighing on the company?
01:15Yeah, it's definitely significant.
01:16Asha Sharma, the new CEO, she actually wrote in a memo a few weeks ago that Bloomberg reviewed that they're
01:25projecting that by 2027,
01:27the price of memory and of storage is going to be five times what it was in 2024 as a
01:34result of this chip crunch that is globally caused by these AI data centers
01:38and everybody needing the chips for that.
01:40So that is definitely significant.
01:42I mean, that is a five, five X increase.
01:44That is a huge.
01:46And so we've seen Xbox raise prices of their consoles in order to account for that, but they're still taking
01:51a big loss on every console.
01:52So that is definitely significant.
01:54I would say the biggest factor here is that Xbox grew way too much without seeing financial growth,
02:00way too, grew too much in employees without seeing the financial growth that they were hoping would correspond with that.
02:07Jason, does this at all relate to the larger parent company?
02:11I realize it's kind of about half and half.
02:13But when looking at this, should we be concerned, for example, and I know you mostly concentrate on Xbox,
02:18so, you know, that taken with a grain of salt, but the overall spending of this company,
02:22because it has been one of the big hyperscalers, the spending,
02:25do Xbox woes translate into greater Microsoft woes and their willingness to continue to throw money at AI?
02:32I don't think the two are related.
02:35Microsoft has a layoff every fiscal year.
02:38I think the part of this that is not Xbox is their kind of typical, quote unquote, efficiency, AI job
02:46cuts that they seem to do every early July.
02:49Um, no, I think Xbox as an organization has its own struggles.
02:53Um, you may recall that a few years ago they bought Activision Blizzard for $69 billion,
02:58an enormous amount of money that they've been spending to try to drive growth,
03:01and they just haven't seen that growth,
03:03which is one of the reasons we're seeing this new leadership regime take over
03:06and, um, come in and do what they're calling this reset.
03:10So, no, I don't think you can really extrapolate much about the broader Microsoft organization from this.
03:15And in fact, Xbox is saying that they are going to reinvest, um, these, this, this money that they're cutting,
03:22um, these jobs that they're cutting,
03:23they're going to reinvest in content in making bigger franchises like Fallout and others, Halo, Call of Duty, etc.
03:30So, um, no, the answer is no.
03:32I don't think you can take much away as far as the Microsoft's broader goals.
03:36Um, this is an Xbox-specific issue.
03:38Um, this is an Xbox-specific issue.
03:38Um, this is an Xbox-specific issue.
03:38Um, this is an Xbox-specific issue.
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