News Jan 26, 2024 05:13 PM EST

Massive Layoffs at Microsoft: 1,900 Employees Axed Post $69B Activision Blizzard Deal

By Patrick Mondaca

According to an internal memo obtained by the Associate Press, Microsoft Gaming CEO Phil Spencer told employees Thursday that the gaming workforce would be reduced by 1,900, or approximately 8% of its gaming division.

The cuts come a little more than three months after the Activision-Blizzard acquisition, Microsoft's largest ever, and are aimed at reducing "areas of overlap."

The mega-merger, that took almost two years to complete, overcame opposition from United Kingdom and European Union antitrust regulators after months of aggressive lobbying by senior Microsoft executives. 

(Photo : Photo by M Rezaie on Unsplash) Microsoft

While the company eventually prevailed over the U.S. Federal Trade Commission's effort to block the acquisition, an administrative complaint is still pending and the FTC's antitrust regulators are still pursuing the case. The FTC complaint "alleges that the deal would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription and cloud-gaming business."

The U.K.'s Competition and Markets Authority (CMA), which also expressed concerns over the impact of the acquisition on cloud game streaming, faced renewed pressure after the merger was approved by the E.U. in May 2023.

Under a restructured takeover plan submitted by Microsoft to the U.K.'s Competition and Markets Authority (CMA) in August 2023, Microsoft proposed selling rival French game maker Ubisoft exclusive rights to stream existing and new Activision games.

In an August 2023 blogpost by Microsoft Vice Chair and President Brad Smith, Smith said that "Microsoft will not be in a position either to release Activision Blizzard games exclusively on its own cloud streaming service - Xbox Cloud Gaming - or to exclusively control the licensing terms of Activision Blizzard games for rival services." The concession swayed the CMA which gave its approval in October 2023, allowing the merger to go forward. 

The merger of Microsoft and one of the leading gaming companies, Activision Blizzard, the producer and developer of the top selling Call of Duty series, transforms Microsoft into a gaming behemoth. As it stated when it announced the acquisition in January 2022, the merger makes Microsoft "the world's third-largest gaming company by revenue, behind Tencent and Sony." Two years later, the new gaming giant is seeking to realign its strategy to reflect the shift in investor expectations prioritizing efficiency and growth opportunities amidst mounting economic pressures.

"As we move forward in 2024, the leadership of Microsoft Gaming and Activision Blizzard is committed to aligning on a strategy and an execution plan with a sustainable cost structure that will support the whole of our growing business," Microsoft Gaming CEO Phil Spencer told employees.

While the Gaming CEO promised that effected employees would receive the "full support" of the company, these latest cuts follow the 10,000 layoffs by Microsoft announced in January 2023 which let go some of the company's sales and customer service staff. 

The most recently laid off Microsoft employees join those of other tech industry employees let go this year by companies including TikTok, Google, and Meta as concerns over a recession and a new focus on AI cause have prompted hiring freezes and additional layoffs.

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