As reports continue to emerge about potential layoffs and restructuring across Microsoft's gaming division, a new report from Bloomberg journalist Jason Schreier suggests that some Xbox-owned studios may now be facing the consequences of decisions that were previously encouraged by company leadership.

Speaking in a recent video discussion, Schreier described growing concerns within Xbox and claimed that some employees have used the word "bloodbath" when discussing the scale of expected layoffs and studio closures that could take place after Microsoft's fiscal year ends on June 30.

Xbox’s Long Road to Its Current Challenges

According to Schreier, many of Xbox's current struggles can be traced back years, beginning with the troubled launch and messaging surrounding the Xbox One generation.

While the Xbox 360 helped Microsoft establish a strong position in the gaming industry, the Xbox One era saw the company lose significant market share to Sony's PlayStation 4. Since then, Microsoft has invested heavily in rebuilding its gaming business through studio acquisitions, subscription services, and major purchases such as the acquisition of Activision Blizzard.

Schreier argued that these investments coincided with rapid growth during the pandemic, followed by a difficult market correction that has affected much of the gaming industry.

Game Pass Strategy Faces Increased Questions

One of the report's central points focuses on Xbox Game Pass and its long-term impact on game development and revenue.

Over the past several years, Xbox encouraged many of its studios to create unique and diverse projects that could strengthen the Game Pass library rather than focusing solely on blockbuster commercial hits.

Studios such as Double Fine and Compulsion Games released critically praised titles that contributed to the service's catalog, even if they did not generate massive sales figures.

According to Schreier, some developers now feel they are being judged by traditional performance metrics after years of being encouraged to prioritize Game Pass value and player engagement.

"A lot of these studios made plenty of their own mistakes, but in a lot of ways they're being punished today for following orders," Schreier said. "For listening to what they were told a few years ago."

Recent Closures and Cancellations Raise Concerns

Xbox has already undergone significant restructuring over the last two years, including multiple rounds of layoffs and the closure of studios such as Arkane Austin and Tango Gameworks. Several projects have also reportedly been canceled, including Perfect Dark, Everwild, and Project Blackbird.

These developments have fueled concerns about stability within Microsoft's gaming division and raised questions about the future direction of Xbox's first-party portfolio.

Schreier suggested that the uncertainty surrounding projects, staffing, and corporate priorities has made it increasingly difficult for teams to operate effectively.

"One of the reasons Xbox studios have struggled to make great games over the past decade is this uncertainty," Schreier said. "It's really hard to make great art when working under the fear of layoffs and turbulence and cancellations and shutdowns."

More Changes May Be on the Horizon

Reports indicate that Microsoft could begin a new wave of restructuring once its current fiscal year concludes. While no official announcements have been made regarding specific studios or teams, rumors suggest that even major divisions within Bethesda could face cuts.

Additional reports have claimed that studios including Compulsion Games, Double Fine, and Ninja Theory have explored discussions about potentially regaining their independence, though no formal plans have been confirmed.

For now, Xbox remains publicly focused on its upcoming lineup of games and ongoing Game Pass strategy. However, with growing reports of layoffs and organizational changes, many within the industry are closely watching to see what Microsoft's next move will be.

As of this writing, Microsoft has not officially announced the rumored layoffs or studio closures discussed in these reports.