Xbox Begins Cutting Contracts Ahead of Major Layoffs

Xbox is terminating contracts with external vendors as part of a larger strategy to cut costs, coinciding with expected mass layoffs of full-time employees and plans to divest several first-party game studios.

Sources close to the situation have indicated that Xbox is ending various contractor roles as it approaches the new fiscal year. Some contractors who supported Xbox’s major summer showcase in June have already been notified that their positions will not be included in the upcoming fiscal budget.

The company’s fiscal year concludes today, June 30, and significant layoffs affecting full-time staff are anticipated in the coming weeks. Earlier this month, employees at Compulsion Games were informed that their studio was facing challenges, with discussions underway regarding a potential sale or buyout to help stabilize it. Similar talks are reportedly happening at Double Fine and Ninja Theory.

Details surrounding the broader changes at Xbox remain unclear. Recently, there were rumors suggesting that Undead Labs, known for the State of Decay series, might also be at risk, although this claim has not been verified. This speculation has led to questions about whether the studio has been showcasing more footage of its long-awaited sequel, State of Decay 3, to attract outside investment.

Additionally, it was reported that Xbox’s primary PR agency, Assembly, experienced layoffs that affected at least one person working on the Xbox account. However, it was later clarified that these layoffs were part of a broader reorganization at Assembly and not directly related to Xbox.

Meanwhile, employees at larger studios like Activision Blizzard and Zenimax are uncertain about how, or if, they will be affected, while Xbox’s unionized workers are preparing for negotiations. When official announcements regarding layoffs are made, they are unlikely to address the contractors whose steady work is being eliminated.