On January 26th, Phil Spencer, CEO of Microsoft Gaming, announced via an internal memo that an unannounced Blizzard survival game, which was in early development, had been cancelled. This decision was made in conjunction with the layoffs of 1,900 employees across Microsoft Gaming, affecting multiple teams within Blizzard, as well as the broader Xbox and ZeniMax Media operations.

The survival game, which did not yet have a title, was first revealed by Blizzard in January 2022. It was described as an all-new PC and console title featuring new stories and characters within the popular Blizzard game universes of World of Warcraft, Overwatch, Diablo and more. At the time, Blizzard put out a call to hire developers to work on building out the mysterious project.

Just over one year later, the nascent game has been scrapped entirely. Spencer’s memo cited a “focus on products and strategies that hold the most promise for Blizzard’s future growth” as reasoning for its cancellation. The resources previously devoted to its development will shift to other early-stage projects within Blizzard instead.

The elimination of the survival title coincides with 1,900 layoffs across Microsoft Gaming, impacting approximately 8.64% of the division’s total staff. Matt Booty, head of Microsoft game content and studios, confirmed in a separate internal memo that Blizzard’s development teams, shared services groups and corporate functions have all been affected.

The job losses come in the wake of Microsoft’s long-awaited $68.7 billion acquisition of Activision Blizzard, which closed last October after securing final regulatory approval. At the time of the merger’s announcement in early 2022, assurances had reportedly been made by then-Activision Blizzard CEO Bobby Kotick that Microsoft was “committed to trying to retain as many of our people as possible.”

Kotick himself departed Activision Blizzard on January 1st, 2023 upon completion of the Microsoft deal. Today’s layoffs also follow the exit of Blizzard president Mike Ybarra, a former 20-year veteran of Xbox and Microsoft. Blizzard’s chief design officer Allen Adham is also leaving the company, according to Booty’s memo.

In his memo, Spencer asserted the cuts “will best enable Blizzard and Xbox to deliver ambitious games…on more platforms and in more places than ever before,” while positioning the company for “sustainable growth.” Laid off employees are receiving severance packages in accordance with local employment laws.

The elimination of 1,900 roles builds on 10,000 positions cut across Microsoft last year amid a shifting economic climate. The move also joins recent workforce reductions at other leading gaming and technology firms such as IBM, Google, Unity, eBay and more amid a widespread pullback in hiring and spending.

For Microsoft, whose $3 trillion market valuation now trails only Apple, the shakeup points toward redundancy amid an expanding gaming empire spanning Xbox, Bethesda and now the Activision Blizzard stable of blockbuster franchises. While undoubtedly painful for those impacted, Spencer maintained that for Microsoft Gaming, realignment will “support the whole of our growing business” in 2024 and beyond.

Here’s Microsoft Gaming CEO Phil Spencer’s internal memo in full:

It’s been a little over three months since the Activision, Blizzard, and King teams joined Microsoft. 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. Together, we’ve set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth.

As part of this process, we have made the painful decision to reduce the size of our gaming workforce by approximately 1900 roles out of the 22,000 people on our team. The Gaming Leadership Team and I are committed to navigating this process as thoughtfully as possible. The people who are directly impacted by these reductions have all played an important part in the success of Activision Blizzard, ZeniMax and the Xbox teams, and they should be proud of everything they’ve accomplished here. We are grateful for all of the creativity, passion and dedication they have brought to our games, our players and our colleagues. We will provide our full support to those who are impacted during the transition, including severance benefits informed by local employment laws. Those whose roles will be impacted will be notified, and we ask that you please treat your departing colleagues with the respect and compassion that is consistent with our values.

Looking ahead, we’ll continue to invest in areas that will grow our business and support our strategy of bringing more games to more players around the world. Although this is a difficult moment for our team, I’m as confident as ever in your ability to create and nurture the games, stories and worlds that bring players together.

Phil

Here’s the full memo of Microsoft’s game content and studios president, Matt Booty:

Blizzard team, 

As you may have read in Phil’s note, today is a challenging day as we say goodbye to some of our colleagues. This is a difficult process, but it is one that will best enable Blizzard and Xbox to deliver ambitious games for our players on more platforms and in more places than ever before. We are moving forward with a more focused strategy across Microsoft Gaming that sets us up for sustainable growth and aligns our talent and resources to our top priorities. 

In addition to the events today, Mike Ybarra and I have been discussing his future and some of his personal passions for some time. As many of you know, Mike previously spent more than 20 years at Microsoft. Now that he has seen the acquisition through as Blizzard’s president, he has decided to leave the company. As we move forward, we will continue to build on the positive momentum that Mike created and strive to continue exceeding the expectations of Blizzard’s players. I want to thank Mike for his leadership and for his partnership and counsel since the deal closed. I know he plans to travel and spend more time with his family. We wish him the very best.

Additionally, Allen Adham, Blizzard’s Chief Design Officer, is leaving the company. As one of Blizzard’s cofounders, Allen has had a broad impact on all of Blizzard’s games. His influence will be felt for years to come, both directly and indirectly as Allen plans to continue mentoring young designers across the industry.

The new Blizzard President will be announced next week. 

What Happens Next 

Those who are impacted are being informed in meetings starting today. Given the challenging day ahead, anyone who is set up to work from home and would prefer to, can work remotely today. Due to time zones and local holidays, some impacted employees in APAC and EMEA will be informed later this evening and into early next week. After the notifications are complete, leaders will bring their teams together. Please be mindful of this process in your conversations and outreach during these next few days. 

Details on Today’s Actions 

The changes announced today reflect a focus on products and strategies that hold the most promise for Blizzard’s future growth, as well as identified areas of overlap across Blizzard and Microsoft Gaming. Today’s actions affect multiple teams within Blizzard, including development teams, shared service organizations and corporate functions. As part of this focus, Blizzard is ending development on its survival game project and will be shifting some of the people working on it to one of several promising new projects Blizzard has in the early stages of development. 

No matter the reason behind these decisions, they are never made lightly. Changes like these affect the lives of colleagues and friends, and we are all grateful for their meaningful contributions to Blizzard and its world class lineup of games. As Phil stated, we will provide our full support to those who are impacted during the transition, including severance benefits informed by local employment laws. 

I understand that this is a challenging time and that it can be a lot to process. I haven’t met many of you yet, and hearing about these decisions from me may be difficult. Today, I am here on Blizzard’s Irvine campus, and I am personally committed to supporting you as teams and individuals, keeping you informed, and approaching this transition period with care and transparency. 

Thank you for working through these changes with us. Together we will continue to create amazing games for our players, with a culture that empowers everyone to be their most authentic selves and do their best work.

Matt