Microsoft Game Studios hit hard by layoffs

While the video game industry has been far outperforming many others in the economic downturn, and has even appeared recession-proof as sales have soared, there have been a number of layoffs and studio closings.

Microsoft is shutting down ACES, one of its wholly owned studios, which produced the company's longest-running game franchise, Flight Simulator. But Microsoft said Flight Simulator will live on in one form or another.

(Credit: Microsoft Game Studios)

Now, according to Gamasutra and VentureBeat, as part of its move to cut 5,000 jobs over the next 18 months, Microsoft has axed hundreds of positions from its game division.

The main victim was ACES, a wholly owned studio producing the venerable Flight Simulator franchise.

A Microsoft representative confirmed on Friday that ACES will be shut down but added that the company remains committed to the Flight Simulator franchise, though she would not provide details.

But while Microsoft's game division was hit hard, VentureBeat reported that its Lionhead and Rare studios--the former just published Fable II--as well as its Forza Motorsports studio were untouched.

Microsoft did not immediately confirm whether those studios are being affected by the layoffs.

[umbrae]

Of course, the companies making stuff that doesn't sell are canned, and the money makers are left alone. Who still buys Flight Simulator? This is non-news, really...

[badasscat]

Who still buys any PC game that isn't called "World of Warcraft"? But, as PC games go, Flight Simulator continues to be among the most popular. It's the "Dark Side of the Moon" of game software - it's evergreen. It doesn't sell only in the month after its release, it continues selling throughout its lifespan. In fact, FS 2004 remains more popular than FSX because of the ease of developing add-ons (this was really the first community-supported game). That might be one of the problems - the next version was supposed to go back to the system FS 2004 used, but FSX was a bit of a disappointment to a lot of people and MS might not have wanted to risk that again given the relatively light (though reliable long term) profits from the series.

[aMUSICsite]

Isn't the reason it sells & continues to sell because it's bundled with new PC, which is how MS makes most of it's money...

[getwired]

Actually I think Flight Sim is still pretty successful. It's probably the general PC games titles that will go bye bye as a result.

[MSSlayer]

A flight sim is a very complicated "game'.<br /><br />They won't just be able to hand it to anyone. Why don't they admit they are going to dumb it down?<br /><br />No, I don't play it, but they have so many crappy game development houses, why rip up a team that actually does quality work?<br /><br />What MS should have done is ax the Zune and shred the xbox division. Talk about failures in marketing(Zune), technology(both), and profit(both).

[AppleSuxLeo]

You are a moron. CNBC was just explaining that XBOX turned in it`s second straight quarter of profit for MSFT and out-sold the PS3 by more than 2-to-1.

[spacydog]

Zune and Xbox actually are bread winners on the long term. If you are so narrow minded as to see them only in the short term, then you obviously don't run a company.

[xcal78]

Nice so 2 whole quarters of profit for the xbox racking up billions of dolalrs of loss a year since 2005. Yea sign me up for that! They are atleast -10 billion in the hole since 2005 on the xbox. I'd love to know when they see a positive ROI from those losses. It won't be before they need to make a new system and go negative again.

[ralfthedog]

They need to hang on to the 360 as long as it is bringing in cash, then get out of the market at the end of it's life.

[basraw]

" by MSSlayer January 23, 2009 11:35 AM PST<br /> A flight sim is a very complicated "game'."<br /><br />Non-sense. The Commodore 64 had a TON of flight simulators. <br /><br />Why aren't there more on Xbox or PC?

[bwvla]

Microsoft has been quite successful on the software side of game development, and frankly thats the more profitable side of the equation. If Microsoft was focusing on just the software end of the spectrum they could be selling ps3 and wii games by the truck load from their relatively successful game houses. Halo xxx would probably look better on a ps3.<br /><br />They however seem dog determined to go outside their software roots to create consumer electronics such as the Xbox and Zune. While the Xbox has been a decent platform in terms of performance and sales but it has a downright dismal quality record, its ui is unintuitive, and its still selling at a loss. The Zune while having some creative wireless ideas is clunky product that in 3 software version and 2 hardware generations has failed to prove competitive.<br /><br />I however believe the issue is that Microsoft does not see the xbox as a game platform, but as their beachhead into the futuristic "home media server" market. Its only a matter of time till broadcast television is not a scheduled but an on-demand downloaded experience, the same with movie rentals, and of course other entertainment like games. They have shuffled various products for years (web tv, xp windows media center, trying to angle into this. <br /><br />However this move to close the game studios seems perplexing as it could affect their Xbox home media strategy. But then again Flight simulator is a PC game, and perhaps PC and non-internet enabled games are where the game cuts are focused.

[viper396]

Obviously you haven't got the slightlest clue about what you're talking about. The Entertainment division, particularly the Xbox, is making money and in the black. Only a complete idiot would even think about shredding it. Next time, check your facts before posting. Moron. <br /> <br />Let me guess....you probable own a PS3 and and iPod and can't stand to see any competition.

[dhavleak]

MSSlayer -- a lot of people lost their jobs yesterday. Don't use that as fuel for your politics.

[xcal78]

From 2001 till now MS has go negative between 8-10 billion dollars on the xbox. 8 straight years of negative profits in a row and your telling me it will turn a profit in the long term? I guess 8 years is short <br />term for gaming system then? I'd be shocked if they could pull it to break even in the next 8 years! <br /> <br />2001-2005: Negative 4 billion dollars <br />"Wednesday, September 28, 2005 <br /> <br />Since launching Xbox in 2001, the Microsoft game console project has resulted in a $4 billion loss for the company, an amount estimated to be approximately equal to 10% of Microsoft's total cash reserves. <br /> <br />The Xbox game console was marketed by Microsoft as a loss leader with the plan of establishing a profit base derived from game sales and licensing to third party game publishers. <br /> <br />Microsoft intends to continue their loss leader strategy with the successor to their console, the Xbox 360, which will be released November 22, 2005, just in time for the Christmas buying season." <br /> <br />2006: Negative 1.29 billion dollars <br />"Despite losses in its game division of $1.26 billion for the fiscal year 2006" <br /> <br />2007: Negative 1.89 billion dollars <br />"Xbox 360 warranty charges drove Microsoft's Xbox division to post a $1.89 billion operating loss for the fiscal year." <br /> <br />2008: ??? - can't find anything but you can guess it's about 1.2-1.5 billion negative <br /> <br />Other: Negative 1 billion dollars <br />"income for 4Q07 is distorted by the $1 billion dollar charge for defective Xbox consoles"

[xcal78]

I'd say they need a government bailout just like the auto industry wouldn't you?

[xcal78]

2008: Positive 426 million dollars <br />"Microsoft Xbox Division Sees $426m Profit In Fiscal 2008" <br /> <br />So they might only be down 6-8 billion dollars so far. Sign me up for that deal! 8 years of work for negative 6 to 8 billion woo hoo!

[seven7dust]

@xcal78<br />Ms makes enough money on their core business Windows and software<br />they definitely don't need a bailout !<br />In fact they make so much spare cash <br />that they decided to enter other markets<br />and compete even on a loss eg-: Zune,Xbox,Windows Live etc<br />they continue to do so because of their monopoly in the PC Industry<br /><br />which is just not fair for other companies like Google/Sony etc.

[xcal78]

AppleSuxLeo your incorrect Q4 2008 wasn't profit I have no idea where you get your bad info from. <br /> <br />"In the fourth quarter, losses were estimated at $188 million, which is a very good result considering the fact that the fourth quarter of 2007 saw losses of $1.2 billion."

[7679vaska]

Layoffs at EA too:<br /><br />"METRO VANCOUVER - One day after releasing its hotly anticipated video game Skate 2, Electronic Arts confirmed it was making "significant" layoffs on Thursday at its Black Box studio in Vancouver."<br /><br />http://www.vancouversun.com/Life/announces+significant+layoffs+Vancouver+Black+studio/1207476/story.html

[bwvla]

Steve Ballmer should step aside.<br /><br /> Ballmer?s jockish business savvy was a great balance for then CEO Gates? more technical nature a decade ago. But his viewpoints have not proven effective as the sole driving force since he?s taken over for Gates. Microsoft?s momentum from the Gates years carried him through the first couple years of his reign with growth, but now his missteps have lead the company to a failed major product, layoffs, lawsuits, heightened pressure from competitors, as well as continual bad press. <br /><br />Microsoft needs fresh leadership. The Microsoft board should cease their buddy buddy relationship with Ballmer in favor of its employees, investors, and customers.

[Compumind]

Very interesting! <br /> <br />I have had nothing but problems with running Flight Simulator X, since the Acceleration Pack! <br /> <br />The support from the "other side of the world" was terrible. <br /> <br />No tears, here!

[Pointedly]

Microsoft Flight Simulator X with Acceleration Pack and DirectX 10 running on a quad-core computer with plenty of RAM and with one of the new high-end graphics cards, impresses everyone. FSX is one of the most impressive pieces of software in the world. There is a night and day difference between running FSX with DirectX 10 and running it with DirectX 9. Likewise, a high-end graphics card, gigabytes of RAM, and a fast multi-core CPU are absolute requisites for true appreciation of the software. Without a proper platform for maximizing the program's capabilities, Flight Simulator 2004 remains attractive to some people just as Windows XP remains attractive to people who have a computer system with insufficient power to take advantage of Vista. But the difference between running FSX with Acceleration Pack and DirectX 10 and running Flight Simulator 2004 with DirectX 9 are greater than the differences between running Vista and running XP. If Microsoft doesn't make something to top FSX, someone else will...and I'll buy from them. Microsoft's move to close ACES Studio is disappointing...and not just to me. It slows progress in flight simulation.

[rouse51]

I would have to agree with the others above that say keep Flight Sim development open. By the way you don't go up to wall street and brag about a year of profits. You take division as a whole. MS gaming division includes the games and systems. If you can show investors that you will have a long term ROI then you keep it open. If your flight sim takes up 5000 employees you have to let it go. If the 360 is finally in the black you ride it out to see if you can recoup the 10 billion in losses. If it can't keep pace with the Wii then they might need to shut it down. It will soon come to a point when the DVD drive size limitations in the 360 will become a drag on the game development. Then they will have to make a choice on if they should go in the black again. That time is coming soon.

[laughing123]

Anyone who thinks the Xbox division should get the ax is a moron. Everyone knows that new consoles are difficult to get the ball rolling on, and are almost assured to lose money initially. The original Xbox was just Microsoft testing the waters; the 360 is their first real attempt. The Xbox 360 is finally reaching the sweet spot in the market where it is affordable, and production costs are lowering beneath this point, making console sales a positive instead of a negative. The software side is a potential goldmine, and Xbox live is Microsoft?s ticket to the big show. The 360 provides a beachhead for Microsoft into all home entertainment, both diversifying their company and opening a massive revenue source (especially video rentals). Looking at the Xbox division?s numbers and saying "they're in the red, stupid Microsoft!" just tells other people you aren't capable of seeing a larger picture.

[xcal78]

When a company is negative 20% of it's total net worth on a project it better be turning a profit not a loss. Basic economics my friend. If MS wants to blame anything for it's troubles they got the Xbox not Vista as Vista is turning a very nice profit. MS can keep it's attempt to get into yet another market and lose but all the lay-off are Xbox's fault clear as day.

[drumheadted]

"Everyone knows that new consoles are difficult to get the ball rolling on" <br /> <br />Except Nintendo, apparently. I set my coffee cup on a stack of XBox consoles while waiting to get our Wii.

[Goalie35_33]

WIth the xbox....loss or profit, it doesn't matter. Microsoft's digging for something deeper with the xbox than just a video game system. I mean sure, they'd love to see a profit but in the meantime, they have to sustain their losses in order to get to what I feel is their ultimate goal. <br /> <br />I feel full immersion of an all-in-one set top box is 1 or 2 console generations away. The PS3 &#38; 360 made huge strides with their movie download services &#38; PS3's inclusion of blu-ray this time around (why buy a blu-ray unit when you can buy an all-in-one ps3 for an extra $150?). I feel that by the end of the next generation, as prices of hard drive hardware keeps comes down, movie &#38; game sales (&#38; possibly music too) will predominantly be made via the console rather than in-store purchases. Sure, you'll still be able to purchase games &#38; movies from your local Best Buy, but I think that method of purchase is going to slowly fade away for home entertainment purchases. This is what I think microsoft's digging for. <br /> <br />And personally, all of us as consumers should embrace microsoft (and sony for that matter) for doing this, not bash them. If only 1 company controls the living room, we're in a lot of trouble. 2 companies competing is only good news for consumers as we move into the next generation of consoles.