Bethesda Prepares Major Direction Shift After Xbox Layoffs, Focuses on Core Franchises

Bethesda’s leadership has warned employees that the studio is entering a major shift in direction as Xbox undergoes large-scale layoffs. The message from the top frames the change as necessary to keep investing in long-running game franchises and to rebuild a steadier footing for the business.

Quick facts on the Xbox cuts

• Microsoft plans to cut 3,200 roles across Xbox during the current financial year.
• 1,600 of those positions are slated to be eliminated on July 6.
• Xbox CEO Asha Sharma described the move as the most significant restructure in Xbox history.
• Sharma said Microsoft’s gaming business “is not healthy,” and that Xbox is shedding about one-fifth of its staff.

Microsoft revealed that 3,200 employees at Xbox will be let go during the current financial year, with half of the impact arriving immediately. July 6 marks the first wave, as 1,600 roles are scheduled to disappear that day.

In a memo to staff, Xbox chief executive Asha Sharma called the reorganization the most significant one Xbox has seen. She also argued that Microsoft’s gaming operation is not in a healthy state, tying the cuts to a broader push for growth that will shrink the workforce by roughly one-fifth.

Bethesda takes a particularly hard hit

Bethesda appears to be among the hardest areas affected. Staff across its many development studios have either already been told they’re losing their jobs or are dealing with uncertainty about what happens next.

In a follow-up note to Bethesda teams sent after Sharma’s message, Bethesda boss Jill Braff said the layoffs and the strategic pivot are meant to match the realities of the industry. She also emphasized the studio’s responsibility to operate from a more stable foundation.

Braff added that the company needs to change course to succeed in the future. Her email stressed strengthening the business, returning to sustainable growth, and continuing to invest in both its franchises and its players, while acknowledging that the day itself is undeniably difficult.

What the strategy shift means for Bethesda studios

Beyond the immediate job cuts, the key question for players is what this restructuring changes about Bethesda’s game plans. Without naming specific titles, Braff explained that Bethesda is moving away from a model that mainly plans “what’s next” for each standalone studio.

Instead, she said the company will center decision-making on Bethesda’s strongest franchises. That includes building a content roadmap designed to serve players and the business as a whole, then matching the right talent, tools, and resources across the organization to deliver on those priorities.

IGN has already explored how that framing could translate into real outcomes for Bethesda’s slate. The idea is that bigger bets like The Elder Scrolls and Fallout will receive more focus, while other projects may become less certain.

With Microsoft planning to sell or close Arkane Lyon, there’s also concern that Marvel’s Blade could stall or end up elsewhere. Meanwhile, ZeniMax Online Studios—the team behind The Elder Scrolls Online—has already indicated shifts to its content plan, including changes that come with fewer staff after the layoffs.

id Software, known for the Doom series, has also reportedly suffered substantial cuts. MachineGames has managed to stay afloat despite the cull, and a new Wolfenstein game is described as an open secret at this point.

Even so, the longer-term future of other announcements looks shakier. It’s becoming increasingly unlikely that Indiana Jones and the Great Circle will receive the sequel that the original game appeared to tease at the end.

With a smaller headcount, id Software may end up supporting other work inside Bethesda’s ecosystem. That could include helping with MachineGames’ Wolfenstein 3, and possibly even a future Fallout project, since id’s specialty is first-person shooting.

What remains unclear is where that leaves teams tied to other first-person shooters such as Doom and Quake, especially if support gets redirected to newer priorities.

Outside Bethesda, the Fallout franchise is also in the spotlight from the Xbox side. Obsidian—developer of Fallout: New Vegas—could be asked to craft a new Fallout entry, particularly since the studio does not have a confirmed new project after last year’s Avowed and The Outer Worlds 2 failed commercially.

If that collaboration happens, the question becomes whether Bethesda studios could lend a hand to Obsidian. Braff’s note points to tighter coordination across the organization, sharing expertise and capabilities, and concentrating investments on the opportunities with the greatest long-term potential.

She argued that this approach should help Bethesda better support its franchises and intellectual property through meaningful long-term commitment.

What comes next for Bethesda’s biggest franchises

Bethesda Game Studios currently has The Elder Scrolls 6 in development, with the expectation that it will arrive in the coming years. Development lead Todd Howard has also indicated multiple times that Fallout 5 is next.

However, it was widely assumed that Fallout 5 would not show up for many years. After this Xbox reset, it’s possible that timeline could move closer than players previously expected.

Bethesda boss Jill Braff’s email to staff

Bethesda boss Jill Braff’s email to staff is provided in the source material.

Wesley is Director, News at IGN. Find him on Twitter at @wyp100. You can reach Wesley at [email protected] or confidentially at [email protected].