Bethesda focuses on core franchises after Xbox layoffs

What happened?

On Monday, Microsoft announced the layoff of 1,600 employees from its Xbox division, with plans to eliminate another 1,600 roles during fiscal year 2027. ZeniMax, Bethesda's parent company, was among the hardest hit. Hours later, Jill Braff, head of studios at Bethesda/ZeniMax, sent an internal memo – obtained by IGN – stating that the company needs to 'change course' to be successful. This means shifting from a model centered on independent studios to one focused on the strongest franchises: Fallout and The Elder Scrolls. IPs like Starfield, Dishonored, or Prey would take a back seat. According to sources close to the matter, the layoffs at ZeniMax affected support and development teams, including studios like Arkane Austin (creators of Prey and Redfall) and Tango Gameworks (The Evil Within), though no complete closures were confirmed. The news adds to a wave of industry cuts: in 2024, more than 10,000 employees lost their jobs at companies like Sony, EA, and Riot Games, according to Game Industry Layoffs data.

Why is this important?

Bethesda is one of the most iconic studios in the industry, responsible for legendary sagas. The strategic shift reflects Microsoft's pressure to monetize its multi-billion dollar acquisitions (ZeniMax cost $7.5 billion in 2021). Moreover, the success of the Fallout series on Amazon Prime Video has revitalized the franchise, demonstrating the potential of established IPs. This move could redefine Xbox Game Studios' portfolio and mark the end of experimentation with new IPs at Bethesda. Historically, Bethesda was known for supporting creative studios like Arkane (Dishonored) and MachineGames (Wolfenstein), but now the priority is maximizing return on investment. The decision also responds to the decline in Game Pass subscriptions, which according to Ampere Analysis data, grew only 3% in 2024 compared to 15% in previous years.

Consequences

• Upcoming releases will focus on Fallout and The Elder Scrolls, while sequels to Dishonored or new titles like Starfield may receive less priority. Starfield, released in 2023, sold 13 million copies but fell short of Microsoft's expectations, according to internal reports.
• A studio reorganization is expected, with possible closures or mergers of teams working on secondary IPs. Arkane Austin, which developed Redfall (a critical failure), could be dissolved, while MachineGames would focus on a new Indiana Jones title.
• Players may see less genre variety but higher quality and frequency in core franchises. The Elder Scrolls VI, announced in 2018, still has no release date, but this shift could accelerate its development.
• The video game job market will take another hit, with more than 3,200 layoffs at Xbox, adding to the 2,500 from early 2024. According to the Communication Workers of America union, layoffs disproportionately affect testing and quality assurance teams.

What should readers know?

Bethesda's strategy is not an isolated case. Across the industry, major publishers are cutting risks and betting on proven IPs (Ubisoft with Assassin's Creed, EA with FIFA/Madden). However, Bethesda had been a bastion of creativity with titles like Skyrim, Fallout 3, and Oblivion. This shift could mean the end of an era of experimentation. Additionally, the layoffs at Xbox affect support and development teams, which will slow future projects. Bethesda fans should expect a more conservative roadmap, with announcements centered on Fallout 5 and The Elder Scrolls VI, whose development could accelerate. It's worth noting that Fallout 76, released in 2018, was an initial failure but has recovered with updates, proving that even established IPs need care. On the other hand, the Amazon Prime Video series attracted 100 million viewers in its first month, according to Nielsen data, boosting Fallout game sales by 600% in April 2024.

"To better position Bethesda for future growth, we are moving from a planning model primarily focused on what's next for each independent studio to one that focuses on our strongest franchises" – Jill Braff, head of studios at Bethesda/ZeniMax.

Analysis

Bethesda's decision is understandable from a financial standpoint: Fallout and The Elder Scrolls generate multi-billion dollar revenues and have loyal fan bases. But it is also a symptom of Xbox's identity crisis, which after spending tens of billions on acquisitions (Activision Blizzard for $68.7 billion in 2023, ZeniMax for $7.5 billion), seeks efficiencies. The risk is that portfolio homogenization reduces Game Pass's appeal, which needs diversity to justify its subscription. On the other hand, Bethesda's independent studios, like Arkane or MachineGames, could see their creativity limited by being forced to work on core franchises. Comparatively, Sony has also reduced its bet on new IPs but maintains studios like Naughty Dog (The Last of Us) and Santa Monica (God of War) that alternate between franchises and new projects. Xbox, in contrast, seems to bet everything on a handful of IPs, which could backfire if one fails. Moreover, the video game job market remains in crisis: according to the International Game Developers Association report, 62% of developers reported job insecurity in 2024. This Bethesda move not only affects laid-off employees but sends a signal that creativity and experimentation are losing value to numbers. Ultimately, players may benefit from more polished games in core franchises, but at the cost of the diversity that made Bethesda great.