Xbox Unions Protest Looming 'Bloodbath' of Layoffs and Studio Closures
Xbox union representatives held a press conference on June 29, 2026, to publicly protest what insiders have described as a looming "bloodbath" of layoffs and studio closures expected from Microsoft. The event, organized by the Communications Workers of America (CWA), was a direct response to widespread reports of impending, severe cuts across Xbox Game Studios.
The union action comes as Microsoft approaches the June 30 close of its financial quarter, a deadline by which sources indicate final decisions on cuts will be made. This follows a massive company-wide layoff in July 2025 that saw 9,000 employees lose their jobs. New Xbox CEO Asha Sharma has previously communicated the need for a company "reset," fueling employee anxiety about job security.
A Microsoft spokesperson responded to the press conference, stating, "We respect the right of our team members to make their voices heard." The spokesperson highlighted the company's history of "good faith partnership with labor organizations" and confirmed ongoing negotiations with the CWA to reach agreements across Xbox.
Unionized workers framed the expected cuts as a failure of executive strategy. "We refuse to be left in the dark as the company decides to restructure in a way that seriously affects us all," said Morgan Goin, a senior designer at ZeniMax Online Studios, during the conference. The CWA is demanding concrete protections, including advance notice of layoffs and robust severance, ahead of the anticipated announcements.
State of Decay 3 Developer Undead Labs Reportedly Among Four Studios at Risk
Undead Labs, the developer behind the highly anticipated State of Decay 3, is reportedly among four studios Microsoft is considering closing or selling, according to a new report from Games Beat corroborated by other industry sources. This news emerges just weeks after the game was confirmed for a PlayStation 5 release during the Xbox Showcase.
The Seattle-based studio, which employs approximately 110 people, is said to be actively seeking external investment or a buyer to avoid closure. This follows similar reports concerning three other Xbox Game Studios: Ninja Theory (Senua’s Saga: Hellblade II), Double Fine Productions (Psychonauts), and Compulsion Games (South of Midnight). According to Games Beat, Microsoft is preparing to close multiple studios if buyers are not found, with action expected in early July following the close of its financial quarter on June 30.
The situation at Undead Labs is described as a fight for funding from its parent company. Windows Central's Jez Corden stated he received corroborating information, noting, "Indeed, Undead Labs seems to be among the studios Microsoft is looking to offload or shut down as part of its fiscal year end." This reported instability contrasts with recent positive momentum for State of Decay 3, which has been shown in pre-alpha gameplay footage to creators.
The potential fate of these studios remains uncertain. Bloomberg's Jason Schreier suggested that some teams might not require a sale to survive but could be spun out as independent entities by their management. For now, the future of State of Decay 3 and the studios developing it hinges on finding new investment or a last-minute change in Microsoft's restructuring plans.
Union Demands: Recall Rights and Protections Against Executive Failures
Union Demands: Recall Rights and Protections Against Executive Failures
Labor unions representing Xbox developers have presented a clear set of demands to Microsoft, centering on a two-year recall right for laid-off employees and protections against executive mismanagement. The Communications Workers of America (CWA), which organized a press conference on June 29, 2026, is pushing for these measures as a buffer against anticipated widespread cuts. The core proposal includes advance notice of layoffs, adequate severance, voluntary severance options to mitigate involuntary cuts, and priority internal transfer rights for impacted staff. Crucially, the union seeks to extend these "common sense protections" to all Xbox workers, not only those who are unionized.
Employees voiced profound frustration, arguing that they are being forced to pay for leadership's strategic failures. "We refuse to be left in the dark as the company decides to restructure in a way that seriously affects us all," said Morgan Goin, a senior encounter designer at ZeniMax Online Studios, during the press conference. She criticized the perceived hypocrisy of Microsoft's financial priorities, stating, "Even as the company calls us too costly to keep, it is raising console prices on players again, citing a RAM shortage that Microsoft itself has exacerbated" through its massive investments in AI.
Multiple speakers highlighted the demoralizing impact of constant layoff threats on creativity and productivity. Alison Veneto, a senior editor at Blizzard, explained, "My coworkers just want to focus on making amazing games for players... They do not want to spend every day worrying about whether another round of layoffs is coming. It drains away the energy we should be using to be creative." She advocated for layoffs to be an absolute last resort.
The union speakers consistently tied the fate of workers directly to the health of the gaming community. Mahreen Fatima, a senior environment artist at Blizzard, pointed to Microsoft's billions in AI investment as proof of available capital, asking why it wasn't being used to protect employees. Andrew Snell, an Activision QA tester, encapsulated the shared sentiment: "Workers and players are on the same side of this and we're done paying for executives' failures." Fatima concluded by demanding respect for the labor that builds the games, stating, "Together we've built a huge community and touched the lives of millions of gamers everywhere. Don't disrespect the developers. Don't disrespect the gamers."
The Cost of AI: Workers Criticize Microsoft’s Financial Priorities
The Cost of AI: Workers Criticize Microsoft’s Financial Priorities
Unionized developers are directly contrasting Microsoft's massive investments in artificial intelligence with its cost-cutting measures in game development, arguing the company is choosing where to spend its money. Workers speaking at the June 29 press conference pointed to recent financial decisions by Microsoft leadership as evidence of misplaced priorities that harm both employees and players.
A key point of criticism centers on Microsoft CFO Amy Hood. According to a report from Windows Central, cited in the Scout sources, the current cuts are "being driven by Microsoft corporate CFO Amy Hood, who has demanded a variety of savings at Xbox to offset losses... which were also a result of her previous 30% margin demands." Union members argue this drive for savings is selective. Morgan Goin, a senior designer at ZeniMax Online Studios, criticized the company for raising console prices "citing a RAM shortage that Microsoft itself has exacerbated" through its heavy investment in AI, which increased demand and cost for components.
Developers highlighted the disparity between studio closures and other corporate expenditures. "They are not short on money. Look at the billions that they’re using to invest in AI. They’re just choosing not to protect us," said Mahreen Fatima, a senior environment artist at Blizzard. This sentiment was underscored by the situation at Compulsion Games, the developer of South of Midnight, which is reportedly at risk despite recently winning a prestigious Peabody Award for its storytelling—an achievement publicly celebrated by Xbox boss Asha Sharma.
The workers' argument frames the looming layoffs not as an unavoidable business necessity, but as a choice by executives. They contend that the financial resources exist, as demonstrated by AI investments and repeated console price hikes since 2025, but are being diverted away from the development teams behind Microsoft's acclaimed games.