Mass layoffs at Microsoft’s gaming division this week reportedly include the closure of departments dedicated to bringing physical games to market.
On Thursday, the company said it plans to lay off 1,900 staff across Xbox, Bethesda and Activision Blizzard.
The cuts are believed to be wide-ranging, impacting various areas of Microsoft’s gaming business from customer service to development.
“Microsoft has also shut down departments dedicated to bringing Xbox games to physical retail … which if you’ve seen the digital-only Xbox console leaks … well, you can get an idea of where Microsoft is going here,” according to Windows Central editor Jez Corden‘s sources.
“Note: reducing retail teams doesn’t confirm Microsoft is quitting physical retail for Xbox games yet, they can outsource, and might be consolidating here,” he added.
Legal documents leaked in September potentially laid bare key elements of Microsoft’s gaming strategy for years to come, including plans to launch an ”adorably all digital” Xbox Series X console codenamed ‘Brooklin’.
While its plans may have changed, according to the documents, the console was targeting a November 2024 launch and a $499 price point.
“There are certain AAA games with 80%+ digital shares on Xbox these days so it’s not too surprising,” Daniel Ahmad, director of research and insights at Niko Partners, said in response to Corden’s claims. “Indicative of how next gen will be for sure,” the analyst added.
While most AAA games currently receive dual physical and digital releases, some are only available to download. High-profile examples include last October’s Alan Wake 2 and Xbox’s Hellblade 2, which will be released in May.
Last June, Circana (formerly NPD) analyst Mat Piscatella said players should expect digital-only releases for consoles to become commonplace over the next few years.
“Digital only AAA releases are here,” he wrote. “Over the next 2 years this trend will accelerate, and by 2028 or so I think it’ll be the norm for most Xbox and PS releases. Nintendo likely won’t move as fast, but then again it’s Nintendo and they’re always full of surprises.”