Xbox Layoffs Gut Studios, Sony Disc Backlash, Switch 2 Battery
Jul 7, 2026 · 14d ago
The video game industry is reeling from a series of massive corporate restructures and shifting strategies. From sweeping layoffs at Microsoft to mounting consumer protests against Sony's digital-only future, the landscape of modern gaming is undergoing a rapid, turbulent transformation.
Xbox Layoffs Gut id Software and Obsidian in Massive Restructure
Xbox CEO Asha Sharma has defended the company's decision to lay off 3,200 employees through fiscal year 2027, pointing to a failed strategy that "spread ourselves too thin" and neglected the brand's core business . The sweeping cuts, which represent roughly 20% of Microsoft's gaming division, have hit several prominent internal studios with devastating force . Legendary developer id Software has reportedly lost approximately half of its staff, primarily targeting its technology and QA departments, on the exact day the studio launched its DOOM: The Dark Ages - Revelations expansion .
Other major Bethesda and Xbox studios are facing similar upheaval as Microsoft pivots to a "franchise-centric" model focused on established intellectual properties like Fallout and The Elder Scrolls. The Outer Worlds developer Obsidian Entertainment has reportedly lost a quarter of its workforce, leaving staff highly concerned about how their current pipeline of projects can continue . Zenimax Online Studios was also reportedly hit hard by cuts that eliminated up to half of the team, forcing an immediate re-evaluation of the roadmap for The Elder Scrolls Online.
As part of this reset, Microsoft is also divesting itself of several key studios . Compulsion Games and Double Fine are returning to independent operations, while Ninja Theory and Undead Labs are being sold to new management . Following its departure from Xbox, Undead Labs' upcoming survival game State of Decay 3 is no longer guaranteed to launch on Xbox Game Pass . Sharma has set an ambitious goal to reach over a billion daily users by centralizing focus on mobile and massive multiplayer giants like King and Mojang .
IO Interactive Regains Project Fantasy Rights but Closes Istanbul Studio
Following Microsoft's decision to pull funding and publishing support for the upcoming RPG codenamed Project Fantasy, developer IO Interactive has successfully regained full ownership of the intellectual property . The Hitman and 007: First Light developer confirmed it remains committed to independently developing and funding the game . However, the loss of Xbox's financial backing has forced the studio to restructure, resulting in the closure of its Istanbul office and an undisclosed number of layoffs .
Sony Faces Massive Backlash Over Ending PlayStation Physical Discs
A growing consumer protest is targeting Sony Interactive Entertainment following its announcement that it will cease manufacturing physical PlayStation discs in January 2028 . The "Don't Kill the Disc" petition has rapidly amassed over 170,000 signatures from players demanding the preservation of physical media . In response to the overwhelming backlash, Sony has temporarily abandoned its primary social media channels, though users have continued to flood the comments of the company's YouTube videos with protests .
Nintendo Switch 2 Gets Replaceable Battery Model as Original Switch Discontinues
Nintendo has confirmed it is developing a revised model of the Nintendo Switch 2 featuring user-replaceable batteries to comply with upcoming European Union sustainability regulations . Alongside this hardware adjustment, the company announced that production of the original Nintendo Switch, Switch Lite, and Switch OLED models for the European market will cease entirely by mid-February 2027 . Retailers will continue to sell through existing stock of the first-generation hardware for the remainder of 2026 .
The Blood of Dawnwalker Previews Tease a Major RPG Contender
Initial hands-on previews for The Blood of Dawnwalker have painted an incredibly positive picture of the upcoming vampire-themed action RPG . Developed by Rebel Wolves—a studio founded by The Witcher 3: Wild Hunt director Konrad Tomaszkiewicz and staffed by numerous CD Projekt Red veterans—the game is already being hailed as a potential Game of the Year contender . Previews highlight a highly reactive, time-driven quest system, deep narrative sandbox choices, and a compelling mix of detective work, romance, and combat .
