The world’s gaming industry is gathering in Cologne this week for Gamescom, one of the largest video game trade fairs on the planet, but the mood is anything but celebratory for many of the professionals attending. Behind the dazzling booths and hotly anticipated game previews, the industry is still reeling from a wave of layoffs and cancellations that have hit even the biggest players—Microsoft included. The event, running from August 21 to August 24, 2025, is expected to draw tens of thousands of gamers and some 1,500 exhibitors, all hoping for a glimpse of the medium’s future—and maybe some reassurance that brighter days lie ahead.
Last year’s Gamescom saw nearly 335,000 people crowding the halls of the Cologne exhibition center, and this year’s show promises a lineup of major releases. Tuesday’s opening night will spotlight "Black Ops 7," the latest installment in the long-running "Call of Duty" series, according to AFP. Nintendo, fresh off record-breaking sales for its new Switch 2 console, is back after skipping last year. Microsoft’s Xbox division is set to showcase new portable hardware expected to hit the market by the end of 2025. Curiously, Sony, makers of the PlayStation, have bowed out this time, a move that’s raised eyebrows among attendees and industry watchers alike.
But even as the industry’s heavyweights compete for attention, the shadow of recent layoffs looms large. According to Bloomberg and Windows Central, Microsoft recently confirmed another round of sweeping job cuts across its gaming division. Around 10% of King, the mobile game developer behind "Candy Crush," has been laid off—amounting to 200 jobs. Rare’s ambitious title "Everwild," first announced back in 2019, has been canceled, a blow for fans who have waited years for updates. ZeniMax Media’s marketing teams in both London and Rockville, Maryland, have also seen cuts, though the exact numbers remain unclear. More layoffs are expected at other U.S. Xbox teams, with details still to come.
These cuts are part of a much larger trend. In early July, Microsoft announced it would lay off approximately 9,000 employees across all divisions, with every branch—including gaming—feeling the impact. This is the fourth major round of layoffs at Microsoft Gaming in just two years. The company slashed 1,900 jobs in January 2024, mostly from Activision Blizzard King, closed three ZeniMax Media studios in May 2024, and cut another 650 employees in September 2024, again mostly from Activision Blizzard King. The message from leadership is clear: the company is making tough choices to ensure long-term success, even if it means painful short-term losses.
Phil Spencer, CEO of Microsoft Gaming, addressed the situation in a company-wide email obtained by Windows Central. "Today we are sharing decisions that will impact colleagues across our organization. To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness," Spencer wrote. He acknowledged the timing was difficult, especially as the company is seeing more players, games, and gaming hours than ever before. "Our momentum is not accidental—it is the result of years of dedicated effort from our teams," he added, assuring affected employees that they would receive severance, healthcare coverage, and job placement resources, and encouraging them to apply for other roles within Microsoft Gaming.
The layoffs at Microsoft are not an isolated event. According to specialist games data firm Alinea Analytics, the industry has shed around 30,000 jobs since early 2023, with more than 4,000 of those losses coming in 2025 alone (AFP). The website Games Industry Layoffs tracks these numbers, painting a sobering picture of an industry in flux. Despite the turmoil, global games market revenue is forecast to hold steady at just under $190 billion this year, according to data firm Newzoo. The number of players and total gaming hours remain stable, but the competition for attention is fiercer than ever. With juggernauts like "Roblox" and "Fortnite" commanding hundreds of millions of monthly users, even established publishers find themselves fighting for a shrinking slice of the pie.
This squeeze has forced companies like Microsoft to rethink their strategies. As Circana expert Mat Piscatella told AFP, "Everyone’s fighting for a smaller share of that pie." Microsoft has begun offering its titles on rival platforms, including PlayStation, in a bid to reach wider audiences. "They’ve had really great success on the PlayStation platform. Sony is making a bunch of money on that too," Piscatella noted. The cross-platform approach is not one-sided: PlayStation games are starting to appear on Xbox as well, with "Helldivers 2" marking a notable example.
Meanwhile, the cost of developing blockbuster "AAA" games continues to skyrocket, with budgets now reaching into the hundreds of millions of dollars. The stakes have never been higher for studios betting on big releases. But as Christopher Dring, founder of industry site The Game Business, observed, there’s a growing realization that success doesn’t always require massive spending. Games like the French turn-based hit "Clair Obscur: Expedition 33," which sold four million copies, show that strong gameplay, story, and art style can still capture players’ imaginations without breaking the bank. "There’s a realisation you don’t need to spend masses of money to deliver a high-quality game that can appeal broadly and so everyone is rushing towards that model," Dring said to AFP.
Still, the path for smaller studios is anything but easy. Piscatella pointed out, "For every 'Clair Obscur' success story, there are 10 games that fail to find an audience at all." The hyper-competitive market means that while breakout hits are possible, most independent developers struggle to secure funding or attention. And despite the cult-hit trend, analysts agree that mega-budget releases aren’t going anywhere. All eyes are on Rockstar Games’ "Grand Theft Auto VI," widely expected to set new records for an entertainment product launch and potentially inject new energy into a flagging industry.
As Gamescom unfolds, the industry’s leaders, creators, and fans are all searching for signs of hope amid uncertainty. The layoffs and cancellations are a stark reminder of the challenges facing even the most successful companies. Yet, the resilience of the gaming community and the ongoing appetite for innovation suggest that, while the road ahead may be rocky, the industry’s story is far from over.
