'So don't get worried and sell all your shares'

Gita Jackson, episode 2 of the new Aftermath Hours podcast (edited for clarity):

Microsoft is beginning to gear up for their first financial meeting where they’re discussing the impact of the Blizzard Activision acquisition. As sort of a runway up to that, they laid off a huge number of roles…

What really drives me wild about the Microsoft one [compared to Riot] is that Microsoft is a company that makes profit at a level that if they eliminated their gaming division tomorrow, it would have a minimal impact on their bottom line. By that same token, they could keep their gaming division at exactly the same size and those 2,000 jobs would not actually impact their bottom line all that much.

Think about how big Microsoft is. Because of the way that the economy works and the way that I’ve learned that most of economic projections are just sort of guesstimates and lies, video games for a company like Sony or Microsoft that do other things, that do consumer electronics and software, video games are not even a secondary revenue stream. They’re like a tertiary revenue stream. They’re like third in priority. They don’t need to do this. They really don’t need to do this. And by that same token, it doesn’t make sense when they have layoffs this huge. This is like a show of force for their investors more than anything else, right? To say that they’ve identified the profit centers and are trimming the fat in their new acquisition. “So don’t get worried and sell all your shares.”

In years past, I would have written extensively about the insane amount of gaming industry layoffs occurring right now. This is exactly the thing I want people paying attention to. Thankfully, there are loads of outlets covering this madness. I also haven’t had time to put my thoughts together. My jaw hasn’t left the floor. I’m flabbergasted by the current state of things, keep seeing more bad news, and frankly, I’m out of practice of research and reporting. Plus, there are much more informed people dropping insightful takes about this atrocious time, like the folks at Aftermath. (I’m really enjoying the Aftermath Hours podcast. Highly recommend.)

That said, if I had written something, I would have wanted it to echo what Gita has said here. It isn’t a coincidence that Microsoft’s layoffs came one week before their shareholder meeting. That’s not to say these layoffs wouldn’t have happened regardless, but this timing does away with any facade.

(Also, if I’m reading this correctly, Gaming accounted for about 7% of Microsoft’s FY24 Q1 revenue. I wouldn’t say it has “minimal impact on their bottom line”, but it certainly isn’t their moneymaker.)