Microsoft laid off ZeniMax Online Studios staff twice in two years

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Terminally Online

(Image credit: Future) This is Terminally Online : PC Gamer's very own MMO column. Every other week, I'll be sharing my thoughts on the genre, interviewing fellow MMO-heads like me, taking a deep-dive into mechanics we've all taken for granted, and, occasionally, bringing in guest writers to talk about their MMO of choice.

I'm somewhat prone to pessimism in this column, though that's not without cause. MMOs aren't exactly a dying breed, per se—we've got Guild Wars 3 to look forward to, and most of the old guard, while a little grey in the beard, have respectable playerbases and are thrumming with things to do.

But it's hard not to feel my blood pressure notch up a few numbers at this week's Xbox layoff news for… well, a number of reasons, really. I'm irate in particular, however, at the current state of Zenimax Online Studios (ZOS), developers of The Elder Scrolls Online, who seem to have become Microsoft's punching bag.

Left hook

I'm hard-pressed to think of a more depressing set of facts than Zenimax's past couple of years—back in July of 2025, Microsoft put thousands of people out of work, including those at ZOS and, more to the point, the cancelled Project Blackbird .

Blackbird was Zenimax's next major project, and while I can't say for certain it would've revitalised the MMO market or anything, we sure as hell need more new MMOs. It was in development for over half a decade , something the then-founder Matt Firor had described as, admittedly, a bit of a "large bet."

Still, the odds weren't bad. The then-CEO of Microsoft Gaming Phil Spencer reportedly had to be torn away from it , and it was slated for a tentative 2028 release. And listen, even if you've got a cynical heart—five years of work from a development team of around 300 people getting flushed right down the toilet, along with 62 jobs (per a WARN notice ), is a damn shame.

It was something that shook Zenimax to its core—but the studio did manage to pull through. I actually spoke to some of them back in January, speaking with executive producer Susan Kath who said that "the team has very much rallied … I see a lot of enthusiasm from the team as we're going forward. Folks are excited about their work. I'm excited for them to be doing this. We're looking forward."

Game director Nick Giacomini also echoed: "We are excited by what we're doing. We're excited by this transformation, this change, this evolution. It's like a second wind, and we've definitely got our eyes on the future, because this is our home. We are determined to make it continue to be so for us, for our players, for as long as we possibly can."

Indeed, things were looking up for ESO. It had found itself in a bit of a rut, as most MMOs do from time to time—but a new commitment to a seasonal model and a whole heap of reworks seemed dedicated to addressing long-held quality-of-life complaints and shaking things up.

The air, to me, felt like a smaller-scale version of the turnaround that World of Warcraft had after the disasters of Shadowlands, commitment to roadmaps and all.

Right hook

Fast-forward less than half a year later—an unconscionable amount of time in shareholder land, I have to imagine—and Zenimax Online Studios has been all but gutted. As PC Gamer's own Ted Litchfield figured out earlier in the week , an estimated 60% of the studio has been laid off between 2025 and 2026, with 213 of those layoffs happening this week.

(Image credit: ZeniMax) That's a reduction of 275 developers at the studio in a year and a half, and, look—I don't want to cry that the sky is falling for ESO. Quite the opposite, I am hoping against hope that it'll manage to find a second wind somewhere down the line—but you simply cannot lose the contributions of 275 people without a massive dip in quality.

It's a response echoed by employees at the studio itself. Andrew Young, who left it in 2024 , wrote: "There’s really no one left and no changing it now". Other employees were sent reeling , stunned at the absence of teams they'd been working with for years and forced to pick up the pieces.

I want to point out that Xbox saw fit to lay these people off literally as its first season launched—with layoffs occurring on Monday July 6, and the season launching on July 8 .

To believe that a game that historically brings you in $166 million annually somehow isn't profitable seems absolutely absurd to me."

Just imagine it—you work on ESO, the layoffs from last year hit you hard, but you're determined to turn things around. You're using words like "rallied" in interviews, you're finally getting to sort out complaints players have been having for years, you're trying new things. And after a year of work, your first season of the new era of your game is coming out. Two days before it arrives, Microsoft lays off 213 of your team. That, or you're shown the door yourself.

This is despite the fact that your game has brought in over $2 billion in revenue over its lifetime . That figure, posited in 2024, was touted 10 years after the game's launch. That means that ESO was raking in an average of $166 million a year.

Now obviously, that figure's going to have dips and peaks, that's just the nature of doing business—but the sheer boneheaded, next-quarter blinders you have to have on to believe that a game that historically brings you in $166 million annually somehow isn't profitable seems absolutely absurd to me.

And sure, maybe this reaction holds water if the fanbase wasn't liking your new changes—except they did! Here's just a few quotes from the Elder Scrolls Online subreddit :

"What the fuck man. ESO was really getting a second wind," says u/ PompeiiSketches .

"The game seemed to be on the up and up, what happened?" says u/ Crimsonmaddog44 .

"Absolute insane behavior to make cuts to the team that has gotten tons of players (myself included!) back into engaging with the game" says u/Ion_bound .

In a post on the game's forums , understandably stating that Zenimax'll have to be shifting its schedule around a bit, support is present, too:

"I just came back because of your roadmap for the future, and knowing now the people working on it are getting cut by a company that's billions in the green is really heartbreaking," writes one user, "know we haven’t always been happy with you all but those affected, whether they remain or not, did not deserve this. Especially in an era where things were finally looking up again. I am horrified," writes another.

This really does paint a picture of an MMO that was finally getting its sea legs back, just for Xbox to sweep in and knock it right off its feet again.

Holding shares

I will state it plainly: I think the way that Zenimax Online Studios has been treated is cruel, senseless, and short-sighted. There's no capitalist argument to be made about shareholders or prices or changing industries that's going to reach my ears on this one—it's downright unconscionable.

This is a studio that was making a profitable MMO with big dreams for the future, one that had somehow, miraculously, recovered from having a massive project that'd been in development for half a decade shuttered overnight. One that was just about to release the first proper season of its new imagined identity for the game that earned Microsoft over $160 million a year for the past decade.

It has been sacrificed almost wholesale on the altar of growth, by a company that spent over $68 billion on Blizzard, with Microsoft itself spending over $80 billion in 2025 on AI pipedreams. Its developers have been laid off to support a fantasy of getting 1 billion daily players, somehow, in a portfolio that's down 1,600 working roles and will be down 1,600 more by 2027.

More than that, this is an MMO we're talking about. If ESO takes a nosedive from here on out (and god, I am hoping it doesn't), that'll be one less game in an already-dwindling genre that's struggling to put up a fight amongst the unhealthy ambitions of the current industry's gluttony. ZOS deserved better.

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