One area hit during the recent round of layoffs at Microsoft were the departments focused on bringing physical Xbox games to retail. On January 25, word began circulating that Microsoft Gaming was laying off a massive 1,900 employees from its 22,000-person team. A large portion of this number apparently is coming from the customer service group at newly acquired Activision Blizzard, which up till now was known for having relatively solid customer service.

When Microsoft officially acquired Activision Blizzard in October 2023, it was seen as a promising portent of good things to come. The potential for increased funding and larger infrastructure to support demanding projects had many Xbox fans excited for the future. What many didn’t consider was the deal’s huge $68.7 billion price tag and what it might mean financially for all companies now under the Microsoft Gaming umbrella. Blizzard President Mike Ybarra and Chief Design Officer Allen Adham have also left the company, and some Bethesda staff have revealed that they were part of the layoffs.

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Microsoft Layoffs Include Most of the Blizzard Customer Service Team

The mass layoffs from Microsoft include nearly the entire customer support branch of Activision Blizzard, leaving many games without moderation.

Another target of the cost-saving restructuring were the teams whose job it was to bring physical Xbox games to retail stores. While this doesn’t necessarily mean that Microsoft Gaming will be phasing out physical releases in the near future, it doesn’t bode well. During the FTC vs Microsoft hearing in September 2023, leaked documents revealed that the gaming giant has plans to release a digital-only Xbox Series X console, with a projected launch window of November 2025.

Are Physical Games Making Way for Digital-Only?

This rumor was followed more recently by the revelation that Walmart was removing all physical copies of Starfield from its retail stores, with a leaked memo stating that “the supplier is funding this action.” Best Buy is also reportedly phasing out all physical media, video games included. None of these events are encouraging for consumers who still prefer, support, or collect physical copies of games.

In general, physical video games sales are decreasing, according to the Digital Entertainment and Retail Association (ERA). The UK-based trade organization tracks sales, both physical and digital, for a range of industries. In January, it revealed that nearly 90% of game sales in the UK in 2022 were digital. Granted, these numbers are estimates, given that Steam and Epic Games Store don’t openly share their sales figures, but the sum of these recent individual occurrences seems to be pointing in one definite direction: digital.