Amidst the recent Microsoft layoffs, the departments responsible for bringing physical Xbox games to retail have been affected.

On January 25, news circulated about a significant reduction of 1,900 employees from Microsoft Gaming’s 22,000-person team. A notable portion of these layoffs appears to stem from the customer service group at recently acquired Activision Blizzard, known for its previously solid customer service.

When Microsoft officially acquired Activision Blizzard in October 2023, there was optimism about increased funding and infrastructure. However, the hefty $68.7 billion price tag and its financial implications for all companies under Microsoft Gaming were not fully considered. Departures of Blizzard President Mike Ybarra and Chief Design Officer Allen Adham, along with reports of Bethesda staff being part of the layoffs, added to the challenges.

The restructuring also targeted teams responsible for physical Xbox games in retail, raising concerns about the future of physical releases. While Microsoft Gaming may not immediately phase out physical releases, it’s a worrisome sign. Leaked documents from the FTC vs Microsoft hearing in September 2023 hinted at plans for a digital-only Xbox Series X console, projected to launch in November 2025.

Recent actions by retailers like Walmart removing physical copies of Starfield and Best Buy reportedly phasing out physical media, including video games, further contribute to the uncertainty. These events are disheartening for consumers who prefer, support, or collect physical game copies. Overall, physical video game sales are declining, as reported by the Digital Entertainment and Retail Association (ERA), with nearly 90% of game sales in the UK in 2022 being digital. While these figures are estimates, the collective evidence suggests a clear trend toward digital gaming.