The Week Gaming’s Foundations Cracked: Xbox Bloodbath, Sony’s Disc Funeral, and Steam’s Record Empire
Date: July 13, 2026
If you thought 2023 was the year the gaming industry stumbled — with its historic wave of layoffs and studio closures — then what happened this past week in July 2026 will be remembered as the week the ground beneath the entire industry cracked open. In the span of just seven days, Microsoft gutted some of its most legendary studios, Sony confirmed it is killing physical game discs, the European Union shrugged, Steam broke its own revenue records, and one of the most beloved live-service shooters in history quietly entered maintenance mode. This is not a drill. This is a reshaping of the gaming landscape as we know it, and the aftershocks will be felt for years to come.
Let’s walk through everything that happened, why it matters, and what it means for the future of gaming.
Xbox’s ‘Reset’: 3,200 Jobs Gone, Legendary Studios Gutted
On July 9, 2026, Xbox CEO Asha Sharma announced what she described as a “reset” of the Xbox division: a staggering 3,200 job cuts across Microsoft’s gaming workforce. 1,600 of those cuts were effective immediately, with the remaining layoffs scheduled to occur before the end of Microsoft’s current financial year. The news sent shockwaves through the industry, not just because of the sheer scale — which would be devastating on its own — but because of which studios were hit.
Activision, Mojang, Blizzard, ZeniMax Online Studios, Bethesda Game Studios, Compulsion Games, Ninja Theory, Double Fine — names that once defined the creative heights of the video game industry — were all impacted to varying, sometimes catastrophic, degrees. But nowhere was the damage more visible than at two studios in particular: id Software and Bethesda Game Studios.
id Software: From Doom Slayers to Support Studio
The studio that effectively invented the first-person shooter — the team behind Doom, Quake, and the critically acclaimed 2016 Doom reboot and its 2020 sequel Doom Eternal — has been, in the words of multiple sources, “gutted.” Reports indicate that so many employees were let go that id Software has been reduced to what insiders are calling “support studio size” status, with multiple in-development projects cancelled outright.
The irony is bitter: in a statement released shortly after the layoffs, id Software insisted it still has “the crew we need to build the games and tech we’re known for,” claiming the team is “about the same size we were when making Doom 2016.” But the statement reads more like a press release designed to contain panic than a genuine assessment of creative capacity. Doom 2016 was nearly a decade ago. The industry has changed. The studio has changed. And not for the better.
Bethesda: Even Elder Scrolls 6 Is Bleeding
If id Software’s losses are shocking, Bethesda’s are arguably more consequential. Multiple anonymous employees told IGN that more than 50 staff — including “key, high-performing people in the trenches” — were impacted by the layoffs at Bethesda Game Studios. The affected employees span every discipline: programmers, artists, designers. One person who had been at the company since Morrowind was cut — reportedly referring to 27-year veteran and lead character artist Christiane Meister, whose credits include Oblivion, Skyrim, Fallout 3, and Fallout 4.
The impact on The Elder Scrolls 6, which was announced with a teaser trailer back in 2018 and still has no release date, is expected to be severe. Staff told IGN they anticipate a “substantial and cascading effect” on the game’s development, heightened likelihood of crunch, and further delays. After years of fans waiting for any morsel of information about Skyrim’s successor, the news that the team building it has been hollowed out is a gut punch.
Meanwhile, ZeniMax and Bethesda are reportedly pivoting to focus on their biggest franchises — Fallout, The Elder Scrolls, Doom, Quake, and Wolfenstein — but with a newly reduced headcount and morale at “rock bottom,” according to staff, the feasibility of executing that strategy anytime soon is questionable at best.
John Carmack Speaks Out
id Software co-founder and industry legend John Carmack took to social media to address the layoffs, writing: “My ‘Microsoft will probably be a good steward of the brand’ statement isn’t aging well.” Carmack, who left id Software in 2013 to focus on Oculus VR, added: “I’m saddened, but I can’t muster anger or outrage.” For a man who built his legacy on the studio that is now being dismantled, the quiet resignation in those words speaks volumes.
Bethesda Union Fights Back: ‘Save Our Devs’ Rally Set for July 15
There is, however, a glimmer of resistance. Over 240 Bethesda employees unionised in 2024 under the OneBGS banner, and the union’s mobilising committee has announced a “Save Our Devs” rally to be held at ZeniMax offices in Rockville, Austin, Dallas, and Montreal on Wednesday, July 15.
In an email to members, the committee wrote: “The company wants us to accept this as a done deal and quietly disappear. We won’t let that happen. Our next steps are to mobilise. We need every single member visible and unified.”
The union is demanding:
- Preferential transfers — forcing Microsoft to place affected BGS workers into open roles across Xbox and Microsoft first
- Stronger severance and extended healthcare — ensuring no one is financially abandoned
- Recall rights — ensuring laid-off members are the first hired back when BGS expands
The committee also rejected Microsoft’s framing of the layoffs as an “entrepreneurial change in the scope of business” — a transition from a “studio-based business model to a franchise-based model” — calling it “corporate wordplay” designed to dodge their legal obligation to bargain. “Changing a title on a PowerPoint slide does not erase our legal right to a say in our working conditions,” they wrote.
Whether the rally will change Microsoft’s course remains to be seen, but it represents one of the most visible acts of union resistance in the video game industry to date — and a test case for whether organised labour can push back against the industry’s most aggressive restructuring.
Sony Kills the Disc: Physical Media Dies in January 2028
While Microsoft was gutting its studios, Sony was busy making a different kind of history — the kind that ends an era. On July 1, Sony announced that it will cease all production of physical game discs for PlayStation, effective January 2028. This applies not only to Sony-published titles but to all games released on the platform — including those from third-party publishers. Going forward, the only physical retail option will be code-in-a-box style downloads.
The announcement triggered immediate and fierce backlash. A Change.org petition titled “Don’t Kill the Disc” amassed over 286,000 signatures within days. The petition’s description pointedly references Sony’s own 2013 Official PlayStation Used Game Instructional Video — a smug, mocking ad in which Sony demonstrated how easy it was to share physical PS4 games — noting that the company is now becoming the very thing it once ridiculed, just 13 years later.
The EU Shrugs
Those hoping for regulatory intervention were disappointed. EU commissioner for consumer protection Michael McGrath, speaking in Strasbourg, admitted that the European Union cannot prevent Sony from scrapping physical discs. “It does come down to commercial and contractual freedoms,” McGrath said. “Companies are free to offer games and services in the manner that they see fit, provided that consumer rights are fully protected in line with national and EU law.”
In other words: if Sony wants to kill the disc, Sony can kill the disc. The market — not regulators — will decide whether that decision has consequences.
God of War Laufey: The Last Disc Holdout?
The timing of Sony’s announcement has created a fascinating subplot. Santa Monica Studio’s upcoming God of War Laufey — revealed during Summer Game Fest as one of the most anticipated PlayStation titles in development — currently has no release date. But over the weekend, the studio tweeted: “We can confirm God of War Laufey will be available on disc.”
That confirmation, by implication, suggests the game will launch before January 2028 — making it one of the final major PlayStation titles to receive a physical release. Industry reporter Jason Schreier has previously suggested a 2027 release window. The game, which features Faye as its new protagonist and stars Daredevil‘s Deborah Ann Woll, was originally pitched as far back as 2018, according to the actress.
God of War Laufey will also not be coming to PC. Sony has confirmed it no longer intends to release its non-live-service single-player games on PC — a reversal of the strategy that saw God of War (2018), Spider-Man, and Horizon Zero Dawn find massive second lives on Steam. The PlayStation ecosystem, it seems, is becoming more walled, not less.
Steam’s Record Empire: $11.1 Billion in Six Months
While Xbox and PlayStation face contraction and controversy, Valve’s PC storefront is having its best year ever. According to estimates by analytics firm Alinea Analytics, Steam generated $11.1 billion in revenue during the first half of 2026 — its highest-ever result for that period, and more than it made during the entire second half of 2025.
Rhys Elliott, head of market analysis at Alinea, pointed to three key drivers: the massive growth of the Chinese market (as of February 2025, 50 percent of all Steam accounts belonged to Chinese-speaking users), higher prices on new releases, and third-party publishers returning to Steam after abandoning their own proprietary launchers. Ubisoft, notably, has been steadily bringing its catalogue back to Valve’s platform.
“Zoom out over the last decade and things get really crazy,” Elliott wrote. “There’s obviously a visible dip as the market normalised after the pandemic sugar-high, but the long arc is relentlessly up, with seven half-years of growth.” Over the past decade, Steam has nearly quintupled its revenue.
The Biggest Games of 2026 (So Far)
Steam’s blockbuster numbers are driven by an unusually strong release slate:
- Forza Horizon 6 — $197.7 million in under two months
- Resident Evil Requiem — $194.5 million since its February launch, with 3.4 million sales on Steam alone (including $1.3 million from cosmetics alone — take note, Ubisoft)
- Crimson Desert — $190 million since March, a remarkable result for a brand-new franchise
- Slay the Spire 2 — $141.7 million, proving the indie roguelike deckbuilder is still a commercial powerhouse
- Subnautica 2 — $133.6 million
- Meccha Chameleon — $71.3 million
The contrast is stark: while Microsoft’s gaming revenue is down 7 percent year-on-year and PlayStation’s first-party exclusive sales have been steadily declining since 2020, Steam is thriving. The PC platform — open, decentralised, and free from the hardware constraints that are squeezing console makers — increasingly looks like the future of gaming. And Valve, with its 30 percent cut and near-monopoly on PC game distribution, is the silent winner of the console wars.
Assassin’s Creed Black Flag Resynced: 2 Million Copies, 99,451 Steam Players, and a Microtransaction Controversy
Amid all the industry turmoil, one game is having a genuinely spectacular launch. Assassin’s Creed Black Flag Resynced, Ubisoft’s remaster of the beloved 2013 pirate adventure, sold 2 million copies on its first day — a figure so strong that the typically tight-lipped publisher openly bragged about it. The game also hit a concurrent Steam peak of 99,451 players, the highest ever recorded for an Assassin’s Creed title on the platform, and topped Twitch on its July 9 launch day.
Before launch, the game had already pulled in roughly $14 million in gross revenue in pre-orders alone, putting it on track to outperform last year’s Assassin’s Creed Shadows. Available on PC (Steam, Steam Deck, Epic Games Store, and Ubisoft+), PS5, and Xbox Series, the remaster invites players to sail the Caribbean as Edward Kenway during the Golden Age of Piracy, crossing paths with Blackbeard, Anne Bonny, and Calico Jack.
But the launch hasn’t been without controversy. The game’s Steam page has become a battleground over cosmetic microtransactions in a single-player game — a long-standing complaint about Ubisoft’s approach that has once again drawn the ire of PC players. Many reviewers praise the updated graphics, the wide open-world, and the faithful interpretation of the original adventure, but a vocal contingent is review-bombing the game over what they see as predatory monetisation in a title that already costs full price.
The irony, as noted by Alinea Analytics, is that Resident Evil Requiem’s $1.3 million in cosmetics revenue on Steam suggests that cosmetic microtransactions — when done tastefully — can be a genuine revenue driver. The question is whether Ubisoft’s implementation crosses the line from optional to obtrusive.
Destiny 2 Enters Maintenance Mode: The End of an Era
After nearly a decade of live-service updates, expansions, and controversy, Destiny 2 has officially entered maintenance mode. Bungie rolled out its final content patch — update 9.7.0.3 — this week, consisting almost entirely of bug fixes and a bump to reputation gains from Vanguard and Crucible activities. Alongside the patch, the developer posted a code on social media that players can redeem to claim the Gloriabundus Emblem, a farewell gift featuring a fortified Destiny logo set against a Last City skyline.
Longtime community lead Dylan “dmg04” Gafner confirmed that beyond regular server maintenance, players should not expect any further patches — though he left the door open for “break glass” fixes for critical issues like game crashes, and suggested that “a small fix could sneak in here or there.”
The final update, which arrived in June, was one of the biggest in the game’s history and triggered the largest player count surge in years as thousands of lapsed Guardians returned to say goodbye. But despite that resurgence, Sony did not greenlight a sequel or continued live-service support. The layoffs that followed took away most of the Destiny 2 team, and the game is now effectively frozen in time.
There’s a silver lining, though it’s bittersweet: the final version of Destiny 2 is well-received, with a wealth of content that millions will continue to enjoy for years. It’s just that the story — the living, evolving narrative that defined the Destiny experience — has reached its final page.
TennoCon 2026: Warframe Goes to Tau, and It’s Gorgeous
Not everything this week was doom and gloom. Digital Extremes held its annual TennoCon fan event and delivered one of the most ambitious reveals in Warframe’s 12-year history: Warframe: Tau, a major update that will transport players to an entirely new solar system later this year.
The Tau system is set in the ringed city of Fornix, a locale creative director Rebecca Ford describes as inspired by Boardwalk Empire, Blade Runner, and even a little Sopranos. Players will take on the role of Brysko, a new detective Warframe voiced by Matthew Mercer (Overwatch’s Cole Cassidy, Critical Role), who wields the Core Cracker revolver, throwable trading cards, and a dog sidekick.
The update’s narrative tackles themes of addiction and exploitation head-on. The Sentients of Tau are shown abusing The Bloom, an organic drug-like substance, while black rain floods the streets, reviving the dead and scarring the living. A luxurious casino, a jazz club singer, and flying Sentient cars create a stark contrast between the gilded elite and the suffering masses below.
Ford was candid about the personal dimensions of the narrative: “Many members of the team have seen firsthand what overcoming that struggle looks like; it’s very close to our hearts. On the front lines here in London, Ontario, we see it in our streets and in our parks.” The update will launch with two regions, new mission types, a card mini-game, and a new take on the Steel Path difficulty system.
Additionally, Digital Extremes announced a fall 2026 update called Iceblade of Narin, which will add a new female ice Warframe. Mesa Prime’s heirloom skin is available now, Citrine will be the next Prime Warframe, and both Banshee and Qorvex are getting deluxe skins — with Banshee finally receiving a long-overdue rework.
Tomb Raider: Legacy of Atlantis Wraps Recording, Targets February 2027
Crystal Dynamics and Flying Wild Hog’s Tomb Raider: Legacy of Atlantis reached a milestone this week: voice actress Alix Wilton Regan, the new voice of Lara Croft, confirmed she has finished recording for the main game. “This journey started in 2022, and it’s now the tenth of July 2026,” Regan posted to Instagram. “What a milestone.”
The game, once slated for 2026, has been delayed to February 12, 2027, and will be available on PS5, Xbox Series X/S, Nintendo Switch 2, and PC via Steam. Early hands-on impressions describe it as “strangely double-A” — not a prestige remake, but a “breezy and enjoyable” adventure with “lovably old-school” design and “pleasantly posh” new voiceover for Lara. Given the current state of the industry, a focused, mid-budget Tomb Raider adventure might be exactly what players need.
SGDQ 2026 Raises $2.4 Million for Doctors Without Borders
In a reminder that gaming communities can be a force for good, Summer Games Done Quick 2026 wrapped up this week in Minneapolis, raising $2.4 million (£1.8 million) for Doctors Without Borders / Médecins Sans Frontières. The annual speedrunning marathon welcomed around 2,500 in-person attendees and thousands more via livestream.
Standout runs included a world record-breaking Kirby Air Riders run by Bluekandy, an against-all-odds Balatro speedrun, and an impromptu beatboxing session during Resident Evil: Requiem. Since 2010, Games Done Quick has collectively raised more than $62 million for charities worldwide, including the Malala Fund and the Organization for Autism Research.
The Big Picture: A Industry in Transition
Step back and look at the week as a whole, and a picture emerges of an industry at a historic inflection point:
- Console gaming is contracting. Microsoft is shedding thousands of jobs, Sony is killing physical media, and both companies are feeling the squeeze of rising hardware costs driven by an AI-fuelled RAM crisis.
- PC gaming is expanding. Steam’s record revenue, driven by a mix of AAA blockbusters and indie hits, suggests the open PC platform is becoming the default home for gaming.
- Live service is faltering. Destiny 2’s quiet exit, Marathon’s legal troubles, and the general fatigue around games-as-a-service models are pushing publishers to rethink their strategies.
- Labour is organising. The Bethesda union’s rally on July 15 represents a growing movement of game workers demanding a say in the decisions that affect their livelihoods.
- Physical media is dying. Sony’s 2028 deadline may be the beginning of the end for game discs — and the EU’s unwillingness to intervene suggests the transition to all-digital is inevitable.
- Creativity persists. Despite the turmoil, games like Assassin’s Creed Black Flag Resynced, Warframe: Tau, God of War Laufey, and Tomb Raider: Legacy of Atlantis prove that developers are still building extraordinary experiences — even as the ground shifts beneath them.
The gaming industry in July 2026 is a place of contradictions: record revenues and mass layoffs, creative ambition and corporate retrenchment, community generosity and corporate avarice. The coming months will reveal whether this week’s disruptions are a painful adjustment or the start of something far more permanent. For now, one thing is certain: the games industry will never look quite the same again.
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