Xbox’s big budget cuts from July might have claimed another victim.
Last month, Microsoft laid off hundreds of staffers in its Xbox division, as part of a broader 9,000 headcount reduction — thought to revolve around funding AI projects and staffing.
To that end, we’ve seen various Xbox projects mysteriously go silent in recent weeks, and the fate of others remains completely unknown. Microsoft cancelled Perfect Dark and shut down The Initiative studio. The Forza Motorsport social channels have gone dark. We don’t really know the fates of other projects like Contraband — although the team there has been hiring. Now, it seems that the budget cuts might have hit another Xbox product.
Yesterday, the illustrious Tom “Wozza” Warren of The Verge noticed that the Xbox Gear Shop has gone offline.
the Xbox Design Lab has been unavailable since December and now the Xbox Gear Shop says it will be “back soon” pic.twitter.com/ywcsnOSoAWAugust 6, 2025
The Xbox Gear Shop is (or was) a place where Xbox fans could buy branded Xbox merchandise, both celebrating Xbox itself and Microsoft’s various video game properties. Things like the notorious Xbox Fridge were sold there, as well as t-shirts, socks, and other bits and bobs.
Mr. Warren also reminded us that the Xbox Design Lab, where you could buy custom Xbox and Xbox Elite controllers, has been offline since last December. The Xbox Design Lab is down while Microsoft moves “payment processors” according to a previous note on the website, but … does it really take over half a year to facilitate that?
I noticed that the Xbox Design Lab actually has a new splash screen on it since the last time I checked in on it, although it’s hard to say how recent the below update was added in. My previous requests for comments on the Xbox Design Lab from Microsoft were met with silence.
I feel like if Microsoft was planning to shut these features down, they probably wouldn’t have set up splash screen pages with “coming back soon,” creating expectations. Although, Microsoft isn’t always the best at managing expectations, let’s be real — showing in-engine gameplay of Perfect Dark only to cancel the game later teaches fans to expect nothing of Microsoft until the game is physically (or digitally) in your hands.
In the case of the Xbox Design Lab, it stands to reason that Microsoft is getting it up for new controller designs. In a previous report from us, I noted how Microsoft is planning multiple new controllers for next-gen, although some of the models may release sooner. The new models have Wi-Fi direct to reduce cloud latency, in addition to Bluetooth and the usual Xbox Wireless signals. They also have better toggles for swapping between devices, and should come with a variety of other new enhancements and features. But, perhaps Microsoft shouldn’t have claimed the Xbox Design Lab was down to “move payment processors” in that case.
With regards to the Xbox Gear Store, Microsoft already has various retail operations since acquiring Bethesda and Blizzard. Both the Bethesda and Blizzard Stores are very good, and both already has warehouses across the world for facilitating these kinds of supply chains.
Could Microsoft be exploring consolidating its merchandising efforts all under one company? Not only would it potentially be more cost effective, but it would also allow fans to see products from other franchises they might be interested in while browsing. Right now, it seems like Bethesda, Blizzard, and Xbox all have separate third-party companies managing their stores.
Or, perhaps, it’s nothing at all, and the Xbox Gear Shop will be restored a few hours after I publish this article. Either way, I’ve asked Microsoft to comment on the situation, but don’t be surprised if we don’t hear back. Hopefully it’s not down as long as the Xbox Design Lab has been …
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