Kevin LaChapelle, the Microsoft vice president of Xbox Platform who spearheaded the Xbox backward compatibility program and cloud gaming, has been laid off after 37 years at the company. His departure is part of a larger wave of cuts affecting 3,200 staff across Xbox this financial year.
Key figure behind backwards compatibility let go
LaChapelle announced his layoff in a LinkedIn post on Tuesday, July 7, 2026. 'I will add my name to the list of people who were laid off today at Xbox,' he wrote. 'This ends my 37 years at Microsoft. I have worked in many different parts of the company, and I will say my fondest memories are of leading the team of very talented engineers who built the Xbox backward compatibility program.'
He recalled the moment the program was announced at E3 2015 by Phil Spencer: 'Sitting in the auditorium when Phil announced the program at E3 2015 was incredible. The audience’s reaction was unbelievable. I followed that with leading the team who created our Cloud Gaming product.'
Before his work on Xbox, LaChapelle led development on various Microsoft applications, including Windows Movie Maker in 2000.
Impact on development studios
Xbox's recently announced plans to cut 3,200 staff members have already hit the majority of its development studios. Compulsion Games and Double Fine have severed ties with Xbox and regained their independence, while Ninja Theory and Undead Labs are being sold off. Arkane Lyon is reviewing its 'potential strategic options.'
According to reports, id Software (Doom) and ZeniMax Online Studios have also been badly affected, along with Bethesda Game Studios.
Obsidian Entertainment hit hard
Kotaku reports that roughly 25% of Obsidian Entertainment, the studio behind Pentiment and The Outer Worlds 2, is being let go. This is estimated to be around 60–70 people. Based on LinkedIn posts, those affected include animators, senior narrative designers, and system designers, some of whom have been at the studio for decades.
Obsidian is currently working on Grounded 2, which entered early access in 2025. Two story expansions are planned for The Outer Worlds 2, though neither has a release date. According to former Obsidian co-founder Chris Avellone on X, a sequel to Avowed is also in development.
Industry-wide uncertainty
While the total of 3,200 layoffs is confirmed, the exact studios and individuals affected are still emerging. LaChapelle expressed optimism for the future: 'I am a firm believer that all entertainment will eventually become streamlined to you wherever you are. I look forward to watching how Xbox evolves going forward and I wish the team nothing but success.'
