I don’t know how you got from A to B on the Porsche. Embracer was funded largely by debt that they were expecting to get bailed out of by an investment that didn’t happen; the classic leveraged investment gone wrong. Microsoft absolutely could stomach whatever losses they face, especially since that was the whole idea a few years back when they started Game Pass, so them deciding to not follow through on that and tighten their belts now is a situation unique to them. At large, across the industry, are tons of companies making big bets like Suicide Squad or Concord or Warhaven that follow a live service template that’s been tapped out of customers and don’t work out, and even smaller companies following the traditional publisher model like Mimimi are so exhausted hunting for funding for their next game, just barely making it by on copies sold, that they decide instead to close up shop. That’ll happen when customer dollars are spread out around more games.
If people don’t buy your game, you don’t have money to pay people. Ideally, Surgent Studios would have developed their game inexpensively enough and with enough of a war chest that they wouldn’t have to lay people off after their first product didn’t sell enough copies, but that’s clearly not how they were funded. It sounds like the studio still exists, so maybe a smaller version of that team gets to take a crack at that second game, but you can’t pay people with money you don’t have, and we as the consumers have been well served by so many other games that it’s not much of a mystery why people didn’t turn up for this one.
How many releases is a very different number than how much profit. Only a few of Microsoft’s releases likely account for a sizable percentage of the entire industry’s profits in a given year. The fact is that investors saw dollar signs, and the industry expanded to a level that the market doesn’t actually sustain. How many metroidvanias do you want to play in a given year? And given that Animal Well and Prince of Persia: The Lost Crown came out this year, how likely are you to play Tales of Kenzera: Zau after you’ve bought and played those? Mass layoffs are not a good thing, but it’s a mathematical consequence of how much companies are permitted to expand relative to what people actually buy.