Summary
Microsoft is announcing a massive restructuring of its Xbox studios today, months after laying off 1,600 Xbox employees and selling off studios. The latest changes will see Activision take on the Halo and Sea of Thieves franchises, as well as Age of Empires. Microsoft is also laying off around 268 Xbox employees as part of this restructuring, and likely closing Ninja Theory.
Activision is taking over Halo as part of a massive Xbox shake-up
The Xbox reset continues with major studio changes, layoffs, and more.
The Xbox reset continues with major studio changes, layoffs, and more.
Halo Studios will be significantly impacted by today’s changes and layoffs. The studio will continue to support existing titles like Halo Infinite and Halo: Campaign Evolved, but the next flagship installment in the Halo franchise will come from Activision instead.
“Activision will also be developing the next Halo title, led by a new, purpose-built team that is separate from ongoing development and plans for Call of Duty,” says Xbox chief content officer Matt Booty in an internal memo. “A small team at Halo Studios will continue supporting the Halo community and games in-market.”
That’s a significant change for the future of Halo, less than two years after Microsoft moved its Halo development to Unreal Engine 5. Halo Studios, formerly 343 Industries, has also undergone a leadership overhaul in recent years, as well as layoffs.
“For Halo, our goal is clear: make the greatest Halo game ever, worthy of its universe and legacy, while staying true to what made players love it in the first place,” says Activision president Rob Kostich. “It is a bold ambition, one that this franchise deserves. We have already begun assembling a purpose-built team, unique in capability and talent, ready and excited to deliver this next chapter with the community.”
World’s Edge, the studio behind the Age of Empires franchise, is joining Activision as part of this shake-up. Activision is also taking control of Sea of Thieves, with Rare’s UK team of developers joining the Activision side of Xbox.
It’s not clear if there are any layoffs impacting Rare or World’s Edge as part of this shuffle. Former Rare studio chief Craig Duncan took on the role of head of Xbox Game Studios in 2024, and then resigned from Microsoft in June ahead of the big Xbox reset. Xbox Game Studios chief of staff Louise O’Connor also left the company alongside Duncan, after originally starting work at Rare in 1999.
Microsoft is also officially acknowledging that Obsidian is moving over to Bethesda to work in close partnership on a new Fallout title. It’s not clear what kind of Fallout game will emerge, but with the success of the TV series I wouldn’t be surprised to see this particular title closely connected to the show.
Turn 10 Studios and Playground Games are also merging into a single studio, focused on the future of Forza Horizon and Fable. Microsoft is also moving its casual games unit, responsible for Solitaire, Mahjong, and Minesweeper, from Bethesda to King.
This is the second round of Xbox layoffs this year, but it might not be the last. Microsoft has already said that 3,200 roles are set to be impacted by Xbox cuts over the course of Microsoft’s 2027 financial year (which ends in June 2027). Today’s cuts bring the number up to nearly 1,900 in total, leaving more than 1,000 roles still yet to be announced. Microsoft now says it’s “roughly three-quarters of the way through previously announced restructuring.”
Here’s the full memo from Matt Booty:
Team,
I’m writing to share several updates as part of the XBOX reset outlined earlier this year.
First, we are eliminating 268 roles across Halo Studios, other first-party studios, and the XGS management and central functions layer. The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring. I am deeply grateful for what our colleagues have built, and I know how difficult today will be for those leaving and the teams around them.
Second, we are reorganizing our studios. The goal is to strengthen our franchises and games by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise.
Activision will expand its remit to World’s Edge, as well as Rare. Activision will also be developing the next Halo title, led by a new, purpose-built team that is separate from ongoing development and plans for Call of Duty. A small team at Halo Studios will continue supporting the Halo community and games in-market.
Bethesda will expand its remit to include Obsidian, which will continue its current projects, including Grounded, as well as the new Fallout project made in collaboration with Bethesda Game Studios.
King will expand its remit to include Microsoft Casual Games, uniting our two global leaders in casual game design and live operations.
Playground and Turn 10 will come together as one studio focused on the Forza and Fable franchises. These two studios have been technological, creative, and franchise partners for over a decade, and today’s changes will formally move their work into one team.
Third, an update on our studio divestitures: In August, Compulsion and Double Fine returned to management with their IP, back catalogs, and runway funding. Undead Labs has now successfully transitioned on similar terms and, with a new publisher, will release State of Decay 3 day one on Game Pass. Unfortunately, two separate agreements for Ninja Theory fell through. We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward. Consultation with Arkane remains underway and is expected to continue through the end of the year.
Today, our focus should be on supporting those affected and treating one another with care and respect. I will spend time with our studios over the next week. At our October 6 town hall, we will come together as an ALL-XBOX team to reflect on our progress and look ahead to one of the strongest game lineups in our history.
Matt