Microsoft has unveiled the next phase of its sweeping Xbox restructuring, cutting 268 roles while dramatically reorganizing some of its most recognizable game studios and franchises.
The announcement confirms reports from earlier that Microsoft was preparing another round of Xbox layoffs and planned to consolidate several studios. At the time, hundreds of jobs were reported to be at risk, but the exact number of affected employees and the studios involved had not yet been disclosed. The biggest change concerns Halo. Activision will develop the next major Halo game through a newly created team, while Halo Studios, formerly 343 Industries, will be reduced to a smaller operation responsible for supporting existing titles and the Halo community. The new Activision team will operate separately from the publisher’s Call of Duty development structure.
The restructuring goes considerably further. Rare and World’s Edge are moving under Activision, Obsidian Entertainment is being placed under Bethesda’s remit, and Playground Games and Turn 10 Studios are being combined into a single studio responsible for the Forza and Fable franchises. King will meanwhile take responsibility for Microsoft’s casual-games operation.
Ninja Theory faces the most uncertain future. Microsoft says two separate agreements to move the Hellblade developer into new ownership have fallen through, prompting the company to begin consultation with employees over a proposed closure while it continues exploring alternatives.
Activision will develop the next Halo
Moving development of Xbox’s flagship franchise to Activision is easily the most striking decision in the latest reorganisation. In an internal memo published by Xbox, Chief Content Officer Matt Booty said Activision will establish a purpose-built team specifically for the next Halo title. Importantly, Microsoft says this group will operate separately from Activision’s Call of Duty teams.
Halo Studios itself isn’t disappearing completely. A smaller team will remain responsible for supporting the Halo community and games already on the market, including Halo Infinite and Halo: Campaign Evolved. Development responsibility for the next major Halo game, however, will move to the new Activision operation.
The decision represents a significant shift for a franchise that has been inseparable from Xbox’s identity since the original console launched with Halo: Combat Evolved in 2001. Activision’s responsibilities are expanding elsewhere as well. Rare, the studio behind Sea of Thieves, and World’s Edge, which oversees Age of Empires, will move under Activision’s organizational structure. The publisher will consequently oversee a considerably broader collection of Microsoft’s major franchises alongside its existing portfolio.
Obsidian moves under Bethesda
Obsidian Entertainment is also being reorganised under Bethesda. Microsoft says Bethesda’s remit will expand to include Obsidian, although the studio will continue working on its existing projects, including Grounded and its previously announced Fallout collaboration with Bethesda Game Studios.
That move is particularly notable because the two studios are already working together on a new Fallout project. TalkEsport previously reported that Obsidian is developing a new Fallout project with Bethesda Game Studios, while Fallout 5 remains in preproduction and The Elder Scrolls VI is Bethesda Game Studios’ primary development focus.
Placing Obsidian within Bethesda’s organisational structure therefore formalises a relationship that was already becoming increasingly important to Microsoft’s plans for Fallout. It does not mean Bethesda has acquired Obsidian in the conventional sense, since both companies were already owned by Microsoft.
Turn 10 and Playground Games become one studio
Another major consolidation affects two of Xbox’s best-known development teams. Playground Games and Turn 10 Studios will formally come together as a single studio focused on the Forza and Fable franchises. The developers have worked closely around Forza for more than a decade, but Microsoft’s restructuring now places their work within one organisation.
Turn 10 created the Forza Motorsport series, while Playground established Forza Horizon before taking responsibility for Microsoft’s Fable reboot. The consolidation therefore brings together two studios with considerable shared franchise and technological history.
King is receiving an expanded role as well, taking Microsoft’s casual-games operation under its remit. That places Microsoft’s casual titles alongside the company behind Candy Crush and its wider mobile portfolio.
Ninja Theory faces possible closure
The situation surrounding Ninja Theory is considerably more serious. Microsoft announced in July that Ninja Theory and Undead Labs were among the studios expected to move into new ownership as Xbox reduced the size of its internal development portfolio.
Undead Labs has since successfully transitioned out of Microsoft on terms similar to those involving Compulsion Games and Double Fine Productions. State of Decay 3 remains planned for a day-one Game Pass release under its new publishing arrangement.
Ninja Theory has not been as fortunate. According to Microsoft’s latest communication, two separate agreements involving the studio fell through. Xbox will now begin consultation with employees over a proposed closure while continuing to explore other possible outcomes for the Hellblade developer.
That means Ninja Theory has not yet definitively closed. Closure is Microsoft’s proposal while the consultation process proceeds, and alternative options are still being explored. The Verge reports that consultation concerning Arkane in France also remains underway and is expected to continue through the end of the year.
Xbox cuts 268 jobs as restructuring continues
The studio overhaul accompanies 268 job cuts across Microsoft’s gaming organisation. The reductions affect Halo Studios, other first-party development teams, Xbox Game Studios management and central functions. Crucially, those 268 positions are part of Microsoft’s previously announced plan to eliminate approximately 3,200 roles throughout fiscal 2027 rather than an additional round being added on top of that figure. Around 1,600 roles were affected when the restructuring began in July.
Booty said the actions completed since July, including Microsoft’s studio divestitures, have now taken Xbox roughly three-quarters of the way through the previously announced restructuring.
The September changes therefore provide the details that were missing when reports of another round of Xbox layoffs emerged earlier in the day. What initially appeared to be another substantial headcount reduction has developed into a much broader reorganisation of how Microsoft manages some of the biggest studios and intellectual properties in gaming.
Xbox’s studio structure looks radically different
The cumulative changes leave Microsoft’s first-party gaming organisation looking dramatically different from the one it assembled during its acquisition spree. Compulsion Games and Double Fine Productions have returned to their management teams, while Undead Labs has now completed a similar transition. Ninja Theory faces a proposed closure if another path cannot be found, while discussions surrounding Arkane continue.
Inside Microsoft, Activision’s role has expanded significantly through Halo, Rare and World’s Edge. Bethesda now oversees Obsidian, Playground and Turn 10 are becoming one studio, and King gains responsibility for Microsoft’s casual-games operation.
The result is a substantially more consolidated structure built around Microsoft’s larger publishing organisations and established franchises. For Halo in particular, the change is historic. The franchise that helped establish Xbox as a console platform will have its next major instalment developed by a purpose-built team inside Activision, the publisher Microsoft acquired as part of its $69 billion Activision Blizzard deal. The restructuring isn’t finished either. With Microsoft saying the process is now roughly three-quarters complete, further changes remain possible before the Xbox reset announced earlier this year reaches its conclusion.
