Microsoft’s Xbox division has launched a second wave of layoffs and studio restructuring this year, eliminating 268 roles and folding several internal teams together in a sweeping shake-up of its first-party operations. The move, announced via a message from Xbox chief content officer Matt Booty and published on Xbox Wire, marks roughly three-quarters of the way through a restructuring plan that began with a July round of cuts affecting around 1,600 staff. In a significant shift for the industry, the Halo franchise has been handed to Activision, while Obsidian Entertainment has been absorbed into Bethesda, and the Forza and Fable studios have been merged into a single unit.
The announcement comes as Xbox continues to reorganize its portfolio around a strategy of operating fewer business units and consolidating teams that already collaborate closely. Booty framed the cuts not merely as workforce reductions but as a deliberate realignment aimed at strengthening the company’s core franchises and sharpening its publishing expertise. The restructuring touches Halo Studios, other first-party studios, and the XGS management and central functions layer, signaling a fundamental reshaping of how Microsoft approaches its gaming business.
A New Home for Halo, Rare, and World’s Edge
Among the most consequential changes is the transfer of Halo to Activision, which now holds custody of the franchise alongside Rare and the Age of Empires developer World’s Edge. This consolidation reflects a broader strategic realignment as Microsoft leans into its partnership with Activision’s parent company, Microsoft’s gaming ambitions increasingly intertwined with the publisher’s roster.
Crucially, the next Halo entry will be developed by a new, purpose-built team that is deliberately separate from the ongoing development and planning of Call of Duty. The remaining structure of Halo Studios will continue to support the franchise’s community and its games in-market, ensuring continuity for players even as the creative leadership shifts.
“The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring.”
Matt Booty, Xbox Chief Content Officer
Booty elaborated that the reorganization seeks to strengthen Xbox’s franchises by aligning groups that already work closely together. The consolidation of Rare under Activision’s umbrella, combined with the departure of Halo’s development to a dedicated team, underscores a clear intent to streamline operations and focus resources on the titles that matter most to the company’s future.
Studio Consolidations and Uncertain Futures
Beyond the layoffs, the announcement details a series of studio mergers designed to consolidate Xbox’s creative output. Obsidian Entertainment, the developer behind The Outer Worlds and Avowed, has been slotted into Bethesda, a move that foreshadows deeper collaboration between the two labels. Meanwhile, Playground Games and Turn 10 Studios—the makers of Forza and Fable—have been merged into a single studio tasked with producing new entries in both series.
The mobile gaming arm also saw movement, as King absorbed Microsoft Casual Games, the developer of the company’s solitaire, sudoku, and mahjong apps. These consolidations reflect a broader industry trend toward fewer, larger studios capable of delivering on ambitious multi-franchise ambitions.
The announcement also addressed the fate of studios parted ways with in July. Ninja Theory, the studio behind Hellblade, is reportedly consulting on a likely closure after two potential acquisition deals fell through. Undead Labs, along with Compulsion Games and Double Fine, managed to secure new publishers, with State of Decay 3 finding a home. The future of Arkane, the developer of the Dishonored series, remains unresolved, with consultation on the studio’s future expected to continue through the end of the year.
Looking Ahead
As Xbox implements these changes, the gaming community has expressed a mix of concern and solidarity for the affected developers. The consolidation of studios and the departure of Halo to Activision represent a pivotal moment for Microsoft’s gaming strategy, one that will shape the landscape of first-party development for years to come.
With the restructuring roughly three-quarters complete, the focus now turns to execution—how these newly aligned teams will deliver on their creative visions and whether the streamlined structure will yield the stronger franchises Booty envisions. For players, the immediate impact may be limited, but the long-term implications for Xbox’s portfolio, from Halo’s future under Activision to the merged Forza and Fable studios, promise to define the next chapter of Microsoft’s gaming ambitions.
Solidarity to all the developers affected by this round of Xbox layoffs and cuts. Xbox parent company Microsoft remains subject to a BDS movement boycott over its reported ties to the Israeli military.
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