Breaking: Xbox Announces Major Studio Overhaul, 268 Layoffs, and Activision-Led Halo Title

In an internal memo sent to Xbox employees today, Head of Xbox Game Studios Matt Booty outlined a massive structural overhaul across Microsoft’s gaming division.

The announcement includes 268 job cuts, major studio consolidations, a proposed closure of Hellblade developer Ninja Theory, and a unexpected shift in development leadership for the Halo franchise.

Here are the key takeaways from Microsoft’s latest restructuring:

1. Activision to Develop Next Halo Title

In one of the biggest organizational shifts in Xbox history, Activision will expand its management scope over Rare and World’s Edge, and will take the lead on the next main entry in the Halo franchise. Development will be handled by a new, dedicated team separate from Call of Duty. A smaller remaining team at Halo Studios will transition strictly to live-service and community support for existing in-market Halo titles

2. Playground and Turn 10 Merge; Bethesda Integrates Obsidian

Xbox is consolidating several long-time partner studios under single management structures:

• Playground Games & Turn 10 Studios: Formally merging into a single combined studio dedicated to the Forza and Fable franchises.
• Bethesda & Obsidian Entertainment: Obsidian will now operate under the Bethesda banner, continuing work on Grounded while co-developing an unannounced new Fallout project alongside Bethesda Game Studios.
• King & Microsoft Casual Games: King’s mobile operations will expand to absorb Microsoft Casual Games.

3. Ninja Theory Faces Proposed Closure; Arkane Consultations Ongoing

Following earlier studio divestitures, Booty provided an update on several first-party teams:

• Ninja Theory: After two separate deal negotiations fell through, Xbox is beginning formal employee consultations regarding a proposed closure of the studio behind Hellblade.
• Arkane Studios: Consultations remain ongoing and are expected to run through the end of the year.
• Double Fine, Compulsion, and Undead Labs: Compulsion Games and Double Fine have officially departed Microsoft to operate independently with their IP and back catalogs. Undead Labs has transitioned under similar terms with a new publisher, with State of Decay 3 remaining pledged as a Day One Xbox Game Pass release.

4. 268 Roles Eliminated in Restructuring

The latest round of cuts eliminates 268 positions across Halo Studios, central Xbox Game Studios management, and various first-party teams. According to Booty, these cuts bring Xbox roughly three-quarters of the way through its broader organizational reset announced earlier this year.

Xbox management will host an all-hands town hall on October 6 to discuss the changes and review upcoming release lineups.