Xbox's latest cuts and studio mergers signal a chaotic pivot for Halo and Game Pass

Key points

• Microsoft eliminated 268 roles across Halo Studios, other first-party studios, and management layers, bringing the restructuring roughly 75% complete.
• Activision will now develop the next Halo title, while a small team at Halo Studios remains to support existing games.
• Studios are being merged: Obsidian joins Bethesda, Turn 10 and Playground combine, and King absorbs Microsoft Casual Games.
• Ninja Theory faces potential closure after two failed acquisition deals, while Undead Labs has transitioned to a new publisher.
• Game Pass continues to be reshaped, with State of Decay 3 set to launch day one on the service.

Background

This restructuring follows a period of significant turmoil for Xbox, which began with thousands of layoffs in early 2024. Recent months have seen the closure of several studios and ongoing uncertainty regarding the future of the Xbox brand and hardware. The current changes are part of a broader 'reset' strategy initiated by leadership, including Asha Sharma, to streamline operations and focus on profitable franchises.

How outlets are covering it

The Verge highlights the deepening uncertainty and morale issues among Xbox employees, noting that the future of the brand feels increasingly unclear. Aftermath criticizes Microsoft for lacking a long-term plan, describing the changes as reactive and short-sighted, with a focus on immediate profits over sustainable development. XBOX Wire, in an internal memo from Matt Booty, frames the changes as a necessary step to strengthen franchises and align studios, emphasizing the goal of creating a stronger game lineup. Windows Central provides a factual overview of the specific studio mergers and divestitures, focusing on the logistical details of the reorganization.

Why it matters

The reorganization of Xbox's studios and the placement of Halo under Activision signal a significant shift in Microsoft's gaming strategy. This could impact the future of key franchises and the overall direction of the Xbox brand, potentially affecting the gaming industry's stability and the development of new titles.

What to watch

Microsoft will hold a town hall on October 6 to discuss progress and future plans. Employees at affected studios, including Ninja Theory, will be consulted on potential closures. The next Halo game will be developed by a new team at Activision, while Obsidian will continue its projects under Bethesda.