Xbox announced a sweeping reorganization that places the storied UK studio Rare and the Halo franchise under Activision's control, initiates a consultation process aimed at closing Ninja Theory, and eliminates 268 positions across Halo Studios, other first‑party developers, and central Xbox Game Studios functions. The details were revealed in an Xbox Wire blog post early this morning, following earlier rumors of extensive layoffs. In the official statement, Microsoft explained that attempts to find a buyer for Ninja Theory had not succeeded, prompting the company to start a formal consultation with the studio’s staff about a proposed shutdown. The post read, "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." The language suggests that while Ninja Theory’s fate remains uncertain, other studios are being repositioned within the broader corporate structure.
Microsoft also clarified the future of the Halo franchise. The next Halo installment will be "led by a new, purpose‑built team that is separate from ongoing development and plans for Call of Duty," the blog noted. A smaller, dedicated Halo Studios team will continue to support the existing Halo community and maintain the live services for current titles.
This separation reflects a strategic decision to keep the two flagship shooter IPs—Halo and Call of Duty—on distinct development tracks. Key points of the restructuring include: - A total of 268 roles have been eliminated across Halo Studios, other first‑party studios, and Xbox Game Studios’ management and central operations. - Activision will broaden its responsibilities to include Rare and World's Edge, the studio behind the Age of Empires series, and will take charge of developing the next Halo game with a newly formed team.
- Bethesda will assume oversight of Obsidian, which will keep working on Grounded and the announced Fallout sequel. - King will absorb Microsoft Casual Games into its portfolio. - Playground Games and Turn 10 Studios will merge into a single entity focused on the Forza and Fable franchises. - Undead Labs has departed the Xbox family under terms similar to those used for Double Fine and Compulsion Games and will launch State of Decay 3 with a new publishing partner.
- Ninja Theory is slated for closure after two separate acquisition attempts fell through; a consultation with employees has begun, though the company says it is still "exploring other paths forward." - Arkane Lyon remains in a consultation phase that is expected to run through the end of the year. These moves are part of a broader restructuring effort that CEO Asha Sharma has described as a "resetting of the business." Over the past months, Xbox has divested five studios, including Ninja Theory and Undead Labs, while returning Compulsion Games and Double Fine to independence. The company has also executed large‑scale layoffs worldwide, most recently affecting Zenimax Online Studios and other divisions. Rare, founded in 1985 and integrated into Xbox in 2002, continues to support the online pirate‑themed game Sea of Thieves.
Its most recent original project, Everwild, was cancelled amid the 2025 wave of Xbox cuts. Halo Studios, originally launched as 343 Industries in 2007, rebranded in 2024 and delivered Halo: Campaign Evolved earlier this year, a remake of the single‑player portion of the 2001 classic Halo: Combat Evolved.
While the remake earned generally positive reviews, it was the studio’s first release since Halo Infinite in 2021, a title whose development was marred by challenges with the in‑house Slipspace engine and accusations of mismanagement. Following Infinite’s launch, several senior leaders departed, and many more employees were laid off during the 2023 reductions. In 2024, the studio announced a switch to Unreal Engine and adopted the Halo Studios name. At the time of the announcement, Xbox said Halo Studios was working on "multiple new experiences" enabled by the shift to Unreal, though Campaign Evolved remains the only project publicly confirmed.
Microsoft reiterated that the next Halo entry will be overseen by a new, purpose‑built team distinct from both ongoing Halo work and Call of Duty plans, while a small core team will keep existing Halo services running. The news also coincides with developments at Activision’s flagship shooter franchise. Treyarch, a long‑standing Call of Duty studio, recently announced it would "move on to something new" after completing the latest Black Ops installment. Activision had previously pledged to adjust its Call of Duty release cadence after back‑to‑back Black Ops launches underperformed commercially.
Halo Studios traces its roots to 2007 when Microsoft created 343 Industries to steward the Halo franchise after Bungie’s departure. Bungie, the original creator of Halo, later launched the Destiny series, which was published by Activision before Bungie was acquired by Sony in 2022 and underwent its own round of cuts this year.
While several Bungie veterans initially stayed on with Halo, many of the senior talent eventually left for other studios. Sharma’s restructuring agenda emphasizes investing in core intellectual property—evidenced by recent announcements of new Fallout, Diablo and StarCraft titles—while reducing organizational fragmentation.
By consolidating the two major shooter franchises under clearer, separate umbrellas, Microsoft hopes to streamline development and avoid the slow release cadence that hampered Halo Studios compared to Activision’s annual, if sometimes polarizing, Call of Duty launches. Xbox has set a target of cutting 3,200 jobs this year as part of Sharma’s overhaul. The latest announcement indicated the company is "roughly three‑quarters of the way through" that goal, implying that another 800 positions could be eliminated before the year ends.
Studios not yet affected include Blizzard and InXile, the developer behind Clockwork Revolution. This story is still developing, and further updates will be provided as more information becomes available.