Xbox announced a sweeping reorganization that sees its iconic UK studio Rare and the Halo intellectual property transferred to Activability, the imminent shutdown of Ninja Theory, and a broad reduction of staff across several first‑party studios. The details were revealed in an Xbox Wire blog post released early this morning, following earlier rumors of large‑scale layoffs within the division. In the official statement, Microsoft explained that attempts to find a buyer for Ninja Theory had fallen through, prompting the company to start a consultation process regarding the studio’s proposed closure.
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." This indicates that while Ninja Theory faces an uncertain future, Undead Labs will continue its work under a fresh publishing arrangement. Microsoft also outlined the future of the Halo franchise.
The next Halo entry will be "led by a new, purpose‑built team that is separate from ongoing development and plans for Call of Duty," while a smaller Halo Studios team will remain responsible for supporting the existing Halo community and maintaining current titles in‑market. This shift underscores a strategic move to separate the two flagship shooter properties under distinct development pipelines. Key points from the announcement include: - A total of 268 positions have been eliminated across Halo Studios, other first‑party studios, and Xbox Game Studios’ central functions.
- Activability will now oversee Rare and the Age of Empires studio World's Edge, and will take charge of developing the next Halo installment with a dedicated, purpose‑built team. - Bethesda will expand its remit to incorporate Obsidian, which will keep working on Grounded and a previously announced Fallout sequel.
- King will absorb Microsoft Casual Games, broadening its portfolio. - Playground Games and Turn 10 will merge into a single studio focused on the Forza and Fable franchises. - Undead Labs departs 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 failed; a consultation with staff has begun, though Microsoft says it is still "exploring other paths forward." - Arkane Lyon remains in a consultation phase that is expected to continue through the end of the year. These moves are part of a broader restructuring effort described by CEO Asha Sharma as a "resetting of the business." Over the past months, Xbox has divested five studios—including Ninja Theory and Undead Labs—while granting independence back to Compulsion Games and Double Fine.
The company has also undertaken deep cuts across its global workforce, with recent reductions at Zenimax Online Studios and id Software. Rare, founded in 1985 and part of the Xbox family since 2002, currently maintains the online pirate adventure 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 released Halo: Campaign Evolved earlier this year. Ninja Theory is still working on the narrative‑driven title Senua. Halo: Campaign Evolved, released in July, is a remake of the single‑player portion of the 2001 classic Halo: Combat Evolved. The title received generally favorable reviews but marked the studio’s first release since Halo Infinite in 2021, a game 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 staff were let go during the 2023 layoffs. In 2024, the studio announced a transition to Unreal Engine and adopted the Halo Studios name. At the time of the transition, Xbox said Halo Studios was working on "multiple new experiences" enabled by the shift to Unreal, though Campaign Evolved remained the only publicly confirmed project. Microsoft reiterated that the upcoming Halo title will be overseen by a newly formed team, separate from both ongoing Halo development and the Call of Duty roadmap.
A small core team at Halo Studios will continue to support the existing Halo community and maintain live services for current games. In parallel, Call of Duty’s long‑time developer Treyarch announced it would be "moving on to something new" after completing the latest Black Ops installment. Activision had previously signaled a change in its Call of Duty release cadence after back‑to‑back Black Ops launches resulted in underwhelming sales for the second entry.
Halo Studios traces its origins to 2007 when 343 Industries was created to steward the Halo franchise after Bungie’s split from Microsoft. 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 faced its own round of cuts this year.
While several Bungie veterans stayed on with Halo after the transition, many of the franchise’s marquee talent eventually moved to other studios. Sharma’s restructuring agenda aims to concentrate resources on core intellectual properties, a strategy reflected in recent announcements of new Fallout, Diablo, and StarCraft titles. By consolidating the two major shooter IPs—Halo and Call of Duty—under a more streamlined organizational structure, Microsoft hopes to reduce fragmentation and improve efficiency.
The comparatively slower release cadence of Halo Studios likely contributed to the decision, especially when contrasted with Activision’s annual, albeit sometimes polarizing, Call of Duty releases. 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 roughly 800 more positions could be eliminated before the year’s end. Studios that have not yet been impacted include Blizzard Entertainment, The Coalition (the studio behind Gears of War), and InXile, the developer of Clockwork Revolution. Overall, the announcement underscores a decisive shift in Microsoft’s gaming strategy: centralising its flagship franchises, shedding underperforming or non‑core assets, and streamlining development pipelines to better compete in a rapidly evolving market. The long‑term impact on the affected studios, their employees, and the broader gaming community will become clearer as the consultation processes conclude and the new studio structures take shape.