In a sweeping announcement posted on Xbox Wire early this morning, Microsoft disclosed a series of major restructuring moves that will reshape its first‑party development landscape. The headline actions include transferring the storied UK studio Rare, along with the ownership of the Halo franchise, to Activision; initiating a formal consultation process that could lead to the closure of Ninja Theory; and cutting an additional 268 positions across Halo Studios, other internal studios, and Xbox Game Studios’ corporate functions. The blog entry explained that earlier attempts to find a buyer for Ninja Theory had fallen through, prompting the company to begin a consultation period with the studio’s staff about a proposed shutdown. Microsoft’s statement read: “Two separate agreements for Ninja Theory fell apart.
We will now commence consultation with employees on a proposed closure while continuing to explore alternative paths forward.” The same communication noted that discussions with Arkane Lyon remain ongoing and are expected to continue through the end of the year. A parallel development concerns Rare, the legendary developer behind titles such as *GoldenEye 007*, *Banjo‑Kazooie*, and *Sea of Thieves*. Effective immediately, Rare and the Halo IP will be managed under Activision’s expanding remit. Activision will also absorb World’s Edge, the studio behind *Age of Empires*, and will take charge of developing the next Halo installment with a newly formed, purpose‑built team that operates independently from the existing Halo Studios and from Activision’s own Call of Duty pipeline.
Meanwhile, Bethesda’s portfolio is being broadened to include Obsidian Entertainment. Obsidian will continue work on *Grounded* and the previously announced *Fallout* sequel, now under Bethesda’s umbrella. King, the mobile‑games powerhouse, will be folded into Microsoft Casual Games, and the Forza‑focused Turn 10 Studios will merge with Playground Games to create a single entity responsible for both the Forza and Fable franchises.
Undead Labs, the creator of the *State of Decay* series, has also exited the Xbox family under terms similar to those used for Double Fine and Compulsion Games. The studio will launch *State of Decay 3* on day one of Game Pass with a new publishing partner, preserving its existing roadmap while severing direct ties to Microsoft. The headline numbers illustrate the scale of the changes: 268 roles have been eliminated across Halo Studios, other first‑party studios, and central Xbox Game Studios management.
This follows a broader restructuring effort described by CEO Asha Sharma as a “resetting of the business.” Over the past months, Microsoft has divested five studios—including Ninja Theory and Undead Labs—while granting independence to Compulsion Games and Double Fine. The company has also announced deep cuts at Zenimax Online Studios and id Software, underscoring a worldwide reduction in headcount. Rare, founded in 1985 and acquired by Microsoft in 2002, continues to support the online pirate‑themed adventure *Sea of Thieves*. Its most recent original project, *Everwild*, was cancelled amid the 2025 wave of Xbox layoffs.
Halo Studios, originally launched as 343 Industries in 2007 to steward the Halo franchise after Bungie’s departure, rebranded in 2024 and delivered *Halo: Campaign Evolved* earlier this year—a modern remake of the single‑player component of the 2001 classic *Halo: Combat Evolved*. While the remake earned generally favorable reviews, it marked the studio’s first release since *Halo Infinite* (2021), a title whose protracted development was plagued by challenges with the in‑house Slipspace engine and accusations of mismanagement.
Following *Infinite*, several senior leaders left, and a wave of redundancies hit the studio in 2023. In response, Halo Studios announced a transition to Unreal Engine and a rebranding effort, promising “multiple new experiences” enabled by the new technology, though only *Campaign Evolved* has been publicly confirmed to date. Microsoft reiterated its plan for the next Halo entry, stating that it will be “led by a new, purpose‑built team that is separate from ongoing development and plans for Call of Duty.
A small team at Halo Studios will continue supporting the Halo community and games in‑market.” This separation mirrors recent shifts at Activision, where Treyarch, the long‑standing Call of Duty developer, announced it is “moving on to something new” after completing the latest *Black Ops* title. Activision had previously pledged to revamp its release strategy after back‑to‑back *Black Ops* launches underperformed commercially. The restructuring also touches the broader legacy of the Halo franchise.
The series originated with Bungie, which split from Microsoft in 2007 to focus on *Destiny*, a franchise initially published by Activision before Bungie’s acquisition by Sony in 2022. Many Bungie veterans migrated to 343 Industries to continue Halo development, but most senior talent has since departed for other studios, leaving a fragmented development pipeline. Sharma’s overarching goal appears to be a tighter focus on core intellectual properties—evidenced by recent announcements of new *Fallout*, *Diablo*, and *StarCraft* titles—while reducing organizational fragmentation.
By consolidating its two flagship shooter IPs, Halo and Call of Duty, under a more unified brand structure, Microsoft hopes to streamline decision‑making and improve financial performance. The relatively slow cadence of Halo releases compared with Activision’s annual, though sometimes polarizing, Call of Duty launches likely contributed to the decision to shift Halo development to Activision’s stewardship.
The company has set an ambitious target of cutting 3,200 jobs this year as part of Sharma’s restructuring plan. The latest announcement indicated that roughly three‑quarters of that goal has been achieved, implying that another 800 positions could be eliminated before the year’s end.
Studios that have not yet been publicly affected include Blizzard Entertainment, The Coalition (the developers behind *Gears of War*), and InXile Entertainment, the studio behind *Clockwork Revolution*. An update from Game Developer notes that an internal email to Blizzard staff from a senior leader confirmed that Blizzard is not among the studios impacted by today’s cuts. This suggests that while the broader Xbox Game Studios organization is undergoing massive change, certain high‑profile studios remain insulated for the time being, at least for now. Overall, the announcement marks a pivotal moment for Microsoft’s gaming division.
By reallocating Rare and Halo to Activision, merging several studios, and reducing headcount, the company is attempting to streamline operations, concentrate resources on its most profitable franchises, and position itself for a more sustainable future in an increasingly competitive market.