Xbox has announced a sweeping reorganization that will see the storied UK studio Rare and the ownership of the Halo franchise transferred to Activator, the imminent closure of Ninja Theory, and a further wave of job reductions affecting 268 positions across Halo Studios, other first‑party studios and Xbox Game Studios’ central functions. The details were released in an Xbox Wire blog post earlier today, following earlier rumors of extensive layoffs within the company. In the announcement, Microsoft explained that attempts to sell Ninja Theory to an external buyer had collapsed, prompting the start of a formal consultation process regarding the studio’s 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." This signals that while Undead Labs is exiting the Xbox family, it will continue its flagship series under a fresh publishing arrangement. 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. A small team at Halo Studios will continue supporting the Halo community and games in‑market." In other words, a dedicated, lean unit will take over the core development of Halo, while the existing Halo Studios will shift to a support role, maintaining live services and community engagement.
The blog post further noted, "Unfortunately, two separate agreements for Ninja Theory fell through. We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward. Consultation with Arkane remains underway and is expected to continue through the end of the year." This indicates that Arkane Lyon is also in a consultation phase, though its ultimate fate has not yet been decided. 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 functions.
- Activator will expand its remit to include Rare and World's Edge, the studio behind Age of Empires, and will assume development of the next Halo title through a newly formed, purpose‑built team. - Bethesda will broaden its scope to incorporate Obsidian, which will keep working on Grounded and the announced Fallout sequel. - King will take over Microsoft Casual Games, integrating casual titles into its portfolio.
- Playground Games and Turn 10 will merge into a single studio focused on the Forza and Fable franchises. - Undead Labs has departed 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 acquisition attempts failed; a consultation process with staff has begun, though Microsoft says it is still "exploring other paths forward." - Arkane Lyon remains in consultation, a process expected to run until the end of the calendar 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 executed deep cuts at Zenimax Online Studios and other global divisions.
Rare, founded in 1985 and part of Xbox since 2002, is best known for titles such as Sea of Thieves. Its most recent original project, Everwild, was cancelled amid the large‑scale layoffs announced in 2025. Halo Studios, originally launched as 343 Industries in 2007, rebranded in 2024 and delivered Halo: Campaign Evolved earlier this year, a modern remake of the single‑player portion of the 2001 classic Halo: Combat Evolved.
The studio’s last major release before that was Halo Infinite in 2021, a game whose development was marred by challenges with the in‑house Slipspace engine and subsequent management criticisms. Following Infinite’s launch, several senior leaders departed, and many more employees were let go during the 2023 cuts. In 2024 the studio announced a migration to Unreal Engine and adopted the Halo Studios name.
At the time of the rebrand, Xbox said Halo Studios was working on "multiple new experiences" enabled by the shift to Unreal, but to date only Campaign Evolved has been publicly confirmed. The new, purpose‑built Halo team will operate independently of the existing Halo Studios and will not be tied to the ongoing Call of Duty development pipeline. In parallel, Activator’s flagship shooter franchise, Call of Duty, is also undergoing change.
Treyarch, a long‑standing CoD studio, recently announced it would "move on to something new" after completing the latest Black Ops entry. Activator had previously pledged to rethink its CoD release strategy after back‑to‑back Black Ops launches underperformed commercially. The restructuring also touches on the legacy of Bungie, the original creator of Halo.
Bungie split from Microsoft in 2007, later launching the Destiny franchise, which was published by Activator before Bungie’s acquisition by Sony in 2022. Many Bungie veterans initially stayed with Halo when it moved to 343 Industries, but most have since migrated to other studios. Sharma’s overarching goal appears to be a sharper focus on core intellectual property—evidenced by recent announcements of new Fallout, Diablo and StarCraft titles—while reducing fragmentation by consolidating the two major shooter IPs under a unified brand.
The comparatively slower release cadence of Halo Studios likely contributed to the decision to shift Halo development to a more agile, dedicated team. Xbox has set a target of cutting 3,200 jobs this year as part of Sharma’s restructuring plan.
The latest announcement indicated the company is "roughly three‑quarters of the way through" that goal, implying that approximately 800 additional positions could be eliminated before the year ends. Studios not yet affected include Blizzard Entertainment, The Coalition (the developer behind Gears of War), and InXile (the studio behind Clockwork Revolution). An update from Game Developer notes that a senior Blizzard leader emailed staff confirming that Blizzard was not included in today’s round of cuts, suggesting that the studio remains insulated for the time being.
Overall, the restructuring reflects Microsoft’s attempt to streamline its gaming division, concentrate resources on its most profitable franchises, and align its development pipelines under clearer, more efficient management structures. While the moves have sparked concern among employees and fans alike, the company maintains that these changes are necessary to position Xbox for sustained growth in a highly competitive market.