Xbox disclosed a sweeping reorganization that sees the storied UK developer Rare and the rights to the Halo franchise transferred to Activision, the imminent closure of Ninja Theory, and a further reduction of 268 positions across Halo Studios, other first‑party studios, and central Xbox Game Studios functions. The announcement arrived in an Xbox Wire blog post early this morning, following earlier rumors of extensive layoffs. The blog explained that attempts to find a buyer for Ninja Theory had fallen through, prompting the company to start a formal consultation process regarding its proposed shutdown. A statement read, "Two separate agreements for Ninja Theory failed to materialize.
We will now begin consultation with employees on a proposed closure while continuing to explore alternative paths forward." The post also confirmed that Undead Labs has completed a transition on similar terms and, together with a new publishing partner, will launch State of Decay 3 on day one of Game Pass. Microsoft added that 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." This signals a shift away from the current Halo Studios structure, which has been rebranded from 343 Industries and suffered a series of setbacks since the troubled launch of Halo Infinite. Key points of the restructuring include: - A total of 268 roles eliminated across Halo Studios, other first‑party studios, and Xbox Game Studios management and central functions. - Activision will broaden its remit to incorporate Rare and World's Edge, the studio behind Age of Empires, and will take charge of developing the next Halo title with a dedicated team distinct from Call of Duty projects.
- Bethesda will extend its oversight to include Obsidian, which will keep working on Grounded and the announced Fallout sequel. - King will assume responsibility for Microsoft Casual Games. - Playground Games and Turn 10 will merge into a single studio focused on the Forza and Fable franchises.
- Undead Labs departs under terms similar to those used for Double Fine and Compulsion Games and will release State of Decay 3 with a new publisher. - Ninja Theory is slated for closure after failed acquisition attempts; a consultation with staff has begun, though the company says it is still looking for other options.
- Arkane Lyon remains in a consultation phase expected to run 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, Microsoft has divested five studios, including Ninja Theory and Undead Labs, while granting independence to Compulsion Games and Double Fine. The company continues to trim its workforce globally, with recent deep cuts at Zenimax Online Studios and other divisions.
Rare, founded in 1985 and acquired by Microsoft in 2002, currently supports the online title Sea of Thieves. Its most recent original project, Everwild, was cancelled amid the 2025 wave of Xbox reductions. Halo Studios, originally launched as 343 Industries in 2007, rebranded in 2024 and shipped Halo: Campaign Evolved earlier this year, a remake of the 2001 single‑player experience. While Campaign Evolved earned generally favorable reviews, it was the studio's first release since Halo Infinite in 2021, a game whose development was marred by difficulties with the in‑house Slipspace engine and accusations of poor management.
Following Infinite's launch, several senior leaders departed, and many more were laid off in 2023. In 2024 the studio announced a migration to Unreal Engine and a name change to Halo Studios, promising "multiple new experiences" on the new platform, though only Campaign Evolved has been publicly confirmed.
Microsoft reiterated that the forthcoming Halo title will be driven by a newly formed, purpose‑built team that operates independently of both current Halo development and Call of Duty planning. A small contingent within Halo Studios will continue to maintain existing Halo games and community support. In parallel, Activision’s flagship Call of Duty studio Treyarch announced it is "moving on to something new" after completing the latest Black Ops entry, reflecting Activision’s recent shift away from back‑to‑back Black Ops releases after underwhelming sales on the second installment. The restructuring also touches on the legacy of Bungie, the original creator of Halo, which split from Microsoft in 2007 and later launched the Destiny franchise under Activision before being acquired by Sony in 2022 and undergoing its own cuts this year.
Many Bungie veterans initially stayed with Halo after the transition to 343 Industries, but most senior talent has since moved on to other studios. Sharma’s strategy appears focused on consolidating core intellectual property—evidenced by recent announcements of new Fallout, Diablo, and StarCraft titles—while reducing fragmentation by placing the two major shooter franchises under a unified brand. Halo Studios' slower release cadence likely contributed to its reduced priority compared to Activision’s annual, if sometimes polarizing, Call of Duty launches.
Xbox has set a target of eliminating 3,200 jobs in 2026 as part of Sharma’s restructuring plan. The latest announcement indicated the company is "roughly three‑quarters of the way through" that goal, implying roughly another 800 positions may be cut before the year ends.
Studios not yet affected include Blizzard, The Coalition (the Gears of War developer), and InXile (the studio behind Clockwork Revolution). A recent report from Game Developer noted an internal Blizzard email stating the studio is not impacted by today’s cuts.