In a sweeping announcement posted on Xbox Wire this morning, Microsoft disclosed a series of dramatic changes to its gaming portfolio that will reshape the future of several well‑known studios. The most headline‑grabbing move is the transfer of the storied UK developer Rare, along with the ownership of the Halo franchise, to Activision. At the same time, the company confirmed that it will begin a formal consultation process aimed at closing Ninja Theory, while also cutting an additional 268 positions across Halo Studios, other first‑party teams, and central Xbox Game Studios functions.
The blog entry explained that attempts to sell Ninja Theory to an external partner fell through, prompting Microsoft to start a consultation with the studio’s staff about a proposed shutdown. "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," the statement read. The same communication noted that discussions with Arkane Lyon remain ongoing and are expected to continue through the end of the year.
Key points from the restructuring plan include: - A total of 268 roles are being eliminated across Halo Studios, other first‑party studios, and Xbox Game Studios’ corporate and central teams. - Activision will broaden its remit to incorporate Rare and the Age of Empires studio World's Edge, and it will assume responsibility for developing the next Halo title. This new Halo effort will be led by a "purpose‑built" team that operates independently of existing projects and of Activision’s Call of Duty pipeline. - Bethesda’s scope will expand to cover Obsidian Entertainment, which will keep working on the upcoming Grounded title and the previously announced Fallout sequel.
- King will now oversee Microsoft Casual Games, while Playground Games and Turn 10 Studios will merge into a single entity focused on the Forza and Fable franchises. - Undead Labs has departed the Microsoft umbrella under terms similar to those used for Double Fine and Compulsion Games, and it will launch State of Decay 3 on day one of Game Pass with a new publishing partner. - Ninja Theory is slated for closure after the failed sale attempts, though the company says it is still looking for alternative solutions. - Arkane Lyon continues its consultation process, projected to run until the close of the calendar year.
These actions are part of a broader restructuring effort that CEO Asha Sharma has described as a "resetting of the business." Over the past several months Microsoft has divested five studios, including the recent spin‑offs of Compulsion Games and Double Fine, and has carried out deep cuts at locations such as Zenimax Online Studios and id Software. The overarching goal, according to Sharma, is to concentrate resources on core intellectual properties and to eliminate fragmentation across the organization. Rare, founded in 1985 and acquired by Microsoft in 2002, has been the caretaker of the online pirate‑themed game Sea of Thieves. Its most recent original project, Everwild, was cancelled amid the larger wave of Xbox layoffs announced in 2025.
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. The studio’s most recent release, the July 2024 remake Halo: Campaign Evolved, received generally favorable reviews but was the first new Halo product since 2021’s Halo Infinite, a title that suffered a protracted and troubled development cycle tied to the in‑house Slipspace engine and management challenges.
Following the release of Halo Infinite, several senior leaders left the studio, and a wave of redundancies hit in 2023. In response, Halo Studios announced a migration to Unreal Engine and a rebranding effort in 2024, promising "multiple new experiences" enabled by the new technology.
To date, only Campaign Evolved has been publicly confirmed. Microsoft reiterated that the upcoming Halo installment will be driven by a dedicated, purpose‑built team separate from both ongoing Halo work and Activision’s Call of Duty schedule.
A smaller contingent within Halo Studios will continue to support the existing Halo community and maintain live services for current titles. The restructuring also touches other parts of the broader Microsoft gaming ecosystem.
Treyarch, a long‑standing Call of Duty developer, recently announced it will "move on to something new" after completing the latest Black Ops entry, aligning with Activision’s revised release strategy that seeks to avoid back‑to‑back Black Ops launches after the second title underperformed commercially. The historical context is worth noting: Bungie, the original creator of Halo, split from Microsoft in 2007, later launching the Destiny franchise (published by Activision) before being acquired by Sony in 2022 and undergoing its own series of cuts this year.
Many Bungie alumni initially stayed with Halo under 343 Industries, but most have since migrated to other studios. Sharma’s restructuring agenda appears designed to double‑down on Microsoft’s flagship IPs—Fallout, Diablo, StarCraft, and now Halo—while streamlining the corporate structure. By moving Halo under the Activision umbrella, Microsoft may be seeking to align its two major shooter franchises under a single brand, potentially improving coordination and reducing internal competition.
Microsoft has set an ambitious target to eliminate roughly 3,200 jobs in 2026 as part of the ongoing overhaul. The latest announcement indicated the company is "roughly three‑quarters of the way through" that goal, suggesting another 800 positions could be cut before the year’s end. Studios not yet impacted include Blizzard Entertainment, The Coalition (the developers behind Gears of War), and InXile Entertainment, the team behind Clockwork Revolution. An update from Game Developer notes that an internal email sent to Blizzard staff by a senior leader confirms Blizzard is not affected by today’s announcements, providing some reassurance to that segment of the workforce.
Overall, the changes signal a decisive shift in Microsoft’s gaming strategy: consolidating core franchises, shedding peripheral studios, and reassigning development responsibilities to maximize efficiency and focus. While the immediate impact includes job losses and the looming closure of Ninja Theory, the long‑term vision aims to position Microsoft’s gaming division for sustained growth around its most valuable and recognizable properties.