Xbox has taken a series of dramatic steps that will reshape its first‑party portfolio. In a single Xbox Wire announcement, the company disclosed that the storied UK studio Rare, together with the rights to the Halo franchise, will be transferred to Activision. At the same time, the firm revealed that Ninja Theory is slated for closure after failed sale attempts, and it confirmed that another 268 positions have been eliminated across Halo Studios, other internal studios, and Xbox Game Studios’ central functions.
The blog post explained that the effort to find a buyer for Ninja Theory fell through on two separate occasions. As a result, Xbox will now begin a formal consultation process with the studio’s staff about the proposed shutdown, while still looking for alternative solutions.
The statement added, "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 mirrors earlier moves that saw Double Fine and Compulsion Games regain independence under comparable conditions. Microsoft also outlined the future of the Halo franchise. The next Halo title will be created by a brand‑new, purpose‑built team that operates independently of the ongoing development streams and of the Call of Duty pipeline. A small, dedicated group within Halo Studios will remain in place to support the existing Halo community and to maintain the live services for current releases.
The company said, "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." Key points from the restructuring announcement include: - A total of 268 roles have been cut across Halo Studios, other first‑party studios, and Xbox Game Studios’ management and central teams.
- 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 installment. - Bethesda will expand its responsibilities to include Obsidian, which will keep working on Grounded and the forthcoming Fallout sequel. - King will assume oversight of Microsoft Casual Games.
- Playground Games and Turn 10 will merge into a single entity 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 the collapse of two acquisition attempts; a consultation process with its workforce has begun, though the company says it is still "exploring other paths forward." - Arkane Lyon remains in a consultation phase that is projected to run until the end of the calendar year. These moves are part of a broader restructuring effort championed by Xbox CEO Asha Sharma, who describes the initiative as a "resetting of the business." Over the past months, Microsoft has divested five studios, including Ninja Theory and Undead Labs, while returning Compulsion Games and Double Fine to independent status.
The company has also carried out deep cuts at Zenimax Online Studios and other divisions worldwide. Rare, founded in 1985 and part of the Xbox family since 2002, continues to support the online pirate adventure Sea of Thieves. Its most recent original project, Everwild, was cancelled amid the massive layoffs announced in 2025. Halo Studios, originally launched as 343 Industries in 2007, rebranded in 2024 and released 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 was the studio’s first launch since Halo Infinite in 2021, a title whose development was marred by challenges with the in‑house Slipspace engine and allegations of mismanagement. Following Infinite’s release, several senior leaders departed, and additional redundancies were announced in 2023. In 2024, Halo Studios announced a switch to Unreal Engine and a rebranding effort, promising "multiple new experiences" powered by the new technology, though only Campaign Evolved has been publicly confirmed so far. Microsoft reiterated that the upcoming Halo entry will be driven by a dedicated team separate from both the ongoing Halo work and the Call of Duty roadmap.
A lean team within Halo Studios will continue to service the existing community and manage live‑ops for current titles. The announcement also coincides with recent developments at Activision’s flagship shooter franchise.
Treyarch, a long‑standing Call of Duty studio, disclosed that it will "move on to something new" after completing the latest Black Ops installment. Activision has previously pledged to alter its CoD release cadence after back‑to‑back Black Ops launches resulted in underwhelming sales for the second title. Halo Studios traces its origins to 2007 when Microsoft created 343 Industries to steward the Halo universe after Bungie’s split from the company. Bungie, the original creator of Halo, later launched the Destiny franchise, which was published by Activision before being acquired by Sony in 2022—a deal that also triggered significant workforce reductions at Bungie this year.
Many veterans from Bungie initially stayed with Halo under 343 Industries, but most have since moved on to other studios. Sharma’s restructuring agenda appears aimed at concentrating resources on core intellectual properties, as evidenced by recent announcements of new Fallout, Diablo, and StarCraft projects. Consolidating the two major shooter IPs—Halo and Call of Duty—under a unified brand may also help streamline marketing and development pipelines.
The slower release cadence of Halo Studios likely contributed to the decision, especially when compared with Activision’s annual (though sometimes polarizing) Call of Duty releases. Xbox has set an ambitious target to cut 3,200 jobs this year as part of the ongoing overhaul. The latest announcement indicated the company is "roughly three‑quarters of the way through" that goal, implying that roughly 800 more positions could be eliminated before the year ends. Studios that have not yet been affected include Blizzard, The Coalition (the studio behind Gears of War), and InXile, the developer of Clockwork Revolution.
An update from Game Developer notes that an internal email sent to Blizzard staff by a senior leader confirms that Blizzard was not included in today’s round of cuts.