In a sweeping announcement posted on Xbox Wire early this morning, Microsoft disclosed a series of dramatic changes affecting several of its most recognizable studios. The company confirmed that the storied UK developer Rare, along with the rights to the Halo franchise, will be transferred to Activision. At the same time, Xbox revealed that Ninja Theory is slated for closure after two attempted sales fell through, and it disclosed that a further 268 positions have been eliminated across Halo Studios, other first‑party teams, and central Xbox Game Studios functions as part of a broader restructuring effort.
The blog entry explained that attempts to find a buyer for Ninja Theory were unsuccessful, prompting the launch of a formal consultation process with the studio’s staff about the proposed shutdown. A statement from the company 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 indicates that while Ninja Theory faces an uncertain future, other studios are being repositioned under new publishing arrangements. Microsoft also clarified the future of the Halo franchise. The next mainline Halo title will be built by a "purpose‑built" team that operates independently of ongoing development streams and separate from the Call of Duty pipeline.
A smaller, dedicated Halo Studios unit will remain in place to support the existing Halo community, handle live‑service updates, and maintain the franchise’s current releases. The company added that the consultation with Arkane Lyon is still underway and is expected to run through the end of the calendar 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 services.
- Activision will assume responsibility for Rare and the Age of Empires studio World's Edge, and will take charge of developing the next Halo game with a newly formed, dedicated team. - Bethesda’s remit expands to incorporate Obsidian, which will continue work on Grounded and the previously announced Fallout sequel. - Microsoft Casual Games will now fall under the King umbrella.
- Playground Games and Turn 10 will merge into a single studio focused on the Forza and Fable franchises. - Undead Labs has departed the Microsoft family on terms similar to those granted to 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 its employees has begun, though the company says it is still exploring alternative options. - Arkane Lyon remains in a consultation phase that will continue until year‑end.
These moves are part of a larger effort described by Xbox 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 restructuring has also involved deep cuts at Zenimax Online Studios, id Software, and other parts of the organization.
Rare, founded in 1985 and acquired by Microsoft in 2002, has been responsible for titles such as Sea of Thieves and the ill‑fated Everwild, which 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. The studio’s most recent release, the July 2024 remake Halo: Campaign Evolved, received generally positive reviews but was its first major launch since Halo Infinite in 2021, a project plagued by a 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 additional redundancies were announced in 2023. In 2024, the studio announced a switch to Unreal Engine and a rebrand to Halo Studios, promising "multiple new experiences" enabled by the engine transition. To date, Campaign Evolved remains the only publicly confirmed project under the new engine. Microsoft reiterated that the upcoming Halo entry will be led by a newly assembled, purpose‑built team distinct from both ongoing Halo development and the Call of Duty roadmap.
A smaller Halo Studios team will continue to support the live service side of the franchise, ensuring that existing players receive updates and community support. The announcement also touched on the broader shooter landscape.
Last week, Treyarch, a long‑standing Call of Duty developer, announced it would "move on to something new" after completing the latest Black Ops title. Activision had previously signaled a shift in its Call of Duty release strategy after back‑to‑back Black Ops launches resulted in weaker sales for the second installment.
The restructuring aligns with Sharma’s stated objective of concentrating resources on core intellectual property. Recent months have seen Microsoft unveil new entries for Fallout, Diablo, and StarCraft, signaling a focus on its flagship franchises.
By consolidating its two major shooter IPs—Halo and Call of Duty—under a unified brand, the company appears to be addressing concerns that Halo Studios’ slower release cadence was less profitable compared with Activision’s annual, though sometimes critically mixed, Call of Duty launches. Xbox has set a target of cutting 3,200 jobs in 2026 as part of this overhaul. The latest announcement indicated the company is "roughly three‑quarters of the way through" that goal, implying that roughly 800 additional positions may be eliminated before the year’s end.
Studios that have not yet been impacted include Blizzard Entertainment, 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 confirmed that Blizzard is not affected by today’s announcements, suggesting that the studio remains insulated from the current wave of cuts. Overall, the restructuring reflects Microsoft’s attempt to streamline its gaming division, sharpen its focus on high‑performing franchises, and reduce operational complexity.
While the transfer of Rare and Halo to Activision signals a major shift in stewardship for two of gaming’s most iconic brands, the closure of Ninja Theory and the ongoing consultations with Arkane Lyon underscore the human cost of such corporate realignments. The coming months will reveal how these strategic moves reshape the landscape of first‑party development on Xbox and whether the newly formed teams can deliver the next generation of experiences that fans expect from Microsoft’s storied gaming portfolio.