In a sweeping announcement posted on Xbox Wire this morning, Microsoft disclosed a series of dramatic changes affecting several of its first‑party studios. The most headline‑grabbing moves involve transferring the storied UK developer Rare, along with the ownership of the Halo franchise, to Activision.
At the same time, the company confirmed that Ninja Theory will be slated for closure after failed attempts to sell the studio, and it revealed that a further 268 positions have been eliminated across Halo Studios, other internal teams, and central Xbox Game Studios functions. The blog entry explained that negotiations to find a buyer for Ninja Theory fell apart on two separate occasions. Consequently, the firm will now begin a formal consultation process with the studio’s staff regarding the proposed shutdown, while still looking for alternative solutions. A similar consultation is ongoing with Arkane Lyon, which is expected to continue through the end of the year.
Key points from the restructuring plan include: - A total of 268 roles have been removed from Halo Studios, other first‑party studios, and Xbox Game Studios’ management and shared services. - Activision will assume responsibility for Rare and the Age of Empires developer Worlds Edge, and will also take charge of developing the next Halo title. This new Halo project will be led by a purpose‑built team that operates independently of the existing Halo Studios work and is separate from Activision’s Call of Duty roadmap. - Bethesda’s remit will be expanded to incorporate Obsidian Entertainment, which will keep working on Grounded and the announced Fallout sequel.
- Microsoft Casual Games will now fall under the King umbrella. - 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 portfolio on 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 following the failed sale attempts; a consultation process with employees has begun, though the company says it is still exploring other avenues. - Arkane Lyon remains in consultation, with the process projected to run until year‑end.
Rob Kostich, president of Activision, expressed enthusiasm about the new arrangement, stating, “We’re thrilled to welcome Halo, Rare, and Worlds Edge to Activision. It’s an honor and a responsibility that we do not take lightly. These teams and their games have inspired fans around the world for decades.” He added that the goal for Halo is to create “the greatest Halo game ever, worthy of its universe and legacy,” and that a specially assembled team is already in place to deliver that vision.
The announcement fits within a broader restructuring effort described by Xbox chief Asha Sharma as a “resetting of the business.” Over the past several months, Microsoft has divested five studios—including Ninja Theory and Undead Labs—while granting independence back to Compulsion Games and Double Fine. The company has also carried out extensive layoffs worldwide, with recent deep cuts at Zenimax Online Studios and other divisions.
Rare, founded in 1985 and integrated into Xbox in 2002, currently supports the live service 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 delivered Halo: Campaign Evolved earlier this year, a remake of the single‑player component of the 2001 classic Halo: Combat Evolved. While the remake earned generally positive reviews, it marked the studio’s first release since 2021’s Halo Infinite, which suffered a protracted and troubled development due in part to challenges with the in‑house Slipspace engine and reports of managerial issues.
Following Infinite’s launch, several senior leaders departed, and many more employees were let go during the 2023 layoffs. In 2024 the studio announced a switch to Unreal Engine and adopted the Halo Studios name. Microsoft reiterated that the upcoming Halo entry will be overseen by a new, purpose‑built team distinct from ongoing development and separate from Call of Duty plans.
A smaller group within Halo Studios will continue to support the existing Halo community and maintain current live‑service titles. The restructuring also touches other corners of Microsoft’s gaming portfolio. Treyarch, a long‑standing Call of Duty developer, recently announced it will “move on to something new” after completing the latest Black Ops installment, aligning with Activision’s broader shift away from back‑to‑back Black Ops releases after underwhelming sales on the second title. Historically, Halo Studios originated when Microsoft split from Bungie in 2007.
Bungie, the original creator of Halo, later launched the Destiny franchise, which was published by Activision before Bungie’s acquisition by Sony in 2022 and subsequent cutbacks. Many Bungie veterans initially stayed with Halo Studios, but most senior talent has since migrated to other companies. Sharma’s stated objectives for the restructuring include concentrating resources on core intellectual properties—evidenced by recent announcements of new Fallout, Diablo, and StarCraft projects—and reducing organizational fragmentation by consolidating the two flagship shooter IPs under a single brand. The slower release cadence of Halo Studios compared with Activision’s annual, albeit sometimes polarizing, Call of Duty launches likely contributed to the decision to shift Halo development to Activision.
Microsoft has set a target of eliminating 3,200 jobs this year as part of the overhaul. The latest announcement indicated the company is “roughly three‑quarters of the way through” that goal, implying that roughly another 800 positions may be cut before the year ends. Studios that have not yet been affected 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 to Blizzard staff suggests the studio remains untouched by today’s cuts. Overall, the moves signal a decisive realignment of Microsoft’s gaming assets, with Activision taking on some of the most iconic franchises, while Microsoft streamlines its internal structure to focus on a smaller set of high‑impact titles and teams.