In a sweeping announcement posted on Xbox Wire early this morning, Microsoft revealed a series of dramatic organizational changes that will reshape the landscape of its first‑party development ecosystem. The most headline‑grabbing move is the transfer of the storied British studio Rare, along with the ownership of the Halo intellectual property, to Activision. At the same time, the company disclosed that Ninja Theory is slated for closure after two attempted sales fell through, and it confirmed that a further 268 positions have been eliminated across Halo Studios, other first‑party studios, and central Xbox Game Studios functions. The blog post explained that the effort to find a buyer for Ninja Theory was unsuccessful, prompting the launch of a formal consultation process with the studio’s employees about the proposed shutdown.
Microsoft’s statement 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. Regarding the Halo franchise, Microsoft said the next installment will be "led by a new, purpose‑built team that is separate from ongoing development and plans for Call of Duty." A smaller, dedicated group within Halo Studios will continue to provide support for the existing Halo community and maintain current titles in‑market, but the core creative work on the next game will shift to this newly assembled team under Activision’s umbrella. Key points from the announcement include: - **268 roles eliminated** across Halo Studios, other first‑party studios, and Xbox Game Studios’ management and central functions.
- **Activision’s remit expands** to encompass Rare and World’s Edge (the studio behind Age of Empires), and it will take over development of the next Halo title with a dedicated, purpose‑built team. - **Bethesda’s remit expands** to include Obsidian, which will keep working on Grounded and the forthcoming Fallout sequel. - **King’s remit expands** to cover Microsoft Casual Games.
- **Playground Games and Turn 10 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 launch State of Decay 3 with a new publishing partner.
- **Ninja Theory is proposed for closure** after two acquisition attempts failed; a consultation process with staff has begun, though Microsoft says it is still "exploring other paths forward." - **Arkane Lyon remains in consultation**, a process expected to continue through the end of the year. Rob Kostich, President of Activision, expressed enthusiasm about the new alignment, stating, "We’re thrilled to welcome Halo, Rare, and World’s 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, "For Halo, our goal is clear: make the greatest Halo game ever, worthy of its universe and legacy, while staying true to what made players love it in the first place. It is a bold ambition, one that this franchise deserves. We have already begun assembling a purpose‑built team, unique in capability and talent, ready and excited to deliver this next chapter with the community. To the World’s Edge and Rare teams, we can’t wait to get to work together." The restructuring is part of a broader "resetting of the business" initiative championed by CEO Asha Sharma.
Over the past 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 executed deep cuts across its global workforce, with notable reductions at Zenimax Online Studios and other divisions. Rare, founded in 1985 and acquired by Microsoft in 2002, continues to support the online pirate‑themed title Sea of Thieves.
Its most recent original project, Everwild, was cancelled amid the large‑scale 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 shipped Halo: Campaign Evolved earlier this year. The studio’s latest release, the July 2024 remake Halo: Campaign Evolved, received generally favorable reviews but was its first major launch since Halo Infinite in 2021, a title whose development was marred by challenges with the in‑house Slipspace engine and managerial turbulence. Following the mixed reception of Halo Infinite, several senior leaders left the studio, and additional redundancies were announced in 2023.
In 2024, Halo Studios announced a transition to Unreal Engine and a rebranding effort, promising "multiple new experiences" enabled by the new technology stack. To date, Campaign Evolved remains the only publicly confirmed project under the Unreal transition.
The announcement also touched on the broader shooter landscape. Last week, Treyarch, a longtime Call of Duty developer, declared it would "move on to something new" after completing the most recent Black Ops entry.
Activision has previously signaled a shift in its Call of Duty release strategy after back‑to‑back Black Ops titles underperformed commercially. Bungie, the original creator of Halo, left Microsoft in 2007 and later launched the Destiny franchise, which was published by Activision before Bungie’s acquisition by Sony in 2022.
Many Bungie veterans initially stayed on the Halo franchise after the transition to 343 Industries, but most have since moved on to other studios. Sharma’s restructuring agenda appears focused on consolidating core intellectual properties—evidenced by recent announcements of new Fallout, Diablo, and StarCraft titles—while reducing fragmentation within the organization. By placing both of Microsoft’s flagship shooter IPs, Halo and Call of Duty, under the same corporate umbrella, the company may be seeking to streamline development pipelines and improve financial predictability.
Microsoft has set a target of cutting 3,200 jobs this year as part of the ongoing overhaul. The latest announcement indicated that the company is "roughly three‑quarters of the way through" that goal, suggesting an additional 800 positions could be eliminated before the year’s end. Studios not yet affected by the cuts include Blizzard Entertainment, The Coalition (the developer behind Gears of War), and InXile (the studio behind Clockwork Revolution). A recent report from Game Developer cited an internal email to Blizzard staff confirming that Blizzard is not part of today’s layoff wave.
In summary, the current wave of changes signals a major realignment of Microsoft’s first‑party studio portfolio. Rare and the Halo franchise will now operate under Activision, while Obsidian joins Bethesda’s roster, and several other studios are either merging, departing, or facing closure.
The restructuring aims to concentrate resources on the company’s most valuable franchises, but it also underscores the turbulent nature of the gaming industry, where strategic pivots can lead to both new opportunities and significant workforce reductions.