In a sweeping announcement posted on Xbox Wire early this morning, Microsoft disclosed a series of dramatic changes affecting several of its first‑party studios. The most headline‑grabbing moves involve 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 Ninja Theory is slated for closure after failed attempts to find a buyer, 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 sell Ninja Theory fell apart on two separate occasions.
As a result, the studio will now enter a formal consultation period with its employees while Microsoft continues to explore alternative solutions. "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. A similar consultation process is already underway for Arkane Lyon and is expected to run through the end of the calendar year. Key points from the restructuring plan include: - **268 roles eliminated** across Halo Studios, other first‑party studios, and Xbox Game Studios’ management and central services. - **Activision’s remit expands** to incorporate Rare and World’s Edge, the studio behind Age of Empires, and it will also assume development of the next Halo title.
This new Halo project will be led by a "purpose‑built" team that operates independently of existing Halo development and separate from the ongoing Call of Duty roadmap. - **Bethesda takes on Obsidian**, allowing the studio to keep working on Grounded and the announced Fallout sequel.
- **King joins Microsoft Casual Games**, broadening its portfolio within the casual gaming segment. - **Playground Games and Turn 10 merge** into a single entity 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 on day one of Game Pass with a new publishing partner.
- **Ninja Theory is slated for closure** after the failed sales process, with a consultation phase now in progress. - **Arkane Lyon remains in consultation**, a process slated to continue until year‑end. Rob Kostich, president of Activision, expressed enthusiasm about the new acquisitions: "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 that the goal for Halo is to create "the greatest Halo game ever, worthy of its universe and legacy, while staying true to what made players love it in the first place." Kostich also noted that a dedicated, purpose‑built team has already been assembled to deliver the next chapter of the franchise. The restructuring is part of a broader initiative described by Xbox chief executive 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 back to Compulsion Games and Double Fine. The company has also carried out deep cuts across its global workforce, most recently affecting Zenimax Online Studios and other divisions. Rare, founded in 1985 and acquired by Microsoft in 2002, continues to support the live service Sea of Thieves but saw its ambitious new project Everwild cancelled amid the 2025 wave of Xbox cuts.
Halo Studios, originally launched as 343 Industries in 2007 to steward the Halo franchise after Bungie’s departure, rebranded in 2024 and released Halo: Campaign Evolved earlier this year. That title, a remake of the original 2001 single‑player experience, garnered generally favorable reviews but was the studio’s first release since Halo Infinite in 2021, a game whose development was marred by challenges with the in‑house Slipspace engine and managerial controversies. Following the release of Halo Infinite, several senior leaders left the studio, and a further round of layoffs in 2023 reduced headcount significantly. In 2024, Halo Studios announced a shift to Unreal Engine and a rebranding effort, promising "multiple new experiences" enabled by the new technology.
However, to date, Campaign Evolved remains the only publicly confirmed project. Microsoft also highlighted that the next Halo entry will be overseen by a new, purpose‑built team distinct from ongoing development and separate from Call of Duty plans.
A smaller core team at Halo Studios will continue to support the existing Halo community and maintain current live‑service titles. The announcement coincides with recent news from Treyarch, a long‑standing Call of Duty studio, which indicated it would "move on to something new" after completing the latest Black Ops installment. Activision has previously signaled a shift in its Call of Duty release strategy after back‑to‑back Black Ops launches underperformed commercially.
The broader context includes the historic split between Microsoft and Bungie in 2007, which led to the creation of 343 Industries (now Halo Studios). Bungie later launched the Destiny franchise, originally published by Activision before being acquired by Sony in 2022 and experiencing its own round of layoffs this year.
Many Bungie veterans initially stayed with Halo, but most senior talent has since migrated to other studios. Sharma’s restructuring agenda aims to concentrate resources on core intellectual properties, a strategy reflected in recent announcements of new Fallout, Diablo, and StarCraft titles. By consolidating the two major shooter franchises—Halo and Call of Duty—under a unified brand, Microsoft hopes to reduce internal fragmentation and improve efficiency. The slower release cadence of Halo Studios likely contributed to the decision, especially when compared to Activision’s annual, albeit sometimes polarizing, Call of Duty launches.
Microsoft has set an ambitious target of cutting 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 800 additional positions may still be eliminated.
Studios not yet impacted include Blizzard Entertainment, The Coalition (the developers behind Gears of War), and InXile, the studio behind Clockwork Revolution. An update from Game Developer notes that an internal email to Blizzard staff from a senior leader confirms that Blizzard was not included in today’s round of cuts. Overall, the moves signal a decisive pivot for Microsoft’s gaming division: consolidating marquee franchises under Activision, streamlining studio portfolios, and continuing a large‑scale reduction in workforce to align the business with its long‑term strategic vision.