Xbox has unveiled a sweeping reorganization that moves the storied UK studio Rare and the Halo franchise into Activision’s portfolio, initiates the closure process for Ninja Theory, and trims another 268 positions across Halo Studios, other first‑party teams, and central Xbox Game Studios functions. The announcement arrived this morning via an Xbox Wire blog post, following earlier rumors of extensive layoffs within Microsoft’s gaming division. In the official statement, Xbox explained that attempts to sell Ninja Theory fell through, prompting the company to start a formal consultation with the studio’s employees about a proposed shutdown.
The post read, “Two separate deals for Ninja Theory did not materialise. We will now begin consultation with staff on a proposed closure while continuing to explore alternative paths forward.” At the same time, the blog confirmed that Undead Labs has successfully transitioned under similar terms to Double Fine and Compulsion Games, and will launch State of Decay 3 on day one of Game Pass with a new publishing partner. Microsoft also clarified the future of the Halo franchise. The next Halo title will be built by a newly assembled, purpose‑built team that operates independently of ongoing projects and the parallel Call of Duty pipeline.
A smaller, dedicated Halo Studios crew will remain in place to support the existing Halo community and maintain current live‑service components. The company added that Arkane Lyon is still in a consultation phase that is expected to run through the end of the year. Key points from the restructuring: - 268 roles have been eliminated across Halo Studios, other first‑party studios, and Xbox Game Studios’ central management and support functions. - Activision will expand its remit to include Rare and World’s Edge (the studio behind Age of Empires), and will take charge of developing the next Halo installment with a newly created, purpose‑built team.
- Bethesda will broaden its responsibilities to cover Obsidian, which will keep working on Grounded and a forthcoming Fallout sequel. - King will absorb Microsoft Casual Games, consolidating the casual‑gaming portfolio. - 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 family under terms similar to those used for Double Fine and Compulsion Games, and will release State of Decay 3 with a new publisher. - Ninja Theory is slated for closure after two acquisition attempts failed; a consultation process with staff is now underway, though the company says it is still looking for other options. - Arkane Lyon remains in consultation, with the process expected to continue until year‑end. Rob Kostich, President of Activision, expressed enthusiasm about the new alignment: “We’re thrilled to welcome Halo, Rare, and World’s Edge to Activision.
It’s an honor and a responsibility we do not take lightly. These teams and their games have inspired fans around the world for decades.” He went on to outline Activision’s vision for Halo: “Our goal is clear—make the greatest Halo game ever, worthy of its legacy, while staying true to what players love.
We have already begun assembling a purpose‑built team, unique in capability and talent, ready to deliver the next chapter with the community.” The announcements form part of a broader restructuring drive that CEO Asha Sharma has described 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 independence. The company has also executed deep cuts across its global workforce, most recently hitting Zenimax Online Studios and other divisions.
Rare, founded in 1985 and acquired by Microsoft in 2002, continues to support the online pirate‑themed adventure Sea of Thieves, though its ambitious new project Everwild was cancelled amid the 2025 Xbox layoffs. 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—a modern remake of the original 2001 single‑player campaign. While the remake earned generally favorable reviews, it marked the studio’s first release since 2021’s Halo Infinite, a title whose development was marred by challenges with the in‑house Slipspace engine and accusations of mismanagement.
Following Infinite’s launch, several senior leaders left, and many more were laid off in 2023. In 2024 the studio announced a switch to Unreal Engine and adopted the Halo Studios name.
At the time of the engine migration, Xbox said Halo Studios was working on “multiple new experiences” enabled by Unreal, but Campaign Evolved remained the only publicly disclosed project. The new purpose‑built Halo team will now operate separately from those ongoing efforts, allowing Activision to apply its annual shooter cadence—refined through the Call of Duty franchise—to the Halo IP. Speaking of Call of Duty, Treyarch, the longtime steward of the series, recently announced it would “move on to something new” after completing the latest Black Ops entry. Activision had previously pledged to rethink its CoD release strategy after back‑to‑back Black Ops titles delivered disappointing sales for the second installment.
The restructuring also reshapes the relationship between Microsoft’s legacy studios. Bungie, the original creator of Halo, split from Microsoft in 2007 and later launched Destiny, which was published by Activision before Bungie’s acquisition by Sony in 2022. Many Bungie veterans stayed on with Halo after the transition to 343 Industries, but most senior talent has since moved on to other companies. Sharma’s overarching goal appears to be a tighter focus on core intellectual property, as evidenced by recent announcements of new Fallout, Diablo, and StarCraft titles.
By consolidating the two flagship shooter franchises—Halo and Call of Duty—under a single brand, Microsoft hopes to reduce fragmentation and accelerate development cycles. The slower release rhythm of Halo Studios likely contributed to the decision, especially when compared with Activision’s reliable annual CoD launches.
Microsoft has set a target of cutting 3,200 jobs in 2026 as part of the restructuring plan. The latest wave of 268 cuts brings the company roughly three‑quarters of the way toward that goal, implying that about 800 more positions could be eliminated before the year’s end. Studios that have not yet been affected include Blizzard Entertainment, The Coalition (the developer behind Gears of War), and InXile (the studio behind Clockwork Revolution).
A report from Game Developer notes that an internal email to Blizzard staff suggests the studio remains untouched by today’s announcements. Overall, the moves signal a decisive shift in Microsoft’s gaming strategy: centralising its most valuable franchises under Activision, pruning underperforming or redundant units, and reallocating resources to teams that can deliver high‑impact, revenue‑generating experiences. While the immediate impact on employees and ongoing projects is significant, the company frames the changes as a necessary step to ensure long‑term competitiveness in a rapidly evolving industry.