Microsoft confirmed Tuesday it is cutting 268 positions across its gaming division while handing future development of its hallmark Halo franchise to Activision.
The moves mark the latest phase of an operational overhaul that Xbox leadership began over the summer as Microsoft restructures its gaming business. Xbox Chief Content Officer Matt Booty outlined the cuts in an internal staff memo titled “Continuing Our Reset,” later published on Xbox Wire. Booty said the cuts affect Halo Studios, other first-party developers, and Xbox Game Studios management.
“The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring,” Booty wrote.
Across Microsoft, the broader round of layoffs affected an estimated 500 to 600 employees in gaming, cloud, AI, and marketing, according to reports.
According to Booty’s memo, Activision will oversee Rare and World’s Edge while assembling a dedicated unit to develop the next Halo installment. Halo Studios will remain responsible for community engagement and support for existing Halo games. Under the restructuring, Booty said Bethesda will absorb Obsidian Entertainment, King will take over Microsoft Casual Games, and Playground Games and Turn 10 will merge into one racing studio.
Meanwhile, Microsoft’s effort to sell several smaller gaming subsidiaries has produced mixed results. While Compulsion Games, Double Fine Productions, and Undead Labs completed management buyouts to regain independence, two separate acquisition talks for Hellblade developer Ninja Theory collapsed.
Booty confirmed Xbox has initiated employee consultations regarding a proposed closure of the Cambridge-based studio. Consultations also remain underway regarding the future of Arkane Studios in France.
“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,” said Rob Kostich, president of Activision. Yet the transition reflects how far the sci-fi franchise has tumbled. Christopher Dring, editor-in-chief of The Game Business, told the BBC that while Halo served as Xbox’s “crown jewel” during its early years, that status vanished “for more than a decade.”
The industrialization of Xbox IP
Following an earlier Xbox leadership shake-up, Microsoft is moving away from a structure built around largely autonomous studios and toward centralized development under larger business units. The company appears to be prioritizing more predictable production schedules and greater coordination across its major franchises.
Consolidation could help Microsoft release games more consistently, but it may also reduce the creative independence of the individual studios behind those franchises. The longer-term test will be whether the new structure improves output without making Xbox’s first-party lineup less distinctive.
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The impact on players and subscribers
For everyday players, the most immediate consequence will be a holding pattern. Halo fans may face a longer wait for the next mainline release while Activision establishes the new development unit and Halo Studios maintains existing games.
Subscribers can still expect announced day-one Game Pass releases such as Undead Labs’ upcoming State of Decay 3. However, the proposed closure of studios such as Ninja Theory raises questions about whether Microsoft’s future lineup will offer fewer experimental, story-driven games as it concentrates resources on larger franchises.