On Tuesday morning, Matt Booty, Xbox's chief content officer, announced to staff that the division would eliminate 268 positions spread across Halo Studios, other first-party operations, and management layers. In a memo published on Xbox Wire titled "Continuing Our Reset," Booty also revealed that Activision will assume development duties for the franchise's next installment. The announcement came alongside news that two separate deals to divest Ninja Theory have fallen apart, leaving the Cambridge-based studio facing a proposed shutdown.

First, we are eliminating 268 roles across Halo Studios, other first-party studios, and the XGS management and central functions layer.

Matt Booty, in his memo to Xbox staff

The 268 figure represents only the gaming division's headcount reduction. Across Microsoft's entire organization on Tuesday, the company shed approximately 500 employees, according to reporting by Ashley Stewart in Business Insider. Additional layoffs touched units focused on cloud infrastructure and artificial intelligence. GeekWire's Todd Bishop reported the global total at fewer than 600 positions, with roughly 300 in Washington state, while marketing and research divisions also experienced cuts.

Activision Inherits Halo Franchise

The reorganization represents a significant shift for Xbox's flagship property. Booty indicated that Activision will develop the next Halo game through a dedicated team separate from its Call of Duty operations. Beyond Halo, Activision also gains stewardship of Rare, developer of Sea of Thieves, and World's Edge, which manages Age of Empires. Halo Studios itself will not disappear entirely; a skeleton crew will remain to maintain community engagement and support existing titles.

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.

Rob Kostich, Activision's president

Kostich added that assembly of the development team is already underway.

A Franchise in Transition

Halo's journey through different studios spans more than two decades. Bungie developed the original title at the 2001 launch of the first Xbox and continued the series through Halo 3 before departing in 2007. Microsoft subsequently established 343 Industries to carry forward the franchise, which was later rebranded as Halo Studios. According to Bloomberg reporting by Cecilia D'Anastasio and Jason Schreier, the studio's output has been characterized by high budgets, inconsistent release schedules, and lukewarm reception from the player base. The most recent release, Halo: Campaign Evolved—a remake of the original game—shipped in July.

Industry observers offered mixed perspectives on the transition. Christopher Dring, editor-in-chief of The Game Business, noted that Halo once represented Xbox's most valuable franchise but had lost that status over the past decade or more. While consolidating the series under Activision's umbrella appears logical, Dring cautioned that the publisher must preserve the qualities that distinguish Halo from other properties. Jez Corden of Windows Central characterized the move as dramatic, drawing a parallel to Nintendo's relationship with Mario. He attributed the shift to years of mismanagement that have diminished Halo's standing within the Xbox ecosystem.

Additional Studio Reorganizations

Beyond the Halo transition, Booty outlined several other structural changes:

  • Bethesda will absorb Obsidian Entertainment, developer of Fallout: New Vegas, while the studio maintains its current slate including Grounded and a forthcoming Fallout title developed in collaboration with Bethesda Game Studios
  • King, the publisher behind Candy Crush, will take over Microsoft Casual Games
  • Playground Games and Turn 10 Studios will consolidate into a single operation focused on Forza and Fable, franchises the two studios have jointly stewarded for over a decade

Ninja Theory's Uncertain Future

The memo's final section addressed Microsoft's divestiture efforts. Two prospective buyers for Ninja Theory withdrew from negotiations, prompting Microsoft to initiate employee consultations regarding a potential closure while exploring alternative paths forward. The Cambridge studio, known for Hellblade: Senua's Sacrifice, which earned a Bafta award, was among five studios placed on the market in June.

Arkane Studios in Lyon remains in the consultation phase, a process Booty expects to conclude by year's end. As Kris Holt reported in Engadget, French employment law required Microsoft to initiate this consultation before determining whether to sell, spin out, or shutter the operation.

Three of the five studios have already secured independence. Compulsion Games and Double Fine Productions returned to their previous ownership in August, regaining their intellectual property, back catalogs, and operational funding. Undead Labs followed suit, with State of Decay 3 now set to launch on day one of Game Pass under a different publisher.

There have been far too many announcements like this across the industry, and we hate adding to that list. These are people we'd hire again in a heartbeat, and we hope the industry takes notice.

Undead Labs, in a LinkedIn statement

The studio acknowledged that independence required parting ways with a significant portion of its workforce but declined to specify the number of departing employees.

Progress Toward Restructuring Goals

Booty characterized the actions taken since July, encompassing both the job cuts and studio divestitures, as bringing Xbox approximately three-quarters of the way through the comprehensive restructuring announced earlier in the summer. That initiative encompasses 3,200 positions and five studios, representing roughly one-fifth of the division's total workforce.

The restructuring effort follows months of acknowledged challenges. In July, Xbox Chief Executive Asha Sharma informed staff that the business was not operating at healthy levels. According to Bloomberg, Xbox's profit margins ran three to ten times below those of comparable enterprises, prompting Sharma to declare that a reset was necessary. Warning signs had surfaced earlier: Microsoft explored a potential spin-off in June when divisional margins reached just 3%, the company had increased console prices three times within thirteen months, and in July it acknowledged that cloud gaming initiatives had not yet achieved their objectives.

Booty concluded his memo by announcing an Xbox town hall scheduled for October 6, where leadership plans to outline what he described as one of the strongest game lineups in the division's history.

Source: The Next Web