Microsoft’s XBOX subsidiary is terminating 268 employees and shuffling major studios as part of the company’s latest “reset” strategy. XBOX Chief Content Officer Matt Booty confirmed the brand’s internal restructuring in a new memo released on Tuesday, with Halo Studios expected to bear the brunt of the changes.
“I’m writing to share several updates as part of the XBOX reset outlined earlier this year,” the message begins.
“First, we are eliminating 268 roles across Halo Studios, other first-party studios, and the XGS management and central functions layer. The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring. I am deeply grateful for what our colleagues have built, and I know how difficult today will be for those leaving and the teams around them.”
“Second, we are reorganizing our studios. The goal is to strengthen our franchises and games by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise.”
Booty’s third update touches on recent studio divestitures, namely Psychonauts and Brutal Legend studio Double Fine and South of Midnight developer Compulsion Games. Both studios “returned to management with their IP, back catalogs, and runway funding,” with State of Decay studio Undead Labs also having “successfully transitioned on similar terms.”
The latter will release State of Decay 3 with the help of a new publisher, which Booty says will launch day-one on Game Pass.
Unfortunately, Booty confirms that two agreements for Hellblade and DmC: Devil May Cry studio Ninja Theory “fell through.” XBOX will now begin employee consultations regarding a proposed closure while exploring other avenues. Consultations with Arkane are currently underway, and Booty says they’re expected to continue through the remainder of 2026.
XBOX will ‘reorganize’ studios in attempt to ‘strengthen’ game franchises
The memo briefly outlines four new fundamental changes that stretch existing studios’ scopes to accommodate Halo Studios projects. Booty says Call of Duty studio Activision will shoulder development for the Halo franchise going forward, with a “new, purpose-built team that is separate from ongoing development plans for Call of Duty.”
Booty adds that a “small team at Halo Studios” will remain available for Halo community support and games in-market.
Bethesda will absorb Obsidian, Booty says, and continue its ongoing projects. These new responsibilities include Grounded and the upcoming Fallout project made in collaboration with Bethesda Game Studios.
Candy Crush studio King — whose workers are expected to strike later this week — will expand to accommodate Microsoft Casual Games in a move that XBOX says marries two “global leaders in casual game design and live operations.”
Lastly, XBOX will combine Playground and Turn 10 to form one studio it says will “[focus] on the Forza and Fable franchises.”
The goal is to strengthen our franchises and games by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise.
Booty’s memo ends with a period, but it feels more like a question mark. “Today, our focus should be on supporting those affected and treating one another with care and respect. I will spend time with our studios over the next week. At our October 6 town hall, we will come together as an ALL-XBOX team to reflect on our progress and look ahead to one of the strongest game lineups in our history.”
Emphasis on reflection, coming together, and offering support has readers (me) scratching their heads, especially after XBOX’s already tumultuous year. Over the summer, XBOX leader Asha Sharma announced it would divest five first-party game studios and lay off more than 3,000 workers — one-fifth of its entire workforce — as part of a comprehensive brand “reset.”
This is a developing story. Stick with Outrun Gaming for more information as it becomes available.
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