Xbox continues its "reset" with dramatic restructuring

Xbox is carrying out a sweeping internal restructuring that reassigns major studios and trims headcount to consolidate development around its biggest franchises. Halo Studios (formerly 343 Industries) will be reduced to a small community-support team while Halo development shifts to Activision, which will also take control of Rare and World’s Edge; that change alone included 268 layoffs. Obsidian will move under Bethesda to continue work on a new Grounded title and a collaborative Fallout project with Bethesda Game Studios. Playground Games and Turn 10 are being merged, Microsoft Casual Games will report to King, and Xbox is seeking buyers for Ninja Theory and Arkane. Several studios previously acquired by Xbox - Compulsion, Undead Labs, and Double Fine - have already been divested, with Double Fine returning to independence.

Microsoft frames the overhaul as a move to reduce fragmentation, streamline publishing and decision-making, and focus investment on higher-priority projects. Leadership argued that too many independent teams and excessive management layers slowed decisions and blurred accountability, so the company is reducing business units and central functions to strengthen franchises. The restructuring is tied to a larger round of cuts announced in July: about 3,200 positions were planned and management says it is roughly three-quarters of the way through those layoffs, which include roles in XGS management and central functions.