Microsoft has announced another major phase of its Xbox restructuring, cutting 268 jobs and dramatically reorganizing its first-party studios. Halo is moving under Activision, Obsidian under Bethesda, Rare and World’s Edge under Activision, Playground and Turn 10 are merging, Undead Labs has gone independent, while Ninja Theory faces potential closure.
The September 22 changes are part of the broader Xbox “reset” announced in July, when Microsoft revealed plans to eliminate approximately 3,200 positions during its current fiscal year.
Xbox chief content officer Matt Booty says Microsoft is now roughly three-quarters of the way through that restructuring.
Here’s where everything stands after the latest changes.
268 More Xbox Employees Have Been Laid Off
Microsoft confirmed that 268 positions are being eliminated in the latest round.
Importantly, these aren’t additional cuts on top of the previously announced 3,200 positions. They are part of that existing restructuring plan.
Based on information that has emerged since the announcement, affected teams include:
- Halo Studios
- The Coalition
- World’s Edge
- Treyarch
- Xbox Game Studios management and central functions
The scale reportedly varies significantly between teams, ranging from relatively small reductions to much larger cuts within individual groups.
Halo Is Moving Under Activision
Perhaps the biggest change involves Microsoft’s flagship Halo franchise.
Activision will develop the next Halo game, with Microsoft creating a new purpose-built team specifically for the project.
This team will operate separately from Activision’s existing Call of Duty development.
Activision president Rob Kostich has already set an ambitious target:
“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.”
A smaller team at Halo Studios will remain in place to support the Halo community and currently available games.
Halo Studios itself has also been affected by the latest layoffs.
Rare and World’s Edge Are Moving Under Activision
Activision‘s responsibilities aren’t stopping with Halo.
Microsoft confirmed that Rare and World’s Edge will also move under Activision’s remit as Xbox reduces the number of separate business units operating across its gaming organization.
The studios aren’t being closed as part of the move. Instead, they will now operate within Activision’s expanded structure.
Microsoft says the objective is to group teams that already work closely together and consolidate publishing expertise.
Obsidian Entertainment Is Moving Under Bethesda
Obsidian Entertainment will now operate under Bethesda, another significant change considering the studio’s RPG background.
Its existing projects will continue.
Microsoft specifically confirmed that Obsidian will keep working on Grounded and its new Fallout project, which is being developed alongside Bethesda Game Studios.
Bringing Obsidian and Bethesda under the same organizational structure therefore creates a more direct relationship between the two studios as work on Fallout continues.
Playground Games and Turn 10 Are Merging
Microsoft is also combining two of its major racing developers.
Playground Games and Turn 10 Studios will become a single studio, with the combined organization working across the Forza and Fable franchises.
Turn 10 has historically led Forza Motorsport, while Playground is responsible for Forza Horizon and the upcoming Fable.
Rather than simply moving one studio beneath another publishing organization, Microsoft is directly combining the two teams.
Undead Labs Is Officially Independent
Not every studio affected by Microsoft’s restructuring is remaining within Xbox.
State of Decay developer Undead Labs has officially completed its separation from Microsoft, becoming independent for the first time since being acquired in 2018.
The change doesn’t mean State of Decay 3 is disappearing.
Undead Labs says State of Decay 3 remains actively in development, is currently in alpha and is targeting closed beta before the end of 2026.
The game remains planned for 2027 on PC, PlayStation and Xbox, alongside Xbox Game Pass.
Ninja Theory Faces Potential Closure
The situation is considerably more uncertain for Ninja Theory.
Microsoft confirmed that two separate agreements involving the studio failed to materialize. The company has subsequently begun consultations with employees regarding a potential closure, while continuing to explore other possibilities.
Geoff Keighley has also reported that Xbox will close Ninja Theory after the deals fell through.
Interestingly, Microsoft filed a new standalone “Senua” trademark on September 15, shortly before the latest restructuring announcement.
Microsoft already controls trademarks including Senua’s Saga and Senua’s Sacrifice, but the new filing suggests it intends to retain control of the Senua IP even if Ninja Theory ultimately closes.
That doesn’t confirm another Senua game will be developed without Ninja Theory, however.
What Does the New Xbox Structure Look Like?
After all of the announced changes, Microsoft’s first-party organization is becoming significantly more consolidated.
Activision
- Rare
- World’s Edge
- Next Halo development team
- Existing Activision operations including Call of Duty
Bethesda
- Obsidian Entertainment
- Bethesda’s existing studios
- Obsidian and Bethesda Game Studios collaborating on the new Fallout project
Merged Studio
- Playground Games
- Turn 10 Studios
- Focused on Forza and Fable
Independent
- Undead Labs
- Double Fine Productions
- Compulsion Games
Potential Closure
- Ninja Theory
Halo Studios will retain a smaller team supporting existing Halo games and the community while responsibility for the next major installment shifts to Activision.
Xbox Says the Reset Isn’t Finished Yet
Despite the scale of the September restructuring, Microsoft’s wider plan still isn’t complete.
Matt Booty told employees that Xbox is approximately 75% through the restructuring announced in July, meaning additional changes could still take place before the process concludes.
The strategy is becoming increasingly clear: Microsoft is reducing the number of separate business units, consolidating development teams beneath larger publishing organizations and allowing or attempting to move some studios outside Xbox entirely.
For players, the immediate projects haven’t necessarily disappeared. State of Decay 3 remains in development, Obsidian continues its projects, Rare and World’s Edge remain operational, and Microsoft has already committed a new Activision-led team to Halo.
But structurally, Xbox’s first-party organization now looks significantly different than it did only a few months ago — and Microsoft says the reset still isn’t finished.
