Xbox is making another major change to its first-party gaming business, confirming 268 layoffs while moving several studios and franchises under different divisions. The restructuring also brings a major change for Halo, with Activision now taking charge of development on the next mainline game in the series.
The layoffs reportedly affect employees across Halo Studios, while Xbox is also changing the structure of several teams under its wider gaming organization. A small team will remain at Halo Studios to support Activision as development of the next Halo title moves forward.
Activision’s responsibilities will extend beyond Halo and Call of Duty. The company will also take control of World’s Edge and Rare, adding studios responsible for franchises such as Age of Empires and Sea of Thieves to its group.
Bethesda is also expanding its responsibilities, with Obsidian moving under its organization. Xbox has not announced cancellations for Obsidian’s current projects. King, meanwhile, will take over Microsoft’s Casual Games business.
Another major change involves Playground Games and Turn 10 Studios. The two teams will merge into a single studio focused on the Fable and Forza franchises. Playground Games is currently working on the upcoming Fable reboot, while Turn 10 has been developing the Forza Motorsport series.
Ninja Theory is facing a different outcome. Xbox said two separate buyout agreements for the studio fell through, leaving the company to proceed with plans that could result in Ninja Theory’s closure. The future of the Hellblade and Senua franchise is therefore expected to involve another Xbox studio.
Undead Labs has already taken a different path. The State of Decay developer has separated from Xbox and will continue as an independent, employee-owned studio. The change will not stop development of State of Decay 3, which remains in production and is scheduled to launch in 2027 for Xbox, PC, and PlayStation 5.
The studio also plans to hold a closed beta for State of Decay 3 before the end of 2026. The game is still expected to be available through Xbox Game Pass.
Philip Holt, CEO of Undead Labs, said:
“Independence brings us closer to our community and lets us focus on what matters most: making the best games we can and earning the continued support of the people who choose to spend their time with us. State of Decay exists because millions of players have made that choice over the years, and we’re dedicated to honoring their trust.”
The latest changes show how significantly Microsoft’s gaming organization is being reshaped. Instead of simply reducing staff, Xbox is also consolidating studios, shifting franchise responsibilities and allowing some developers to operate independently.
