Microsoft chief executive Satya Nadella has backed the continuing restructuring of Xbox, describing the latest changes under Xbox chief executive Asha Sharma as “great to see” while hundreds more jobs are being removed and major game studios are moved under new management.
Speaking about the future of Microsoft’s gaming business, Nadella said: “I feel fantastic. There’s some amount of streamlining the team is doing, and Asha is doing, which is great to see. And then we have to invent the right sustainable business model that allows us to deliver gaming to more and more people. That has always been the goal, which is, we want to be a great publisher and a great platform provider for games across both PCs and Xboxes.”
His comments came days after Microsoft announced that 268 roles would be eliminated across Halo Studios, other first-party teams, and Xbox Game Studios’ management and central functions. The latest cuts form part of a wider plan to remove about 3,200 roles during the company’s financial year, although Microsoft has said the final number could be lower as staff are moved between departments and studios where possible.
The September cuts were accompanied by one of the biggest internal reorganisations in Xbox’s history. Microsoft said the purpose was to operate fewer business units, bring together teams that already work closely, and concentrate more of its publishing expertise around its largest franchises.
The most striking change involves Halo. The next mainline Halo game will be developed by Activision under a new, purpose-built team. Halo Studios will remain involved in supporting the existing game and its player community, but its role has been reduced as Microsoft shifts the franchise away from the studio that has managed it in recent years.
Activision said: “We’re thrilled to welcome Halo, Rare, and World’s Edge to Activision. It’s an honor and a responsibility that we do not take lightly. These teams and their games have inspired fans around the world for decades.
“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. It is a bold ambition, one that this franchise deserves. We have already begun assembling a purpose-built team, unique in capability and talent, ready and excited to deliver this next chapter with the community.
“To the World’s Edge and Rare teams, we can’t wait to get to work together.”
The transfer affects more than Halo. Rare, the British studio behind Sea of Thieves, and World’s Edge, which oversees the Age of Empires franchise, will also come under Activision. Microsoft is placing Obsidian Entertainment under Bethesda, where it will continue its existing projects, including Grounded and a new Fallout project being made with Bethesda Game Studios.
King, Microsoft’s mobile and casual games division, will take responsibility for Microsoft Casual Games. Playground Games and Turn 10 will be brought together as a single studio focused on Forza and Fable. The two teams have worked as franchise partners for more than a decade, but the new arrangement formally combines their operations.
The reorganisation follows a summer of reductions across Xbox. Microsoft initially announced the 3,200-role plan in July, calling it the most significant restructure in the history of Xbox Game Studios. The first wave removed about 1,600 positions, with further cuts planned through the financial year. The company has also reduced its management layers and changed the ownership structure of several teams.
Matt Booty, Microsoft’s president of game content and studios, said the company was “roughly three-quarters of the way through” the previously announced restructuring. He added: “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.”
The latest reductions reached several teams, including Halo Studios, The Coalition, World’s Edge, Treyarch and the wider Xbox Game Studios organisation. Some groups lost only a small number of employees, while others saw much deeper cuts. The changes have also affected senior staff and people who had been working at Microsoft for many years.
Josh Daniels, a cinematic director at Halo Studios who had spent 11 years working for Xbox in various roles, said he was promoted on the Monday before being laid off the following day. Daniels wrote: “Promoted and laid off in the same week is pretty wild. I’m one of the many hit by the Halo Studios layoffs. I’ll be taking some offline time today but very much would love to talk to anyone looking for Cinematic Direction or Production roles. Feel free to get in touch if anything looks like I might be a fit.”
The studio changes have also raised fresh questions over Ninja Theory, the Cambridge developer behind Hellblade. Microsoft said two separate agreements to find a new owner for the studio had fallen through. It will now begin consultation with employees over a proposed closure while continuing to look for other options for the developer and the Hellblade franchise.
Compulsion Games and Double Fine have already returned to independent management with their intellectual property, back catalogues and funding to continue operating. Undead Labs has also completed a similar transition. The State of Decay developer now has a new publisher and is expected to release State of Decay 3 on Game Pass on its first day of release.
Arkane remains in a separate process, with discussions over its future continuing through the end of the year. The studio’s position is being watched closely because it is also working on Blade, one of Xbox’s high-profile announced projects.
For employees, the latest changes represent a continuing process rather than a single round of job losses. Microsoft has described the reset as a way to build a more sustainable gaming business, with a smaller corporate structure and fewer overlapping units. The company is also seeking to place large franchises closer to teams with established publishing and live-service experience.
Nadella said Xbox’s goal was to reach growth in the next financial year. “And then we have to invent the right sustainable business model that allows us to deliver gaming to more and more people,” he said. “That has always been the goal, which is, we want to be a great publisher and a great platform provider for games across both PCs and Xboxes.”
The restructuring leaves Xbox Game Studios centred on Playground, The Coalition, InXile and Microsoft’s publishing arm, while Activision, Bethesda and King take larger roles across the group. Microsoft has said it expects the changes to support a stronger line-up of games, but the immediate effect is a smaller workforce, fewer standalone studios and a new leadership map for some of the company’s most recognisable franchises.