Microsoft Keeps Calling It an XBOX Reset, but It Looks More Like a Dismantling

Map TrailJuly 13, 20269 min read

XBOX had already gone through one massive round of restructuring earlier this year, resulting in thousands of layoffs, studios being sold off, and plenty of uncertainty surrounding Microsoft’s gaming business. At the time, Microsoft positioned those changes as necessary to reset XBOX and build a stronger business going forward. I didn’t particularly like what I was seeing then, and after today’s announcement, I like it even less.

Microsoft has now revealed the next phase of that restructuring, and personally, I think it’s a mess. Another 268 people are losing their jobs, several major XBOX studios are being moved underneath Activision, Bethesda, and King, Turn 10 and Playground Games are being combined, Halo Studios will no longer lead development of the next Halo, and Ninja Theory is now facing closure after Microsoft failed to sell the studio. Microsoft calls this a reset, but from where I’m sitting, it looks more like Microsoft continuing its race toward the bottom and gutting XBOX piece by piece. Yes, that’s definitely quite a bit to take in.

Another 268 XBOX Employees Are Losing Their Jobs

According to a message sent to XBOX employees, Microsoft is eliminating another 268 positions across Halo Studios, other first-party developers, XBOX Game Studios management, and central functions. Microsoft says that the cuts completed since July, including its studio divestitures, bring the company roughly three-quarters of the way through the restructuring it previously announced.

That also means XBOX isn’t finished yet. Behind all of these studio moves, mergers, and corporate reshuffling are another 268 people losing their jobs as Microsoft continues trying to figure out what it wants XBOX to be. We were already talking about XBOX’s layoffs and studio losses back in July, and now we’re right back here again.

Halo Studios Is No Longer Leading Halo

Then we get to perhaps the strangest part of the announcement. Halo Studios, formerly known as 343 Industries, will no longer be the primary developer of the next Halo game. Instead, Activision is putting together a new, purpose-built team that will develop the next entry, separate from the teams currently working on Call of Duty. A much smaller group will remain at Halo Studios to support the Halo community and games already on the market.

Just two years ago, 343 Industries was renamed Halo Studios and moved the franchise to Unreal Engine 5. At the time, that was presented as a new beginning for both the studio and Halo. Now, after all of that, Halo Studios isn’t even going to lead development of the next game.

I’m not saying Activision can’t make a good Halo game. There are plenty of talented developers under Activision who understand first-person shooters, but that’s not really the point. Microsoft’s answer to years of problems surrounding one of the most important franchises in XBOX history is apparently to reduce the studio named after that franchise and hand the next game to another part of the company. That doesn’t exactly inspire confidence in what’s going to happen with the franchise going forward.

Microsoft Is Rearranging XBOX Studios Again

The changes don’t stop with Halo, either. Rare and World’s Edge will now report to Activision, Obsidian Entertainment is moving underneath Bethesda, Microsoft Casual Games will move underneath King, and Turn 10 Studios and Playground Games are being combined into one studio focused on Forza and Fable. There’s also an almost ridiculous bit of irony here, as Activision once made a bid to acquire Rare back in 2002, only for Microsoft to ultimately win that bidding war. More than two decades later, Rare is effectively ending up underneath Activision anyway.

Microsoft says the goal is to reduce the number of business units, group teams that already work closely together, and make better use of its publishing resources. I understand the corporate reasoning behind that, but from the outside, it feels like XBOX Game Studios is slowly being absorbed into Activision, Bethesda, and King.

Microsoft spent billions building one of the largest first-party gaming organizations in the industry, and now we’re watching the company consolidate much of that organization underneath the publishers it acquired. Maybe that works better on Microsoft’s organizational chart, but it’s becoming harder to tell where XBOX Game Studios ends and those other companies begin.

I also don’t even comprehend the decision to put Obsidian underneath Bethesda. Sure, Bethesda and Obsidian both make games we broadly call RPGs, and yes, they’re both involved with Fallout, but these are two studios with very different interests, creative outlooks, histories, and development philosophies. That’s why I’m genuinely baffled that Microsoft has decided to lump them together as though they’re close enough that it simply makes sense.

It feels like a staggering disregard for the legacies of these studios and the developers working at them, especially when Microsoft voluntarily went out and spent billions of dollars acquiring them in the first place. None of this had to happen. Microsoft wasn’t forced into these acquisitions, and nobody made the company build this enormous collection of studios only to start folding them into one another years later.

That said, not all of this is completely dire, as combining Turn 10 Studios and Playground Games is something that probably should have happened sooner. The two companies have shared an existence for a long time, working with each other across the Forza Horizon and now-dead Forza Motorsport titles, so it only makes sense that they’re merging.

While I do feel bad that it’s Turn 10 being absorbed, it makes more sense than simply shutting the studio down, especially since Forza Motorsport has been shelved and will receive no more updates, and we’re unlikely to see another release. Having that expertise help with future Forza Horizon games is probably the best possible outcome.

Ninja Theory Is Facing Closure

Then there’s Ninja Theory, which might be the part of this announcement that frustrates me the most. Microsoft acquired Ninja Theory in 2018 and spent years presenting the studio as one of the developers that would help shape the future of XBOX. The studio released Senua’s Saga: Hellblade II, and just a few months ago, during the XBOX Games Showcase 2026, Ninja Theory revealed another Senua project.

According to XBOX, two separate agreements to sell Ninja Theory fell through, and Microsoft will now begin consultations with employees regarding a proposed closure while continuing to explore other options. Geoff Keighley has reported the situation more directly, stating that after a buyer fell through, XBOX will now close Ninja Theory.

Whatever language Microsoft wants to use for the process, it looks terrible. Microsoft bought the studio, spent years talking about its importance, showed off its next project just months ago, decided it no longer wanted the developer, failed twice to sell it, and now the people working there are facing the possibility of losing their jobs.

What exactly was the point of buying Ninja Theory if this was where things were eventually going to end up? You can argue that, despite the studio’s talent and critical success, Ninja Theory was never really a powerhouse and its games didn’t consistently move the needle commercially. But that only raises an even bigger question: if that was always the concern, why did XBOX acquire the studio in the first place?

Microsoft chose to buy Ninja Theory. Nobody forced that acquisition on them. So if the company ultimately decided the studio didn’t fit its long-term strategy, that says just as much about Microsoft’s planning as it does about Ninja Theory’s performance. That’s the part of Microsoft’s acquisition strategy that bothers me, because these aren’t just studio names being moved around on a corporate spreadsheet. These are teams filled with people who likely expected that being acquired by one of the richest companies in the world would bring some level of stability, and we’ve seen repeatedly that this isn’t necessarily the case.

Undead Labs Managed to Get Out

There is at least some better news for Undead Labs. As we reported earlier today, the State of Decay developer has successfully separated from XBOX and is now operating independently and under employee ownership. State of Decay 3 remains in development and will still launch day one on Game Pass through a new publishing arrangement.

Compulsion Games and Double Fine, despite recently suffering layoffs, have also returned to independent management, while Arkane’s future remains unresolved, with Microsoft saying consultation will continue through the end of the year. Given everything happening elsewhere inside XBOX, Undead Labs getting out may have been the best outcome it could have hoped for.

What Exactly Is XBOX Supposed to Be Anymore?

And this is where my frustration with Microsoft really kicks in. Microsoft says all of this is part of its XBOX reset, with the company wanting fewer business units, studios working more closely together, and a more efficient organization. I understand the business argument, but I’m having a hard time looking at the results and seeing how any of this makes XBOX stronger.

To me, this feels like Microsoft continuing its race toward the bottom. Another 268 people are losing their jobs, while Halo Studios has been reduced as Activision takes over development of the next Halo. Rare and World’s Edge are moving underneath Activision. Obsidian is moving underneath Bethesda. Turn 10 is being folded together with Playground Games, and Ninja Theory is facing closure.

The worst part is that we’ve been here before. Back in 2024, after Microsoft closed Arkane Austin, Tango Gameworks, and Alpha Dog Studios, I wrote about how frustrated I was with what XBOX was doing. In “My Trust in Xbox is on Shaky Ground Right Now,” I specifically questioned whether studios such as Ninja Theory and Double Fine were actually safe. Two years later, Double Fine has left Microsoft, and Ninja Theory is facing closure. That’s exactly the sort of thing I was worried about.

Microsoft spent years buying studios and telling everyone that XBOX was investing in developers for the future. Now we’re watching those same studios get sold, merged, moved around the company, downsized, or potentially shut down. At some point, I have to ask what the point of all those acquisitions was if this is where Microsoft was going to end up anyway.

Maybe this saves Microsoft money and makes XBOX look better on a spreadsheet, but I don’t see how gutting the studios and identity that built the brand is supposed to make XBOX stronger. That’s why I think this entire situation is a waste. People are losing their jobs, studios are disappearing, and Microsoft’s answer continues to be another restructuring, another reorganization, and another promise that this is somehow setting XBOX up for the future. Meanwhile, fans of the brand are left scratching their heads and wondering if this is really how XBOX plans to become a contender in the industry again.

Microsoft calls this a reset, but from where I’m sitting, it looks more like they’re dismantling XBOX and hoping whatever is left at the end will somehow be better than what they started with.

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