Xbox Cuts 268 Roles as Major Studio Reorganization Moves Halo to Activision

Microsoft has confirmed the next stage of its Xbox restructuring, eliminating 268 roles while reorganizing several of its best known development teams under fewer business units. Activision is expanding its responsibility to include Rare and World's Edge while also taking development responsibility for the next Halo game, Bethesda is adding Obsidian to its group, Playground Games and Turn 10 are combining into a single studio, and King will take responsibility for Microsoft Casual Games. The changes were detailed by Xbox Chief Content Officer Matt Booty in the company's official restructuring update, providing confirmation for several changes that had been circulating through reports earlier this month.

The 268 eliminated positions affect Halo Studios, other Xbox development teams, and management and central functions within Xbox Game Studios. Microsoft says the restructuring completed since July, including studio divestitures, now represents roughly 75% of the previously announced plan, meaning additional changes are still expected before the process is complete. The new layoffs remain part of the wider restructuring Microsoft announced earlier in 2026 rather than representing a completely separate reduction beyond that plan.

"The actions completed since July bring us roughly three quarters of the way through previously announced restructuring."
— Quote by: Matt Booty

Halo is receiving one of the largest structural changes. Activision will develop the next Halo title through a new dedicated team that Microsoft says will operate separately from Call of Duty development. Halo Studios will remain active, but with a smaller team responsible for supporting the Halo community and games already on the market. This goes considerably further than earlier reports suggesting Activision might simply provide development support. Halo Campaign Evolved used extensive external development support while Microsoft explored Activision involvement, but the new structure now formally places development of the next Halo title under Activision. Rare and World's Edge will also fall under Activision's expanded remit, although Microsoft has not announced that either studio is closing or being absorbed into another development team.

Bethesda will meanwhile expand its responsibility to include Obsidian Entertainment. Obsidian remains a functioning studio and will continue its existing projects, including Grounded, while also developing the previously reported new Fallout project in collaboration with Bethesda Game Studios. The change therefore represents a management consolidation rather than the disappearance of Obsidian as a development identity. Microsoft's decision also creates a much closer relationship between the studio behind Fallout: New Vegas and Bethesda Game Studios at a time when Xbox has made Fallout one of its major franchise priorities.

Another significant consolidation combines Playground Games and Turn 10 into a single studio responsible for both Forza and Fable. The 2 teams have already collaborated extensively across the Forza franchise, but Microsoft is now formalizing that relationship under one organization. Playground currently develops both Forza Horizon and the upcoming Fable, while Turn 10 has historically led Forza Motorsport. King will also broaden its responsibility to include Microsoft Casual Games, bringing Microsoft's long running casual properties into the same organizational group as one of the company's largest mobile gaming businesses.

The restructuring also brings major updates for studios Microsoft has been trying to move outside Xbox. Compulsion Games and Double Fine returned to their management teams in August together with their intellectual property, back catalogs, and runway funding. Undead Labs has now completed a similar transition and will continue State of Decay 3 under a new publisher, with Microsoft confirming that the game will still launch on Game Pass on day 1. That gives the studio independence while preserving one of the most important commitments already made to Xbox players.

The situation is considerably more serious for Ninja Theory. Microsoft says 2 separate agreements to transfer the studio to new ownership fell through, and it will now begin consultation with employees over a proposed closure while continuing to explore alternatives. That places the future of the developer behind Hellblade and the recently announced Senua in doubt. Arkane also remains in consultation, with Microsoft expecting that process to continue through the end of 2026. Neither studio should be described as closed yet, but both now face substantial uncertainty.

Microsoft says the purpose of the restructuring is to operate fewer business units while aligning studios that already work together and concentrating publishing expertise around its major franchises. The changes confirm a direction that has become increasingly visible throughout 2026. Xbox is retaining ownership of some of the industry's largest intellectual properties while reducing the number of independently managed internal organizations responsible for them. The company will discuss the restructuring further during an Xbox town hall scheduled for October 6.

This is more than another round of layoffs. Microsoft is changing the internal structure of Xbox around a smaller number of larger organizations, and some of its most recognizable studios are losing the independence they previously had inside the company.

Halo represents the biggest shift. Activision moving from a potential support partner to the developer responsible for the next Halo game changes the franchise's production model completely. Activision has enormous experience building shooters at scale, but Halo Studios being reduced primarily to support for the existing community means the team that carried the franchise through the post Bungie era is no longer leading its next main project.

Obsidian moving under Bethesda is less dramatic operationally because the studio remains intact and continues developing its own projects. The Fallout connection is nevertheless impossible to ignore. Microsoft now has Obsidian and Bethesda working within the same organization while collaborating on a new Fallout title, something that would have sounded highly unlikely before the acquisition era.

The most difficult part remains the workforce impact. Microsoft says it is only around 75% through the restructuring announced earlier this year, meaning the reset is still not finished even after 268 additional roles were eliminated and several studios were reorganized.

Which change do you think will have the biggest impact on Xbox games: Activision leading the next Halo, Obsidian moving under Bethesda, or Playground and Turn 10 becoming one studio?