Microsoft has initiated a major reorganization of its Xbox division, resulting in the layoff of approximately 3,200 employees and substantial shifts for at least four internal game development studios. Xbox CEO Asha Sharma detailed the changes in a memo to staff, characterizing the move as the "most significant restructure in XBOX history."
The layoffs, which will occur throughout Microsoft's 2027 fiscal year, with 1,600 employees affected immediately, stem from a broader strategic review. This restructure particularly impacts studios acquired during Microsoft's 2018-2019 acquisition spree.
Studios Moving to Independence
Compulsion Games, the studio behind "South of Midnight," and Double Fine Productions, known for titles such as "Psychonauts" and "Headlander," are transitioning to independent operations. Both studios will retain their intellectual property, existing catalogs, and will manage their future projects independently. Microsoft acquired Compulsion Games in 2018 and Double Fine Productions in 2019.
Studios Under New Ownership
Ninja Theory, creators of "Hellblade: Senua's Sacrifice," and Undead Labs, known for the "State of Decay" series, have entered into agreements to be sold to new ownership. Funding is expected to continue for their current projects, including "Senua's Saga: Hellblade 2" and "State of Decay 3." Microsoft acquired both Ninja Theory and Undead Labs in 2018.
Arkane Studios' Future Uncertain
The fate of Arkane Studios, a ZeniMax Media subsidiary acquired by Microsoft, remains unclear. The Lyon, France-based studio is reportedly beginning consultation with its Works Council regarding potential strategic options. Arkane Studios is recognized for its work on the "Dishonored" series, "Deathloop," and the upcoming Marvel's "Blade" game.
Broader Reductions and Studio Realignment
Reductions are also planned across other Microsoft-owned entities, including Activision, Bethesda/ZeniMax, Blizzard, King, and Mojang Studios. These changes may involve shifting investment towards higher-priority projects, potentially leading to game cancellations. Sharma emphasized that no first-party publicly announced games or projects are being canceled as part of these specific reductions. In a separate organizational move, Mojang and King will now report directly to Sharma, recognizing their significant player bases and strategic importance to Xbox.
