Xbox Undergoes Sweeping Restructuring as Halo Studios Cut and Key Franchises Shifted

Xbox has been reduced to a shadow of its former identity, and the situation is deteriorating further. As part of layoffs affecting roughly 3,200 employees, Microsoft unveiled additional changes that will continue to erode the brand. Studios are being consolidated, others face outright closure, and Xbox’s flagship franchise, Halo, is being transferred to a new developer. The trajectory of Xbox has never looked more uncertain.

Today’s announcement covers the elimination of 268 positions across Halo Studios, other first-party studios, and Xbox Game Studios’ management and central functions. Significant reorganization is also underway, particularly involving Xbox subsidiary Activision Blizzard. Halo development is shifting to Activision, led by a newly created team separate from the Call of Duty divisions. Halo Studios will remain for now, primarily in a support capacity. Meanwhile, Sea of Thieves developer Rare and Age of Empires studio World’s Edge are both being placed under Activision.

Similarly, Obsidian is being transferred from Xbox Game Studios to Bethesda Game Studios, where it will refocus on the Fallout franchise. All of Microsoft’s casual games, including Minesweeper and Solitaire, are being moved under Candy Crush developer King. Playground Games and Turn 10, the studios behind Fable and Forza respectively, are being merged into a single entity.

These moves are part of the Xbox “reset” outlined by new CEO Asha Sharma, which began with 1,600 layoffs in July and another 1,600 planned over the following fiscal year, leaving many employees in limbo. Two studios were also spun off — Double Fine and Compulsion going independent. Today’s cuts represent the second wave of those previously announced layoffs.

Sharma states the goal is to eventually reach “more than a billion people each day” — an ambitious target that becomes increasingly difficult amid all the reductions. The plan centers on proven hits like Minecraft, Halo, and Candy Crush, while scaling back elsewhere and reassessing investment in the Game Pass subscription service.

Rob Kostich, Activision president: “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.”

Image: Xbox Game Studios

Some of today’s moves — expanding King, doubling down on franchises like Halo and Fallout — align with the stated framework. But they once again raise a question that has haunted Microsoft’s gaming division for years: What even is Xbox?

Once, Xbox was clear: a console business that also developed and published exclusive titles for the platform. But as Microsoft expanded — spending billions to turn Game Pass into a Netflix for games — the brand diluted. The console grew less central, and the exclusives strategy became unclear. Despite superficial rebranding, the case for Xbox remains just as muddled.

Today’s changes make that even more evident. Xbox Game Studios was once a vast organization of developers creating titles for Game Pass and Xbox consoles. But after waves of layoffs, closures, and spinoffs, little remains under the umbrella. It now consists of just a handful of studios — Gears of War developer The Coalition and Wasteland studio InXile, among others. The fate of these teams feels increasingly precarious. What happens to The Coalition after Gears of War: E-Day launches next month? History suggests it won’t be promising. Halo Studios itself released a well-received Combat Evolved remake in July, yet has now been reduced to a “small team” tasked with supporting the Halo community and in-market games.

Xbox still plans a hardware future through whatever “Project Helix” becomes. But in terms of games, Xbox is now mostly just Activision Blizzard and Bethesda. Nearly all its notable new titles come from these subsidiaries, acquired for billions initially to bolster Game Pass. Recently, these companies have announced distant projects like Fallout 5 and StarCraft — seemingly to project normalcy while the broader Xbox operation descends into chaos.

Now Activision is making Halo games. It signals Xbox is trying to make its franchises as large as possible — Activision did that with the annual juggernaut Call of Duty — but it also shows the traditional Xbox brand matters less than ever. No amount of capital letters will change that.

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