Microsoft Consolidates Xbox Studios, Moves Halo Development to Activision

Microsoft is undergoing another major reorganization of its gaming division, with layoffs and studio consolidations that further reshape the Xbox brand. The company announced today that it is eliminating 268 roles across Halo Studios, other first-party studios, and Xbox Game Studios management layers as part of broader cuts impacting around 3,200 workers total.

The most significant change involves Halo, Xbox's most iconic franchise. Development is moving to Activision Blizzard, which will assemble a "new, purpose-built team" separate from the Call of Duty teams. Halo Studios will continue to exist as a support studio focused on community engagement and maintaining current Halo games in the market. Activision president Rob Kostich said in a statement: "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."

Beyond Halo, Microsoft is reshuffling studio ownership across its portfolio. Sea of Thieves developer Rare and Age of Empires studio World's Edge are both moving under Activision Blizzard. Obsidian Entertainment is being moved from Xbox Game Studios to Bethesda Game Studios, where it will refocus on the Fallout franchise. Playground Games and Turn 10, the studios behind Fable and Forza respectively, are merging into a single entity. All of Microsoft's casual games, including Minesweeper and Solitaire, are moving under Candy Crush developer King.

These changes are part of the Xbox "reset" outlined by new CEO Asha Sharma. An initial wave of 1,600 layoffs occurred in July, with today's cuts representing the second wave of 1,600 additional job losses previously announced. Two studios, Double Fine and Compulsion Games, were spun off from the company to operate independently.

The reorganization reflects Microsoft's stated goal of becoming a company that reaches "more than a billion people each day." The strategy focuses investment on established franchises like Minecraft, Halo, and Candy Crush while reevaluating spending on Game Pass, the subscription service that was meant to serve as a Netflix for games.

The changes raise fundamental questions about Xbox's identity. What began as a console business with exclusive games has shifted as Microsoft invested billions into Game Pass and expanded beyond hardware. Xbox Game Studios, once a sprawling organization of developers, now consists of only a handful of studios like The Coalition (Gears of War) and InXile (Wasteland) after waves of layoffs and consolidations. The fate of these remaining teams remains uncertain.

When Halo Studios released a well-received Combat Evolved remake in July, the studio was subsequently reduced to a small support team. History suggests similar outcomes could await other studios after their current projects launch. The Coalition, for example, is preparing to release Gears of War: E-Day next month, raising questions about the studio's future role.

Looking ahead, Microsoft still plans to pursue hardware through Project Helix. For game development, however, the Xbox brand increasingly relies on Activision Blizzard and Bethesda, both acquired for billions of dollars. Nearly all notable upcoming titles from Microsoft now come from these subsidiaries. Activision has announced far-off releases like Fallout 5 and StarCraft, moves that underscore how the traditional Xbox brand has become less central to Microsoft's gaming strategy.