The latest Xbox studio changes and restructuring have reshaped Microsoft’s gaming organization, with 268 additional roles eliminated and several major studios moved into new groups. The September 22 update also transferred development responsibility for the next major Halo game to a new Activision team, brought Obsidian under Bethesda, and combined Playground Games with Turn 10.
These changes are part of a broader Xbox reset that began earlier in 2026. Microsoft previously announced a much larger workforce reduction and plans to reduce the size and complexity of its gaming organization.
The latest stage is different from a simple round of layoffs. Microsoft is also changing how its studios are organized, which teams manage particular franchises, and which developers remain directly inside Xbox’s first-party structure.
The company says the objective is to operate fewer business units, align teams that already work closely together, and concentrate publishing expertise.
The September announcement confirms that the restructuring is still underway. Microsoft says the actions completed since July have brought the company roughly three-quarters of the way through the previously announced restructuring.
268 More Xbox Roles Eliminated
Microsoft confirmed the elimination of 268 roles across Halo Studios, other first-party studios, and Xbox Game Studios management and central functions.
The reductions form part of a larger restructuring announced earlier in the year. Xbox had already confirmed approximately 1,600 role eliminations in July as part of a plan affecting 3,200 positions during Microsoft’s fiscal year ending in June 2027.
The September reductions therefore represent another stage of that previously announced plan.
The latest cuts affect multiple parts of the gaming organization rather than one individual development team.
That distinction matters because the September announcement combines workforce reductions with a wider reorganization of Xbox’s studio portfolio.
Microsoft is reducing some organizational layers while placing several existing teams under larger publishing groups.
The company has also been changing the ownership status of selected studios.
Activision Takes Responsibility for the Next Halo Game
One of the biggest changes involves Halo.
Activision will develop the next major Halo title through a new purpose-built team.
Microsoft says the new team will operate separately from teams working on Call of Duty. That structure gives the next Halo project a dedicated development group within Activision.
Halo Studios itself is not being completely eliminated.
A smaller team will continue supporting the Halo community and games already available.
That means Microsoft’s latest announcement separates two functions that previously sat more closely together: ongoing support for existing Halo games and development of the next major installment.
The move is one of the clearest examples of how Microsoft’s gaming organization is changing.
Halo remains within Microsoft’s broader gaming portfolio, but the development structure around the franchise has changed substantially.
The next major title will now be developed through Activision rather than by the existing Halo development organization.
Rare and World’s Edge Move Under Activision
Activision’s expanded responsibilities go beyond Halo.
Rare and World’s Edge are also moving under Activision.
Rare is the studio behind Sea of Thieves, while World’s Edge manages the Age of Empires franchise.
The new structure brings these teams into Activision’s wider publishing organization.
Microsoft has not announced the closure of either Rare or World’s Edge.
Instead, their management position within the Xbox organization is changing.
The move reflects Microsoft’s stated goal of grouping teams that already work closely and reducing the number of separate business units.
For Rare, the transition affects the organizational structure surrounding Sea of Thieves.
For World’s Edge, it changes where Age of Empires sits within Microsoft’s broader gaming operation.
Neither change represents an announcement that those franchises are ending.
Obsidian Moves Under Bethesda
Another significant change affects Obsidian Entertainment.
Microsoft is moving Obsidian under Bethesda.
The studio will continue its existing projects under the new arrangement.
That includes Grounded and a new Fallout project being developed in collaboration with Bethesda Game Studios.
The decision places Obsidian within a larger organization that already has extensive experience with the Fallout franchise.
This is particularly relevant because Obsidian has a long history with Fallout. The studio previously developed Fallout: New Vegas.
The current restructuring does not cancel Obsidian’s existing projects.
Instead, Microsoft has explicitly confirmed that the studio will continue its current development work.
The change is therefore primarily organizational.
Obsidian remains part of Microsoft’s gaming portfolio, but its position within that portfolio has changed.
Playground Games and Turn 10 Become One Studio
The restructuring also brings two major racing-game developers together.
Playground Games and Turn 10 are becoming one studio focused on the Forza and Fable franchises.
The teams have worked together as creative and franchise partners for more than a decade.
Playground Games is closely associated with Forza Horizon and has also been developing Fable.
Turn 10 is the developer behind the Forza Motorsport series.
The new structure formally combines their work into one team.
Microsoft has not described the change as the end of either franchise.
Instead, the company says the combined studio will focus on Forza and Fable.
This creates a new organizational home for two of Xbox’s major franchises.
It also removes the previous separation between Playground Games and Turn 10 at the studio level.
The decision fits Microsoft’s wider strategy of consolidating teams that already have significant creative and franchise connections.
King Takes Over Microsoft Casual Games
Microsoft Casual Games is also moving into a new organizational group.
King will take responsibility for Microsoft Casual Games.
The change brings two major casual-gaming operations together.
Microsoft Casual Games includes long-running titles such as Solitaire and Minesweeper.
King has extensive experience with casual games and live-service operations through its mobile gaming business.
The new arrangement gives King responsibility for Microsoft’s casual-game portfolio while reducing the number of separate business units inside the wider Xbox structure.
This part of the restructuring is different from the changes involving Halo, Bethesda, or Playground Games.
It does not center on a traditional console development studio.
Instead, it brings Microsoft’s casual gaming operation into an organization already focused heavily on that type of game.
Compulsion Games Becomes Independent
The restructuring also includes changes to Xbox’s ownership of individual studios.
Compulsion Games returned to independent management in August.
The transition included the studio’s intellectual property, back catalog, and runway funding.
The move places Compulsion outside Microsoft’s direct first-party studio management structure.
Compulsion is known for We Happy Few and South of Midnight.
The transition does not represent the cancellation of its existing work.
Instead, the studio continues outside Xbox’s direct management structure.
This approach is part of a broader effort by Microsoft to reduce the number of studios it directly operates.
Double Fine Also Returns to Independent Management
Double Fine Productions completed a similar transition in August.
The studio returned to independent management with its intellectual property, back catalog, and runway funding.
Double Fine joined Microsoft’s Xbox organization in 2019.
The studio is best known for the Psychonauts franchise and other distinctive narrative-driven games.
Its transition back to independent management represents another major change in Microsoft’s first-party portfolio.
The move also demonstrates that Microsoft’s restructuring does not always mean shutting down a studio.
In some cases, the company is separating a developer from Xbox while allowing the team to continue operating independently.
Undead Labs Completes Its Transition
Undead Labs has also successfully transitioned away from Xbox management.
The studio is continuing work on State of Decay 3 under a new publisher.
Microsoft confirmed that the game will release day one on Game Pass under the new arrangement.
This is important because the studio’s transition does not end development of its major announced project.
Undead Labs therefore joins Compulsion Games and Double Fine among studios that have moved outside Microsoft’s direct management structure.
The transition changes the ownership and business relationship while preserving the development path for State of Decay 3.
Ninja Theory Faces a Proposed Closure
Ninja Theory’s situation is more uncertain.
Microsoft said two separate agreements involving the studio fell through.
Following those failed agreements, the company began consultation with employees regarding a proposed closure.
Microsoft has also said it will continue exploring other possible paths forward.
The consultation means the process is not identical to the completed transitions involving Compulsion, Double Fine, or Undead Labs.
Ninja Theory is known for the Hellblade franchise and Senua’s Saga: Hellblade II.
The studio’s next project, Senua, was also revealed during the 2026 Xbox Games Showcase.
The latest restructuring update does not establish that Ninja Theory has already closed.
Instead, it confirms that Microsoft has begun the consultation process while continuing to look for another possible solution.
That distinction is important when describing the studio’s current status.
Arkane Consultation Remains Underway
Arkane is also part of the continuing restructuring process.
Microsoft confirmed that consultation involving Arkane remains underway.
The process is expected to continue through the end of 2026.
As a result, the studio’s final status has not been determined by the latest announcement.
Arkane has developed major franchises including Dishonored and Prey.
The studio has also been associated with Blade, which remains part of the broader discussion surrounding the restructuring.
Microsoft has not announced a completed closure for Arkane in its latest update.
The consultation process remains active.
Why Microsoft Is Consolidating Xbox Studios
Microsoft’s stated reason for the organizational changes is straightforward.
The company wants to strengthen its franchises and games by operating fewer business units.
It also wants to align groups that already work closely together and concentrate publishing expertise.
That strategy can be seen throughout the latest changes.
Halo is moving to a dedicated Activision team.
Rare and World’s Edge are joining Activision.
Obsidian is moving under Bethesda.
Microsoft Casual Games is moving under King.
Playground Games and Turn 10 are becoming one studio.
Each move reduces the number of separate organizational structures involved in Microsoft’s gaming business.
The changes therefore go beyond individual job reductions.
They represent a restructuring of how Microsoft organizes its entire first-party development portfolio.
How the 2026 Restructuring Has Developed
The current changes follow several months of significant movement across Xbox.
The July restructuring announced approximately 3,200 affected positions during Microsoft’s fiscal year.
That announcement was followed by changes involving several studios.
By August, Compulsion Games and Double Fine had returned to independent management.
Undead Labs subsequently completed a similar transition.
The September update then added 268 more role eliminations and introduced the latest studio reorganizations.
Microsoft says these actions have brought the company roughly three-quarters of the way through the previously announced restructuring.
That means additional work remains.
The final shape of Xbox’s first-party organization has therefore not yet been established.
What the Changes Mean for Xbox’s Studio Structure
The latest changes create a more consolidated Xbox organization.
Several studios that previously operated within separate structures are now grouped under larger organizations.
The key changes include:
- Activision: World’s Edge, Rare and development of the next major Halo title.
- Bethesda: Obsidian and its continuing projects.
- King: Microsoft Casual Games.
- Combined studio: Playground Games and Turn 10, focused on Forza and Fable.
- Independent management: Compulsion Games, Double Fine and Undead Labs.
- Proposed closure consultation: Ninja Theory.
- Ongoing consultation: Arkane.
This list highlights how varied the restructuring has become.
Some teams are being consolidated.
Others are moving into different corporate groups.
Several studios are leaving Microsoft’s direct management.
At least one studio faces a proposed closure process, while another remains under consultation.
What Happens Next
Microsoft’s restructuring is continuing into the final months of 2026.
The company has said that the actions completed since July represent roughly three-quarters of the previously announced restructuring.
An all-Xbox town hall is scheduled for October 6, giving employees an opportunity to review progress and discuss the organization’s direction.
Meanwhile, the consultation involving Arkane is expected to continue through the end of 2026.
Ninja Theory’s future also remains subject to the ongoing consultation process and Microsoft’s search for other possible options.
These unresolved matters mean that further changes to Xbox’s studio organization remain possible.
For now, the September update provides the clearest picture of the new structure.
The Bigger Picture
Microsoft is moving Xbox toward a smaller and more consolidated first-party organization.
The latest changes affect some of the company’s most recognizable development teams and franchises.
Halo is receiving a new development structure through Activision.
Rare and World’s Edge are moving under Activision’s expanded responsibilities.
Obsidian is joining Bethesda.
Playground Games and Turn 10 are becoming one studio.
Microsoft Casual Games is moving to King.
At the same time, Compulsion Games, Double Fine and Undead Labs have moved outside Microsoft’s direct studio management.
Ninja Theory faces a proposed closure consultation, while Arkane’s consultation continues.
The result is a substantially different Xbox studio structure from the one that existed before the 2026 reset.
Microsoft’s stated objective is to simplify its organization and concentrate resources around major franchises and publishing capabilities. The remaining restructuring work will determine how much further that transformation goes.
What do you think about the latest Xbox studio changes, and which part of the restructuring deserves the most attention? Share your thoughts and stay updated as Microsoft announces further confirmed developments.