Microsoft's Xbox division confirmed on September 22, 2026, that it is cutting 268 more roles and reorganizing several of its first-party studios under fewer publishing groups, in a memo that moves the next mainline Halo game to Activision, merges Forza developers Turn 10 and Playground Games into a single studio, and begins consultation on a proposed closure of Hellblade developer Ninja Theory.
The changes were announced in a memo titled "Continuing Our Reset," sent to Xbox employees by Chief Content Officer Matt Booty and published in full on Xbox Wire. The cuts affect Halo Studios, other first-party development teams, and Xbox Game Studios' central management and operating functions. Microsoft said the reductions, combined with the studio divestitures completed since July, bring the company roughly three-quarters of the way through a restructuring it first outlined earlier this year.
What Xbox Announced
The memo is built around three parts: job cuts, a reorganization of remaining studios, and an update on studios Microsoft has been trying to sell. Booty framed the goal as strengthening franchises "by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise."
The 268 roles eliminated this week are counted inside the roughly 3,200-role reduction that Xbox CEO Asha Sharma announced in July 2026, which she described at the time as the biggest restructuring in Xbox's history. That earlier announcement cut 1,600 jobs immediately and outlined plans for another 1,600 over the following year, alongside a stated pullback toward console exclusivity and an effort to improve profitability across Xbox and Xbox Game Studios.
Halo's Next Game Moves to Activision
The most significant single change is the transfer of the next mainline Halo game's development away from Halo Studios, the team formerly known as 343 Industries, to Activision. According to reporting on the memo, Activision is assembling a dedicated team for the project that will be kept separate from its Call of Duty staff. A smaller team will remain at Halo Studios to support existing games, the community, and esports, rather than lead the franchise's next major release.
The move comes only weeks after Halo Studios shipped Halo: Campaign Evolved, a 2026 remake of the original Halo: Combat Evolved campaign built on Unreal Engine 5.
Rare and World's Edge Also Join Activision
Activision's remit is expanding beyond Call of Duty and the next Halo project. The memo also places Rare, the studio behind Sea of Thieves and Everwild, and World's Edge, the team responsible for Age of Empires, under Activision. That puts Halo, Sea of Thieves, and Age of Empires within the same broader publishing structure, a notable shift for franchises that have historically operated as independent first-party teams.
Obsidian Joins Bethesda
Bethesda is expanding its remit to include Obsidian Entertainment, the studio behind Fallout: New Vegas and The Outer Worlds. According to the memo, Obsidian will continue its current projects, including the survival game Grounded, while also collaborating with Bethesda Game Studios on a new Fallout project. Microsoft has not detailed what that new Fallout project is, and speculation among community observers about its scope should be treated as unconfirmed until Bethesda or Obsidian says more.
Turn 10 and Playground Games Become One Studio
Forza Motorsport developer Turn 10 Studios and Forza Horizon developer Playground Games are being formally combined into a single studio focused on the Forza and Fable franchises. The memo describes the two teams as "creative and franchise partners for over a decade," noting that the restructuring "will formally move their work into one team."
Reporting on the change indicates there is no new studio name; instead, Playground co-founder and studio head Trevor Williams will continue to lead Playground Games, which implies that Turn 10 no longer exists as a separate organizational entity, even if some of its staff and technology continue under the merged team.
What This Means for Forza Motorsport
Microsoft has not announced the cancellation of Forza Motorsport, and the memo does not address the game's future directly. However, the merger follows a period in which Turn 10 had already shifted its development priorities toward Forza Horizon 6, confirming in late 2025 that it did not plan to add new cars, tracks, or major features to the 2023 Forza Motorsport release during 2026, while continuing to keep its servers and multiplayer ecosystem running. Given that context, it would be accurate to say the series' future as an actively developed title is uncertain, without stating that it has been formally discontinued.
Microsoft Casual Games Moves Under King
The memo also places Microsoft Casual Games, which includes long-running titles associated with Windows, under King, the Candy Crush developer Microsoft acquired as part of Activision Blizzard. Booty described the move as uniting "two global leaders in casual game design and live operations." Microsoft has not announced any changes to how these games currently function for players.
Ninja Theory Faces a Proposed Closure
The most consequential news for a single studio involves Ninja Theory, the Cambridge-based developer of the Hellblade series. Booty's memo states that two separate agreements to sell the studio fell through, and that Xbox "will now begin consultation with employees on a proposed closure while continuing to explore other paths forward."
This follows a July 2026 announcement in which Xbox said Ninja Theory, along with State of Decay 3 developer Undead Labs, had entered terms to join new ownership with funding. That deal did not materialize. Because Ninja Theory is based in the United Kingdom, UK employment law requires a minimum 30-day consultation period before redundancies can proceed, meaning the closure is not yet finalized. Microsoft has not issued a formal cancellation notice for Senua, the third Hellblade game announced at Xbox's June 2026 showcase, leaving its future genuinely unresolved rather than confirmed as cancelled.
Arkane Studios Remains in Limbo
Arkane Studios, the Lyon-based developer working on the Marvel project Blade, remains in a separate consultation process that Booty said is expected to continue through the end of 2026. Unlike Ninja Theory, Microsoft has not indicated that a closure has been proposed for Arkane, only that its situation remains under review alongside ongoing conversations about the studio's path forward.
Studios That Already Left: A Status Update
The memo also provided updates on studios Microsoft previously said it would divest. Compulsion Games and Double Fine Productions returned to their own management in August 2026, retaining their intellectual property, back catalogs, and operating funding, effectively becoming independent studios again. Undead Labs has similarly completed its transition to independent, employee-linked ownership under a new publisher, with State of Decay 3 still expected to launch day one on Game Pass, though no release date has been announced.
The Bigger Picture: Why Xbox Is Doing This
Taken together, the changes point toward a clear strategic direction: Microsoft is consolidating its first-party output under a small number of large publishing groups, principally Activision and Bethesda, rather than continuing to operate a wide roster of independently branded Xbox Game Studios teams. Sharma's July 2026 restructuring announcement was explicit about the financial motivation, stating that Xbox had been "operating at margins that are 3-10x lower than comparable platform and publishing businesses." Folding Halo, Rare, and World's Edge into Activision's structure, and Obsidian into Bethesda's, appears designed to apply the operating discipline and release-schedule track record of Microsoft's largest acquired studios to franchises that have struggled with lengthy or troubled development cycles, Halo's yearslong post-Infinite development being the most visible example.
What Happens Next
Microsoft has scheduled an "ALL-XBOX" town hall for October 6, 2026, which Booty said would be used to reflect on the reset and discuss what he called one of the strongest game lineups in Xbox's history. That event is likely to be the next point at which Microsoft provides further detail on the studios still in transition, particularly Arkane and Ninja Theory, and on how the newly merged Forza and Fable studio will be organized creatively.
Discussion (…)
Loading discussion…