Activision to Develop Next Halo Game as Xbox Restructures and Lays Off 268

Microsoft has announced a massive restructuring of its Xbox studios, which includes handing over key franchises like Halo, Sea of Thieves, and Age of Empires to Activision. This reorganization comes with the layoff of 268 Xbox employees and the potential closure of Ninja Theory, the studio known for titles like Hellblade, as reported by The Verge. It's a significant shift in the company's strategy, aiming to consolidate operations and optimize video game development in an increasingly competitive market.

This isn't the first time Xbox has made such moves. For months, the company has been involved in a process they call an "Xbox reset." This plan already led to 1,600 layoffs and the sale of some studios earlier this year, as also reported by The Verge. The decisions announced today are part of that broader effort to make game production more efficient, seeking a more agile and centralized structure.

The company had indicated that a total of 3,200 roles would be affected by cuts by June 2027, the end of its fiscal year. With the current 268 layoffs, almost 1,900 roles have now been eliminated, meaning over 1,000 more are yet to be announced. Microsoft states it is "roughly three-quarters of the way through" implementing the restructuring it had previously communicated.

An Unexpected Turn for Halo

The most striking news of this reorganization is, without a doubt, the future of the iconic Halo saga. Halo Studios, the team formerly known as 343 Industries, will continue to provide support and updates for existing titles, such as Halo Infinite and Halo: Campaign Evolved. However, the next flagship installment of the franchise will be in the hands of Activision.

Matt Booty, Xbox chief content officer, explained in an internal memo that Activision will develop the next Halo title with a new, dedicated team. This team will operate independently of current Call of Duty projects, aiming to give Halo the attention it deserves. A small team at Halo Studios will continue supporting the community and in-market games, according to the same source from The Verge.

This change represents a major shift for Halo, a franchise that has had a turbulent path in recent years. Less than two years ago, Microsoft had moved its development to the Unreal Engine 5 engine, and Halo Studios had experienced significant leadership changes and previous layoffs. Rob Kostich, Activision president, assured that their goal is to create "the greatest Halo game ever, worthy of its universe and legacy," and that they are already assembling a team with unique talent and capabilities to achieve this ambition.

Other Strategic Studio Moves

Xbox's restructuring is not limited to Halo. World’s Edge, the studio behind the popular strategy franchise Age of Empires, is also joining Activision. The same applies to Rare's UK team, responsible for the successful pirate game Sea of Thieves. For now, it has not been clarified whether these changes will involve additional layoffs at Rare or World’s Edge, according to The Verge.

Among other important decisions, Obsidian, the acclaimed studio known for its RPGs, will move to Bethesda. There, it will work closely on a new Fallout title. Given the recent success of the Fallout television series, it would not be surprising if this new game has a direct connection to the popular adaptation. This move aims to capitalize on the franchise's momentum and Obsidian's expertise in the genre.

Furthermore, Turn 10 Studios, the creator of Forza Motorsport, and Playground Games, known for the Forza Horizon series and the upcoming Fable, will merge into a single studio. Their objective will be to consolidate the development and vision for these important racing and RPG franchises. Finally, Microsoft's casual games unit, which includes classics like Solitaire, Mahjong, and Minesweeper, will move from Bethesda to King, thus uniting two global leaders in casual game design and live operations.

The Fate of Divested and At-Risk Studios

Microsoft also provided an update on the status of studios that have separated from Xbox or are in the process of doing so. Compulsion and Double Fine, for example, returned to independent management with their intellectual properties, their back catalogs of games, and runway funding to move forward. Undead Labs, the studio behind the State of Decay series, also successfully transitioned, and under a new publisher, will release State of Decay 3 day one on Game Pass.

The situation is more delicate for Ninja Theory. According to available information, two separate agreements for its sale fell through. As a result, Microsoft will begin consultations with employees regarding a proposed closure of the studio, although it will continue to explore other avenues for its future. Consultation with Arkane, another important studio, is still underway and is expected to continue until the end of the year.

Why it matters

This Xbox reorganization is a strong step in Microsoft's strategy to streamline its video game operations and adapt to a changing landscape. Handing over iconic franchises like Halo to Activision is a clear signal that the company is seeking new approaches and an injection of energy for its most important titles. While it involves layoffs and the potential end of beloved studios like Ninja Theory, the ultimate goal is to strengthen key sagas, optimize resources, and prepare Xbox for the future of gaming with a more consolidated and competitive structure. Players will see how this translates into upcoming releases and the creative direction of their favorite franchises.