REDMOND, Wash. — Ninja Theory has made two of the most artistically ambitious games in Microsoft’s catalog. Hellblade: Senua’s Sacrifice won awards, earned a sequel, and produced exactly the kind of prestige gaming that Xbox spent years saying it wanted to be known for. On Tuesday, Microsoft announced it had failed twice to sell the studio and will now begin consultations with employees on a proposed closure.
The Ninja Theory situation is the sharpest edge of the announcement Xbox COO Matt Booty sent to staff Tuesday morning under the heading “Continuing Our Reset.” The company is cutting 268 more positions across Asha Sharma‘s restructured first-party studio network, transferring three studios (Halo Studios’ franchise responsibilities, Rare, and Age of Empires developer World’s Edge) under Activision, and consolidating Obsidian Entertainment under Bethesda. Booty wrote that the moves bring Xbox “roughly three-quarters of the way through previously announced restructuring.”
That restructuring began formally in July, when Microsoft‘s gaming CEO announced 3,200 planned job cuts. Sharma called it “the most significant restructure in Xbox history,” after Xbox acknowledged it was “operating at margins that are 3-10x lower than comparable platform and publishing businesses.” Tuesday’s 268 positions come on top of that total, and target Halo Studios’ development staff, other first-party teams, and the Xbox Game Studios management layer.
The Halo transfer is the structural change with the longest reach. Activision, the Call of Duty publisher Microsoft acquired for $69 billion in 2023, will build the next mainline Halo game through a “purpose-built team that is separate from ongoing development for Call of Duty,” Booty wrote. A reduced team at Halo Studios will continue supporting games already in market, including a 2026 remake of Halo: Combat Evolved. The franchise that defined Xbox’s original identity as a console platform will now be developed by a company that did not create it.
Activision’s new responsibilities extend beyond Halo. Rare, which built Sea of Thieves into one of Xbox’s most consistently profitable live-service titles, and World’s Edge, the Age of Empires custodian, both move under Activision’s oversight. The logic is legible: Activision is the one studio inside Microsoft Gaming that reliably generates franchise revenue at scale, and giving it supervision over Xbox’s most durable commercial properties is at minimum a defensible organizational choice. Whether the Call of Duty production culture translates to a centuries-spanning real-time strategy series or a nautical pirate sandbox is a different question.
Obsidian Entertainment, whose catalog includes The Outer Worlds and Grounded, moves under Bethesda, where both studios will collaborate on a new Fallout title while Obsidian continues its existing projects. Forza Motorsport developer Turn 10 is being merged with Playground Games, which develops Forza Horizon and the revived Fable series, creating a single studio responsible for Microsoft’s two flagship racing franchises and its new RPG property.
Compulsion Games, developer of South of Midnight, was shut down in June after a sale process failed, weeks after Microsoft’s own gaming head had praised the studio publicly for winning a Peabody Award. Ninja Theory is a second case with the same shape: acclaimed work, failed sale, proposed closure. Two separate agreements that would have determined Ninja Theory’s future both collapsed, Booty wrote, before beginning the consultation process required under employment law. “We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward,” his note read. The phrase “other paths forward” is the only optimism in the announcement for Ninja Theory’s roughly 170 employees.
At 75 percent completion, roughly 800 cuts remain under the current plan, with no timeline announced for when the final quarter of restructuring will land, or which studios or functions it will affect.
The larger context here is Microsoft’s $69 billion acquisition of Activision Blizzard, closed in 2023 after an extended regulatory battle that centered on whether the deal would give Microsoft an unfair advantage in the market. Three years later, the dynamic is almost inverted: Microsoft is dismantling large portions of the first-party studio empire it built over a decade, using Activision as the vehicle for consolidating whatever first-party gaming it intends to keep. As Engadget noted, the industry concern was that Activision would give Microsoft too much power. The outcome is that Activision is now what Microsoft is reorganizing toward.
