Microsoft has cut another 268 jobs from its games division and redrawn the map of Xbox Game Studios in the same breath. A memo sent to Xbox staff worldwide on September 22 confirms the redundancies and lays out a reorganisation that moves Halo development to Activision, folds Obsidian Entertainment under Bethesda, merges Playground Games with Turn 10, and puts Ninja Theory into consultation on a proposed closure.
268 roles, and three-quarters of the way through
The note, published in full on Xbox Wire and signed by Matt Booty, opens with the cuts: 268 roles eliminated across Halo Studios, other first-party studios, and what the memo calls the XGS management and central functions layer. That last phrase is doing a lot of work — a meaningful share of the reductions sit in the middle-management and shared-services tier that sat between individual studios and the top of the organisation, rather than in the teams shipping games.
Booty frames the day as another step in the restructuring Microsoft set out earlier in 2026, writing that the actions completed since July, including the studio divestitures, bring the company "roughly three-quarters of the way through previously announced restructuring." That is worth reading twice. It is both an acknowledgement that the reset is not finished and a signal that the remaining quarter is still to come.
Activision takes Halo, Rare and World's Edge
The structural change is the bigger story. Activision — brought into Microsoft with the 2023 acquisition and best known internally as the Call of Duty organisation — is expanding its remit to cover World's Edge, the studio that has stewarded Age of Empires, and Rare.
Activision will also develop the next Halo title. The memo is specific that this will be handled by "a new, purpose-built team that is separate from ongoing development and plans for Call of Duty," which reads as a pre-emptive answer to the obvious worry: that Halo would be absorbed into an annualised shooter pipeline. A small team at Halo Studios stays in place to support the Halo community and the games already in market.
For a series that has spent the past decade under the studio formerly known as 343 Industries, this is the most consequential sentence in the memo. Halo's next entry is now being built by a team that does not yet exist, inside a publisher whose expertise is first-person shooters at enormous scale. Whether that is a rescue or a rupture depends entirely on who staffs it.
Obsidian goes to Bethesda, King absorbs Microsoft Casual Games
Bethesda's remit expands to include Obsidian Entertainment, which the memo says will continue its current projects — Grounded is named explicitly, as is the new Fallout project Obsidian is making in collaboration with Bethesda Game Studios. That collaboration is presumably the logic here: the two teams were already working together on a shared property, so the org chart is being redrawn to match the work.
King, the Candy Crush company, takes on Microsoft Casual Games. The memo describes it as uniting "our two global leaders in casual game design and live operations," which is corporate phrasing for consolidating the free-to-play and mobile side of the business under one roof.
Playground and Turn 10 become one studio
The two Forza studios are merging. Playground Games — the Forza Horizon team, also currently building Fable — and Turn 10 Studios, the Forza Motorsport team, will come together as a single studio focused on the Forza and Fable franchises. The memo notes the pair have been "creative and franchise partners for over a decade," and casts the merger as formalising a working relationship that already existed.
In practice, it means one Forza organisation instead of two, with Fable sitting inside it. Fable has been in development for years and has already slipped more than once; consolidating it into a larger combined studio is the kind of move that can go either way.
Ninja Theory faces closure after two deals collapsed
The divestiture update is the hardest part of the memo. Microsoft has spent months trying to hand studios back to their leadership rather than shutting them. In August, Compulsion Games and Double Fine returned to independent management with their IP, back catalogues and runway funding intact. Undead Labs has now transitioned on similar terms and, with a new publisher, will ship State of Decay 3 day one on Game Pass.
Ninja Theory did not get that outcome. Two separate agreements for the Cambridge studio behind Hellblade fell through, and Microsoft is now beginning consultation with employees on a proposed closure while, in the memo's words, "continuing to explore other paths forward." Consultation with Arkane remains underway and is expected to run through the end of the year.
"Proposed closure" is a specific term under UK employment law and the consultation is a formal process, not a euphemism for a decision already taken — but it is not an encouraging position for a studio to be in after two buyers walked.
What happens next
Booty closes by pointing at an all-hands on October 6, where the company will "reflect on our progress and look ahead to one of the strongest game lineups in our history." That lineup is not hypothetical: Gears of War: E-Day launches on October 6 as well, the same day as the town hall.
It makes for a strange split screen. Xbox is heading into a genuinely stacked autumn while simultaneously eliminating hundreds of roles, breaking up its publishing structure and starting the process that could end one of Britain's best-known development studios. The memo's own framing — a reset that is three-quarters done — means there is at least one more announcement like this still to come.
