On September 22, 2026, Xbox’s senior leadership revealed the most extensive reorganisation of its first-party ecosystem to date. 268 positions across Halo Studios, other internal studios, and the central XGS management layer are being eliminated. Matt Booty, the chief content officer, framed the move as the third phase of a reset that began earlier in the year, noting that the company is now roughly three-quarters of the way through the announced restructuring plan.
Consolidating publishing power: new studio hierarchies
The core of the shuffle is a realignment of existing studios under three larger publishing umbrellas. Activision will now oversee World’s Edge and Rare while also receiving a brand-new team tasked with developing the next Halo instalment. This Halo team operates independently of the ongoing Call of Duty pipeline, and a slim support group at the former Halo Studios will continue to service the live-service side of the franchise.
Bethesda expands its remit to include Obsidian Entertainment. Obsidian will keep working on its current titles, such as Grounded and will spearhead a new Fallout project in partnership with Bethesda Game Studios. King the maker of Candy Crush absorbs Microsoft Casual Games uniting two of Microsoft’s most prolific casual-gaming operations under a single banner.
Finally, Playground Games and Turn 10 Studios merge into a single studio that will nurture both the Fable and Forza franchises. The two teams have collaborated for over a decade, and the formal merger is intended to streamline development pipelines and concentrate publishing expertise.
Divestitures and studios on the brink
Parallel to the internal shuffling, Microsoft completed several divestitures. In August, Compulsion Games and Double Fine Productions returned to independent ownership, taking their intellectual property and back-catalogues with them. Undead Labs followed a similar path, securing a new publishing partner and committing to launch State of Decay 3 on Game Pass from day one.
Negotiations with Ninja Theory collapsed, and the studio now faces a consultation process that could lead to closure unless an alternative buyer emerges. Arkane Studios remains in consultation, a process expected to run through the end of the year. These moves leave only three studios still directly under the xbox game Studios banner: The Coalition which continues the Gears of War series; inXile Entertainment developing Clockwork Revolution and the newly formed Playground/Turn 10 entity.
Looking ahead: the next town hall and what it means for fans
Booty emphasized that the human impact of the cuts must be met with empathy and support. He announced a series of visits to affected studios over the coming week, and an all-hands town hall scheduled for October 6, where the entire Xbox team will review progress and preview what Booty described as “one of the strongest game line-ups in our history.” The remaining titles on the horizon include Gears of War: E-Day the next Fable a new Forza Horizon and Clockwork Revolution. By concentrating resources on these franchises, Microsoft hopes to deliver a tighter, high-impact portfolio while shedding the layers of publishing duplication that once existed across Xbox Game Studios, Bethesda Softworks, and Activision Blizzard.
