Activision Steps In to Lead Halo Amid Major Xbox Restructuring

Microsoft is making significant changes to its Xbox studios today, following a previous round of layoffs affecting 1,600 employees and the sale of several studios. The latest restructuring will see Activision take over the Halo and Sea of Thieves franchises, along with Age of Empires. Additionally, around 268 Xbox employees will be laid off, and there are indications that Ninja Theory may be closing its doors.

Halo Studios will face considerable changes due to these layoffs. While the studio will continue to support existing titles like Halo Infinite and Halo: Campaign Evolved, the next major installment in the Halo series will be developed by Activision. Xbox’s chief content officer, Matt Booty, noted in an internal memo that “Activision will also be developing the next Halo title, led by a new, purpose-built team that is separate from ongoing development and plans for Call of Duty.” A small team at Halo Studios will remain to support the Halo community and maintain current games.

This marks a pivotal shift for the Halo franchise, especially after Microsoft transitioned its development to Unreal Engine 5 less than two years ago. Halo Studios, previously known as 343 Industries, has also seen a change in leadership and workforce reductions in recent years.

Rob Kostich, president of Activision, expressed the ambition for the next Halo game, stating, “For Halo, our goal is clear: make the greatest Halo game ever, worthy of its universe and legacy, while staying true to what made players love it in the first place.” He emphasized that a dedicated team is already being assembled to take on this challenge.

World’s Edge, the studio responsible for Age of Empires, will also be joining Activision as part of this transition. Furthermore, Rare’s UK development team will now be under Activision’s umbrella, taking control of Sea of Thieves.

It remains uncertain if there will be layoffs affecting Rare or World’s Edge during this transition. Former Rare studio head Craig Duncan became the head of Xbox Game Studios in 2024 but resigned in June ahead of these major changes. Louise O’Connor, chief of staff for Xbox Game Studios, also departed the company after a long tenure that began at Rare in 1999.

In another notable shift, Microsoft has confirmed that Obsidian is moving to Bethesda to collaborate on a new Fallout title. While details about this upcoming game are scarce, the success of the recent TV series may influence its direction.

Turn 10 Studios and Playground Games are merging into a single entity to focus on the future of the Forza Horizon and Fable franchises. Additionally, Microsoft is relocating its casual games division, which includes titles like Solitaire, Mahjong, and Minesweeper, from Bethesda to King.

This marks the second wave of layoffs for Xbox this year, and it may not be the last. Microsoft has indicated that a total of 3,200 roles are expected to be affected by cuts throughout the 2027 financial year, which concludes in June 2027. With today’s layoffs, the total number of job losses has reached nearly 1,900, leaving over 1,000 positions still to be addressed. Microsoft has stated that it is “roughly three-quarters of the way through previously announced restructuring.”

Here’s the full memo from Matt Booty:
> Team,
> I’m writing to share several updates as part of the XBOX reset outlined earlier this year.
> First, we are eliminating 268 roles across Halo Studios, other first-party studios, and the XGS management and central functions layer. The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring. I am deeply grateful for what our colleagues have built, and I know how difficult today will be for those leaving and the teams around them.
> Second, we are reorganizing our studios. The goal is to strengthen our franchises and games by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise.
> Activision will expand its remit to World’s Edge, as well as Rare. Activision will also be developing the next Halo title, led by a new, purpose-built team that is separate from ongoing development and plans for Call of Duty. A small team at Halo Studios will continue supporting the Halo community and games in-market.
> Bethesda will expand its remit to include Obsidian, which will continue its current projects, including Grounded, as well as the new Fallout project made in collaboration with Bethesda Game Studios.
> King will expand its remit to include Microsoft Casual Games, uniting our two global leaders in casual game design and live operations.
> Playground and Turn 10 will come together as one studio focused on the Forza and Fable franchises. These two studios have been technological, creative, and franchise partners for over a decade, and today’s changes will formally move their work into one team.
> Third, an update on our studio divestitures: In August, Compulsion and Double Fine returned to management with their IP, back catalogs, and runway funding. Undead Labs has now successfully transitioned on similar terms and, with a new publisher, will release State of Decay 3 day one on Game Pass. Unfortunately, two separate agreements for Ninja Theory fell through. We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward. Consultation with Arkane remains underway and is expected to continue through the end of the year.
> Today, our focus should be on supporting those affected and treating one another with care and respect. I will spend time with our studios over the next week. At our October 6 town hall, we will come together as an ALL-XBOX team to reflect on our progress and look ahead to one of the strongest game lineups in our history.
> Matt