Xbox may close Arkane Studios and halt development on the Blade game amid impending layoffs.

Rumors about Microsoft’s potential mass layoffs are intensifying. Reports suggest that the company is contemplating shutting down Arkane Studios, the team behind the beloved Dishonored series, Deathloop, and Prey (2017). Additionally, Xbox may cancel Arkane’s upcoming game featuring the Marvel character Blade. An announcement regarding significant layoffs at Xbox studios is expected next week.

Sources indicate that Marvel’s Blade was initially set to launch later this year, but its internal release date has now been pushed to late 2027, and it is reportedly exceeding its budget.

Although Blade was announced in December 2023, Arkane has yet to showcase any gameplay. This title will differ from the studio’s usual first-person perspective, opting instead for a third-person view. Arkane’s latest release, Redfall, did not meet expectations upon its 2023 launch, receiving poor reviews and achieving minimal sales, according to Microsoft.

The potential cancellation of Marvel’s Blade adds to the woes of this vampire antihero, who has faced numerous setbacks. The MCU’s Blade film has been mired in development issues for years, cycling through two directors and various cast changes, with reports suggesting it has been shelved in favor of a Midnight Suns movie.

On a slightly positive note, Arkane’s closure isn’t a foregone conclusion. While Microsoft is reportedly considering shutting down Compulsion Games (South of Midnight), Double Fine, Ninja Theory (Hellblade), and Undead Labs (State of Decay) alongside Arkane, the company is also exploring options to sell these studios, which could prevent shutdowns. However, layoffs still appear likely even in that scenario.

Following the retirement of Microsoft Gaming CEO Phil Spencer, Asha Sharma took over the role in February. Since then, several Xbox executives have departed, including Craig Duncan, head of Xbox Game Studios, and Louise O’Connor, chief of staff for Xbox Game Studios.

On June 10, Sharma and Xbox chief content officer Matt Booty released an open letter indicating a forthcoming “reset” within the division. They noted that Microsoft has invested over $20 billion in Xbox over the past five years, yet annual revenue has dropped by half a billion during that period. The letter also highlighted hardware supply challenges, issues in the game development pipeline leading to fewer releases, and struggles with platform infrastructure.

Insiders have suggested that this reset could lead to one of the largest layoffs in gaming history, impacting not only studios facing closure but also others like Bethesda and Blizzard.

The past few years have been tough for the gaming industry, marked by widespread layoffs and studio closures. Unfortunately, it seems that the worst may still be ahead.