Gaming
Xbox Gets Smaller to Grow, the Great Studio Unbundling
Xbox announced another 268 role eliminations on September 22, bringing the division roughly three quarters of the way through the 3,200 reductions announced in July. The headline writes itself, but the memo from Xbox chief content officer Matt Booty tells a more interesting story. Xbox is getting smaller, and the pieces are landing in sharper hands.
Activision will develop the next Halo with a new purpose built team separate from Call of Duty, while a small Halo Studios team keeps supporting the community and the games already in market. Bethesda absorbs Obsidian, which continues its current projects including Grounded, plus a new Fallout collaboration with Bethesda Game Studios. Playground and Turn 10 merge into one studio dedicated to Forza and Fable, two teams that have been creative partners for over a decade. King absorbs Microsoft Casual Games, uniting two leaders in casual design and live operations. Rare and World's Edge move under Activision's remit.
The overlooked thread is the divestiture program, which is quietly producing the outcome every developer hopes for when a giant restructures. Compulsion and Double Fine returned to management in August with their IP, back catalogs, and runway funding. Undead Labs has now completed the same transition, becoming an independent employee owned studio, and State of Decay 3 remains actively underway with a new publisher, launching day one on Game Pass. Studios leaving with their games, their teams, and their funding is the best version of this story.
Booty also confirmed that two separate agreements for Ninja Theory fell through, and Xbox has begun consultation with employees on a proposed closure while continuing to explore other paths. Consultation with Arkane continues through the end of the year. An all Xbox town hall is set for October 6.
Watch the independents. The studios walking out with their IP and their people have a track record of making their most personal work next, and the industry's next great games may come from the teams Xbox just set free.
The scale of the restructuring puts this week's memo in perspective. The 268 roles announced September 22 bring Xbox roughly three quarters of the way through the 3,200 reductions announced in July, and 2026 has seen more than 19,000 layoffs across the gaming industry. Against that backdrop, the studios walking out with their IP, their teams, and their funding look less like a consolation prize and more like the smartest deal on the table.
Quick answers
What is this story about?
Xbox announced another 268 role eliminations on September 22, bringing the division roughly three quarters of the way through the 3,200 reductions announced in July. The headline writes itself, but the memo from Xbox chief content officer Matt Booty tells a more interesting story. Xbox is getting smaller, and the pieces are landing in sharper hands.
Why does this story matter?
The scale of the restructuring puts this week's memo in perspective. The 268 roles announced September 22 bring Xbox roughly three quarters of the way through the 3,200 reductions announced in July, and 2026 has seen more than 19,000 layoffs across the gaming industry. Against that backdrop, the studios walking out with their IP, their teams, and their funding look less like a consolation prize and more like the smartest deal on the table.
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