Microsoft's Xbox group is eliminating 268 roles and moving some of its biggest series under Activision's umbrella. In a note to staff Tuesday morning, Matt Booty said Activision will lead development of the next Halo. The cuts will affect employees at Halo Studios, which will continue operating existing Halo games.
Activision will also take charge of Rare and Age of Empires maker World's Edge. Booty wrote that King, the Candy Crush publisher, will absorb Microsoft Casual Games. He added, "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."
Microsoft's Bethesda is set to absorb Obsidian. The studio will keep supporting Grounded and is working on a new Fallout project. Xbox is also combining the teams behind Forza and Fable into a single studio.
Seeking stronger margins, Microsoft divested a number of teams, among them Double Fine, Compulsion, and most recently Undead Labs. Booty noted that two separate attempts to spin out Ninja Theory "fell through." He wrote, "We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward." He also said, "Consultation with Arkane remains underway and is expected to continue through the end of the year."
Back in July, Microsoft announced plans to cut 3,200 positions over the next year, representing a 20% reduction in headcount. In an email to employees then, Xbox Chief Executive Officer Asha Sharma told staff "our business today is not healthy," and said Xbox was operating with margin levels three to 10 times below peer businesses. "We must reset Xbox," she wrote.
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Booty said Xbox is about three quarters through its broader reductions. The Information first reported the latest round of layoffs.
Halo originated at Bellevue-based Bungie and debuted in 2001 together with the first Xbox, which helped the system take on Sony's PlayStation and Nintendo. In 2007, Bungie separated from Xbox following the launch of Halo 3, committed to make two additional titles, and subsequently exited the series. Xbox created 343 Industries - recently rebranded as Halo Studios - to carry the series forward.
Later entries were expensive, arrived inconsistently and struggled to click with fans. The latest release revisited the first game as a remake titled Halo: Campaign Evolved. Activision President Rob Kostich set the bar: "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."
For investors, the thread here is consolidation. More marquee Xbox franchises are now housed under Activision while Microsoft trims costs to chase better margins. How this reshuffle lands with players - and how quickly - will shape how confidently you can view Microsoft's gaming bets.
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