Microsoft Plans Layoffs and Studio Closures in Xbox Division

Next week, Microsoft is expected to announce significant layoffs affecting its Xbox studios and employees. According to sources familiar with the situation, these layoffs may lead to the closure or spinoff of several studios and potential studio mergers.

Reports suggest that Microsoft is considering shutting down at least five game studios, including the team responsible for developing Marvel’s Blade. This decision is part of a broader cost-cutting strategy within the Xbox gaming division. Blade, which was in development at Arkane Studios, known for its work on the Dishonored series. was originally slated for release later this year. However, insiders indicate that the game’s internal ship date has been pushed back to late 2027, and it is currently exceeding its budget.

In addition to potentially canceling Blade, Microsoft is reportedly looking into the possibility of selling Arkane Studios. Earlier this month, Bloomberg highlighted that the company is also attempting to spin off other studios, including Compulsion Games and Double Fine. GamesBeat reported that Microsoft is actively seeking a buyer for Undead Labs, the studio behind State of Decay. If these studios can secure buyers, they may avoid closure, but discussions could take several months.

Compulsion Games, which is developing South of Midnight, has already begun informing its employees to seek new job opportunities, fearing that closure is imminent. Meanwhile, Ninja Theory staff were notified about Microsoft’s intentions concerning the future of the UK-based studio, which could either face closure or a spinoff.

Beyond these studio concerns, Microsoft is preparing for a substantial wave of layoffs across the Xbox division that will significantly transform its workforce. Sources indicate that these layoffs are set to begin on July 6th and will impact various departments within Xbox. Speculation suggests that there could be as many as 1,000 job losses. Coupled with the potential closure of five studios, this could mean at least 500 employees are affected even before the broader cuts take effect.

This restructuring is part of a “reset” for the Xbox division under new CEO Asha Sharma, who recently expressed the need for making difficult decisions. Sharma has previously stated that the Xbox business is not in a healthy state, but she emphasized that her goal is to position the company as the leading name in gaming and entertainment.

As Microsoft navigates these changes, the gaming community will be closely watching how these developments unfold and what they mean for the future of its studios and titles.