Everything Microsoft Revealed About Xbox Layoffs Amid Restructuring Process

Microsoft has finally unveiled information about massive and ongoing restructuring within the Xbox division. It was announced that the company has cut around 5,000 employees, and we finally have an understanding about the fate of various gaming studios. Despite rumors about possible closures, all gaming departments that were mentioned over the past weeks for now will continue their operations and, consequently, the development of upcoming projects. Below, you will find everything that we know so far about Microsoft’s restructuring regarding Xbox.

Compulsion Games and Double Fine Productions Are Independent Again

Early rumors suggested that Compulsion Games, the developers of South of Midnight, might be shut down due to Microsoft’s restructuring process. However, despite layoffs, the exact number of which is currently unknown, the studio will continue to operate—just no longer under Microsoft's umbrella. It was announced that the developers will become independent again and retain the rights to all their previously owned IPs. Furthermore, Microsoft has confirmed that they will provide financial support to the company until it finds a new publisher. The same situation happened to Double Fine Productions, the developers behind the Psychonauts franchise. At this time, it remains unknown who will serve as the publisher for both studios.

Ninja Theory and Undead Labs Are In Talks with New Possible Publishers, and Arkane Studios Still Might Be Shut Down or Sold

As for other game studios whose fates had remained uncertain for several weeks, Microsoft has finally managed to clarify the situation. For instance, Ninja Theory (the Hellblade series) and Undead Labs (State of Decay) will also no longer be part of Xbox. Moreover, both studios are already in talks with potential new owners. Although Ninja Theory and Undead Labs are separating from Microsoft, the publisher will still support the funding of their upcoming projects—Senua and State of Decay 3, respectively—and the rights to the franchises will be transferred to the new publisher.

The situation with Arkane Studios is more complicated. The developers behind the Dishonored franchise were considered the most likely to be shut down, as rumors suggested, but so far, it hasn't happened. However, it has been confirmed that due to layoffs (the number is also unknown), Marvel’s Blade’s release has been postponed indefinitely, and the game's budget has significantly exceeded the original amount. Currently, Xbox is considering whether to shut down or sell Arkane Studios, with the studio’s fate expected to be decided in the coming months. Meanwhile, Arkane's founder, Raphael Colantonio, has teased on social media about the studio’s possible buyout, which has already sparked a lot of speculation among gamers.

Bethesda—Focus on Fallout, The Elder Scrolls, Doom, Quake, and Wolfenstein

Speaking about Bethesda, the company also suffered from layoffs, and Microsoft revealed their plans about the studio’s future priorities. According to Jeff Gardiner, the former studio’s producer, 35 employees left Bethesda Game Studios, while another 95 were cut from id Software. Bloomberg’s Jason Schreier also mentioned "cutting a significant number of staff this morning" on his Bluesky page. As for the future, Microsoft is focusing on Bethesda’s key franchises such as The Elder Scrolls, Fallout, Quake, Doom, and Wolfenstein. It was recently revealed that the company will continue investing in MachineGames, with Wolfenstein 3 in development but not confirmed by the studio yet. Meanwhile, Todd Howard confirmed that the studio needs more time for The Elder Scrolls VI —even though it has been over eight years since the game’s announcement, the release date is still unknown.

What do you think of Microsoft’s restructuring process related to Xbox? Share your thoughts in the comments below!